E sccr/20/2 Rev Original: English date : May 10, 2010 Standing Committee on Copyright and Related Rights Twentieth Session Geneva, June 21 to 24, 2010
GLOBAL IMPACT OF UNAUTHORIZED SIGNAL ACCESS
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GLOBAL IMPACT OF UNAUTHORIZED SIGNAL ACCESS85 Data provided in this report has been sourced from multiple organizations, including regional broadcasting organizations, platform operators, anti-piracy associations and governmental agencies. Numbers have been included to provide examples and illustrate the impact of unauthorized access and piracy on the economy, however, due to the differences in methodologies between studies, are not necessarily directly comparable. Rights owners86 Content rights owners and local rights holders are those parties most immediately affected by unauthorized distribution of content, as they are denied the opportunity to legitimately monetize their product. Unauthorized access and piracy of broadcast content prevents the rights holders from receiving monetary benefits through payment of royalties, rights values, share of subscription revenues or carriage fees, etc. which they might otherwise have received had the content been acquired and distributed legally. In the case where distribution of rights for a particular market has been acquired by an individual licensee, the license holder/licensee may forego revenues through re distribution of this content as a result of unauthorized distribution and access. In markets where unauthorized access is highly prevalent, rights values may reduce over time as the licensee will factor the impact of unauthorized signal access on subscription and distribution revenues into its negotiations. Our analysis of available rights value data from large sporting organizations (such as the Olympics, EPL) does not suggest that rights values have shown an absolute decline over time14 although it is possible that the growth in revenues from sales of rights could have been negatively affected due to unauthorized access and piracy. Stakeholders have suggested, however, that smaller sporting bodies, for whom quantitative data on this subject is not widely available, may be affected disproportionately. 87 Studies undertaken in the UK by IPSOS indicated that 21 per cent of viewings of pirated TV shows/content results in lost revenues – after accounting for the fact that not all viewers of pirated content would have paid for viewing legitimate content even if it had been available15. In the case of rights owners of smaller, niche content where the viewing population may be more selected and more inclined to pay for content access, these figures can be substantially higher. For smaller players, even the migration of small number of viewers to pirated content (either via physical piracy or online) could have a much larger impact on rights values and future rights negotiations due to the smaller overall audience and the greater proportional impact. Examples of this content would be local language/niche content like TV drama, films, special interest sports whose revenues from both pay TV and international distribution may be minimal due to language and other barriers. Unauthorized access and piracy of content in this case may force content producers to either completely forego producing such content, or resort to producing low cost lower quality content, as has been seen in countries such as Nigeria16. Investment in content production, technology, innovation88 A secondary impact of unauthorized access and piracy is on the investment in content production. Production of content, particularly premium content such as sports and TV drama is expensive and often funded by the sale of rights to broadcasters/channel operators (for TV drama/programming), who in turn, depend on either advertising or subscription revenues – both forms equally dependent on audience viewership/willingness to pay. The unauthorized availability of content has the ability to negatively affect this relationship. Easy availability of unauthorized content and less stringent enforcement of anti-piracy legislation can influence legitimate viewers to shift from legal sources of content (pay TV subscription, watching legally available FTA channels, etc.) to pirated sources, thus adversely affecting rights holder’s ability to recoup their expenses. As stated previously, the impact of unauthorized access and piracy may be magnified for smaller players who produce niche content – for whom rights payments will be crucial for funding future productions. 89 The impact of unauthorized signal access on investment in innovation and technology is also one area that needs to be considered seriously. A direct result of the proliferation of unauthorized access and piracy of broadcast signals may be on the rights holder or rights owner’s return on investment. Lower profits as a result of falling subscribers/viewers and higher costs from changing encryption technologies, swapping smart cards and pursuing litigation will result in redirecting funds to these activities and away from investment in technology and innovation. In Germany, one of the effects of piracy on satellite pay TV operator Premiere was on its financial performance – as a result of having to bear additional costs from swapping all its subscriber smart cards and changing its CAS. In developing nations, unauthorized access and piracy can also negatively impact the flow of FDI (foreign direct investment) into the media and technology industries. For instance, large levels of under-declaration in India (roughly 70 80 per cent of the cable subscriber base) can be cited as one of the reasons for the slow digitization of the country’s analogue cable networks as even the larger MSO (Multi System Operators) are yet to make profits – potentially keeping away foreign companies who are unsure what the returns on their investment will be. This has resulted in a significant shortfall in funding for network digitization and acquisition of consumer premises hardware like STBs, etc. Jobs90 One of the results of lower rights values and subsequent lowering of spend on content production are the losses of jobs in the TV value chain. The impact of unauthorized access and piracy is felt not only in the content production and TV distribution industries – which are most prone to the damages from piracy – but in other ancillary industries which support the broadcast industry. Similarly, US-based IPI (Institute for Policy and Innovation) claims that total job losses in the US stemming from copyright piracy of all forms (motion pictures, software, gaming, etc.) were 373,375 in 200517. 91 However, results from a survey conducted in Africa opined that physical piracy in the region could have actually led to a creation of jobs and income as more unemployed individuals took to it18. The survey went on to state that an increase in physical piracy had led to higher sales and penetration of video display hardware – further creating jobs in retail and increasing national incomes. It also stated that piracy benefited consumers as it forced a reduction in pay TV subscription costs and prices of legal DVD. 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