Piracy: Loss in Plain Sight
Piracy is one of the 21st century’s most catastrophic financial epidemics.
It is an equal opportunist, hitting both large production companies as well as small solo-girl operations.
Coming to terms with piracy and how it has affected your company, is an emotional process that is hard to endure and observe. It is dark, ambiguous, complex, but worst of all, ever evolving.
On a daily basis, producers go through the emotional process of coming to terms with how piracy has hit them.
First, there is the denial. When they see the number of piracy instances our servers have discovered there is complete and utter disbelief.
Most producers are 100 percent positive they already have a handle on searching out their own content and sending out hand-crafted DMCA notices.
Larger companies have expensive teams they have hired and set-up.
Solo-girls are convinced that they are so small, they cannot be harmed.
Unfortunately, it simply doesn’t matter how larger or small you are, piracy will still take you hostage.
The next round of distress is when producers see the amount of links that are still alive and generating free downloads. They are skeptical; what they see cannot be real. The source links, however sadly, are inescapable. The feeling of violation hits, like your house has been robbed, like your car has been stolen. It is that disgusting feeling in the pit of your stomach when you realize you have been robbed blind.
The questions begin; what can possibly be done to combat such colossal amounts of theft? What can be done about previous loss and future expense? Is there really anything that can be done to protect against piracy? Like insurance, perimeter alarms or personal security, content requires protection.
Piracy has a two-pronged sting. At Degban, we call it the Double-Trauma Principle. Piracy hits the bottom line on two levels; present sales or membership retention, and future brand value.
Membership retention is affected when customers find out they can get content they once paid for easier, faster, anonymously, in a variety of different formats, and above all, for free. They are going to choose the free option. Why pay for it?
New formats for obtaining free (albeit stolen) content offer anonymity and safety that is not always guaranteed from a membership site. There are scam performances from days gone by, there are social stigmas attached to purchasing porn, there is the fear of being “found out” with a credit card statement, the excuses go on and on. Free, anonymous downloads allow them access to a broader spectrum of pornography. No names, no X-rated charges on credit card statements, no recurring monthly membership to remember, and if the brand title is unprotected; no chance of getting caught. If a surfer is on the fence about paying, and is looking for justification to obtaining his content for free, he can easily dwell on all the “risky” elements of pulling out his credit card. Bottom line, surfers just want free porn, they will use any excuse they can to justify their theft.
Brand value is the second way a company is vandalized by piracy. How can a company compete with the natural laws of supply and demand? When a company has lost its power over its own inventory distribution it loses control over the value of that product. Regardless of production costs, no longer can the company decide what the product is worth, or who has permission to distribute it. This lack of exclusivity causes damage to a company’s brand, decreasing its value.
Most producers have become masters at re-branding their current inventory, allowing them different ways to make new money with older content. The concept of remarketing older material as “vintage” goes out the window with the current piracy climate. Re-brushing, re-branding and selling content later as a classic package is null and void. The amount of piracy has created a bottomless archive for surfers to browse. Additionally, the marketing technique of offering additional sites with purchase of membership is no longer inviting. The surfers know they can get it all for free instead; they simply need to wait a few days until the newer content has been uploaded on piracy sites.
In reality, producers are so busy with daily business struggles, and advancements; they are in the dark about the complexity and danger of piracy. The lack of tools to do proper damage assessment creates a dangerous negligence. Producers who are trying to run their business and protect themselves from piracy simply can’t keep up.
So many intangibles and variables surround piracy, and its actual effects on a company’s bottom-line, that businesses find it nearly impossible to pinpoint financial loss. In order to clearly define a producer’s financial loss and the profits made by pirates, one must be aware of a few widely accepted technical benchmarks and shorthands.
There is no uniformity in the calculation of production costs, budgets range from fullblown sets to made-at-home content. To combat the inconsistency this creates, Degban uses the 1 Dollar Loss Principle. The 1DLP is an easily modifiable factor that can be altered depending on a company’s internal analytics. This principle simply states that for every converted unit of downloaded stolen content, the producer loses one dollar.
Conversion rate is key to the 1DLP. Pulling from various webmasters and our inhouse simulations, gives a typical although slightly aggressive, conversion rate of 1:1200. To make calculations easy, the conversion rate has been rounded down to 1:1000. This conversion rate can again, be easily modified to customize calculations for specific productions. Conversion rate is used in conjunction with estimated downloader traffic to speculate possible lost revenue.
Simulations and data mining show that each link posted on a file-sharing site will produce in only the first six months of life cycle, at least 4,000 downloads per month. Pirates and hosts often provide downloading statistics in order to encourage more uploading. Their findings, on average, show that a mid-size forum/blog receives 30,000 hits per day. Out of those daily hits, 85 percent convert to downloads. For the first six weeks of life, a link will generate a minimum of 1,000 downloads per week, hence 4,000 per month.
For large and small companies alike, the sheer number of downloads created from pirated content can be catastrophic. To see the damage in action, take the numbers at their most simple and create the following equation.
If there have been 1,000 infringements, in one month, those will have enjoyed 4,000 downloads. 1,000 x 4,000 = 4,000,000 downloads in one month. At 1:1,000 conversion, that leaves 4,000. If each download costs just $1 (1DLP) it amounts to a loss of $4000 per month.
For any sized site, that’s a hefty chunk of change.
The story only gets more infuriating. Not only are the producers losing potential revenue, but like a slap in the face, the thieves are profiting.
The same amount of links can earn pirates anywhere from $3 to $33 per 1000 download. Using the lowest amount of possible revenue they could earn, and the same data for the solo-girl site, their profit looks like this:
(1,000 links x $3 minimum payout x 4,000 downloads) / 1000 unit of payment = $12,000 profit for the pirates.
This scenario is sadly realistic. It happens every day, and though the numbers are so enormous that they seem unreal, it is a daily occurrence. It is a dire place in which the adult industry has found itself. Much like other mainstream content producing industries, companies need to fully face the attack that is being waged on their inventories. Battling against the theft, and protecting ones inventory requires a paradigm shift. The numbers shown above are perhaps too high or too low for your specific situation. The question must be asked however, can you really afford to lose even a fraction of the speculated amount? You must protect your livelihood.
The article was written by the Degban Ltd. Anti-Piracy Team, under the supervision of Ella Black.