Illegal Torrent and Streaming Sites Made $227 Million Last Year…

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Having trouble landing a job after college?  Illegal torrent, download, linking, and streaming raked in $227 million last year, according to an estimate by Digital Citizens Alliance.  A large percentage of that money is coming from BitTorrent and file-swapping sites ($28.5 million), with ‘linking sites’ pulling a very respectable chunk (of nearly $17 million).

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Of course, the biggest sites are making the most money, but the report noted that sites large and small are making solid returns.  “The 45 largest sites, 7.6% of the entire sample, accounted for 62.5% of the total aggregate ad revenue,” the report analyzed, based on a sample of more than 500+ sites.

“The average large site makes an estimated $3 million in ad revenue a year – $4.4 million for those that are supported solely by advertising – while even small sites can net $100,000.”

Still, smaller sites comprised 69.3% of the sample but only accounted for 11.8% of aggregate ad revenue, according to the study.  But costs are relatively low compared to other business, thanks to content costs of zero.  Which means, profit margins in this space kick ass.  “Because their business model relies entirely on illicitly distributing millions of stolen copies of highly valuable works that cost others billions to create, their profit margins range from 80% to 94%,” the report continued.

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Users pay nothing, so who’s fueling these plush profits?  Well, lots of brands you know and love: Digital Citizen’s Alliance attributed a large chunk of the profits from major advertisers like Geico, Sony, Domino’s and even Comcast.  In fact, ‘premium’ advertisers now account for 30% of total illegal site revenue, according to the report.  The remaining 40% comes from ‘secondary advertisers’ across gambling, gaming, and other brands that are less recognizable.

The Alliance pointed to serious reputation damage for these brands, though this may be considered unimportant or irrelevant to major brands.  Part of the reason is that targeted viewers are already users of illegal sites, and are unlikely to make negative judgements (instead, they are typically in highly-targeted demographics that will purchase products from these companies).  “The technology and services to identify and filter out content theft sites are available and should be adopted in the online advertising community,” the report stated.

“Just as brands do not advertise on porn or hate sites, they can easily take steps to assure they are not on content theft sites.”

8 Responses

  1. visitor

    Follow. The. Money.

    In August of 2012, Digiday (which is owned by the economist) posted this story:

    Why is Ad Tech Still Funding Piracy?

    “According to AppNexus CEO Brian O’Kelley, it’s an easy problem to fix, but ad companies are attracted by the revenue torrent sites can generate for them. Kelley said his company refuses to serve ads to torrent sites and other sites facilitating the distribution of pirated content. It’s easy to do technically, he said, but others refuse to do it.

    “We want everyone to technically stop their customers from advertising on these sites, but there’s a financial incentive to keep doing so,” he said. “Companies that aren’t taking a stand against this are making a lot of money.”

    • FarePlay

      Credit, where credit is due.

      Ellen Seidler of Vox Indie made The pop up pirates video in 2009 or 2010 that originally brought attention to this scandal, where Anerican companies are underwriting pirate sites.

      Followed by a concerted, six month long continuing exposé by the Trichordist and Miusic Technology Policy that led to Jonathan Taplin’s USC Annenberg Lab research that led to Ben Sisario’s piece in the NYT.

      We pro-artist proponents have been around long enough that we are leaving a historical trail. I’m the new kid on the block and I’ve been doing this since January, 2011.

      Paul, how long have you been around with DMN?

  2. Anonymous

    “Illegal Torrent and Streaming Sites Made $227 Million Last Year”

    Thanks to Google.

  3. Jeff Robinson

    Major labels should get in on this racket. It would be like the airline industry that hedges oil prices and sells airfare to customers. Majors could earn millions at both ends. Then again, maybe they already do this?

    • Wayne

      Jeff, they’ve been doing it for years, via the extra levy on blank media like blank CDs. The artist’s though, don’t see much of that.

  4. Anonymous

    Well, most of the money earned by those scam operators came from Google!

    Few entities sale music, due to all inclusive open access to every tune in existence provided by music ID entities like Google or Shazam, so ads are the only source of cash for the scam.

    Current state of the art is GLOOMY!

    ALMIGHTY GOOGLE with label boys on their knees bagging for better output from VEEVOO.
    Veevoo and Spoofy will save the business, WOW!