Pay-TV pirates of the Asia-Pacific: piracy in various forms is costing the Asian pay-TV industry—from channel operators to last-mile operators—at least $970 million a year. It's also impacting foreign investment and tax revenues, and funding crime syndicates and terrorist groups. The good news: regulators may finally be starting to take pay-TV piracy seriously

Telecom Asia,  Dec, 2004  by John C. Tanner

• E-mail
• Print
• Link

Go on. Admit it. You've done it at least once in your life. You've knowingly paid for pirated multimedia. Or you know someone who has. Maybe it was the first season of Buffy The Vampire Slayer on DVD, or a Best of the Bee Gees CD, or Final Fantasy X for PS2. Or maybe it was something more hardware-based, like having your DVD player reconfigured to ignore regional codes or buying a cable W/satellite descrambler.

Okay. Maybe you haven't. But odds are, you have. [Full disclosure: your reporter admits to once buying a fake Faye Wong CD. And Season 2 of CSI on DVD. Sorry.] Case in point: an instant audience poll during a panel session at the CASBAA (Cable and Satellite Broadcast Association of Asia) conference in Hong Kong this past October asked the following question: "Have you ever purchased, rented or knowingly viewed a pirated video product in the last 12 months?"

Some 63% of the audience responded "yes".

The punch line: the topic of the panel session was pay-TV piracy.

Pay-TV piracy is as old as pay-TV itself, particularly in Asia, where in many markets cable TV operations themselves were either unlicensed or downlinking satellite video channels illegally--practices that still go on today. But it wasn't until last year that CASBAA and CLSA Asia-Pacific made the first serious attempt to quantify the scope of pay-TV piracy in Asia in terms of lost dollars, as well as defining the different types of piracy that cable and satellite companies must deal with.

The report was well-timed. Not only is pay-TV becoming a major force in liberalizing markets where cable/satellite monopolies are getting some competition, it's also being positioned as the next big growth area for telcos aiming for triple-play broadband services. Several broadband players across the region have already cracked their respective pay-TV markets, and piracy issues will affect them just as much as they affect cable operators. The same will be true for mobile operators that adopt broadcast video standards like DVB-H (digital video broadcast for handheld devices) or satellite DMB being developed in Korea and Japan.

How big a problem is pay-TV piracy? Last year, CLSA reported that annual losses from various forms of piracy came to a conservative estimate of $874 million for all of Asia Pacific. This year, according to a report released at the end of October, the number was $970 million--up 11%.

Simon Dewhurst, director and head of media and entertainment investment banking at CLSA Asia-Pacific Markets, cautions that this doesn't necessarily mean that piracy is becoming a worse problem, although in some markets it is.

"The figures in the report are estimates, not exact numbers," he says. "The fact that the amount we came up with is 11% higher doesn't necessarily mean the industry is losing more money than last year. It means we've got better at finding where the piracy is. We were much more cautious last year, and even this year's numbers are still conservative."

In fact, says Dewhurst, in a sense the dollar numbers are beside the point. "It's not a matter of operators being out of pocket. This is money that is not being reinvested into the industry. It's not being passed on to the channel providers and the program providers and everyone else in the value chain."

Moreover, Dewhurst adds, the damage from pay-TV piracy also comes from the knock-on impact on things like foreign investment, concerns over IPR protection and even tax losses. There's also the darker side of pay-TV piracy--the fact that some of the money generated by illegal services goes to crime syndicates and terrorist groups.

Beyond black boxes

One key element in pinning down the extent of the pay-TV piracy problem is knowing piracy when you see it. The most obvious facet of piracy is, of course, the consumers who buy descramblers to view cable or satellite TV channels for free. Many in the industry see this as a behavioral issue, in which consumers see cable TV as an entitlement and don't see buying a descrambler as stealing.

"Many people, because of the cultural characteristics in a given market, don't think stealing cable is morally wrong," says David Dea, president and CEO of Taiwan Broadband Communications. "We need to do something about it."

Francis Chang, chair of CASBAA's legal and anti-piracy group, as welt as VP of legal and business affairs for Star Group, says that consumer piracy is a behavior issue based more on economics and ease of access than a desire to stick it to the Big Cable Company.

"Piracy is easy behavior," he says, drawing a comparison between cable piracy and illegal MP3 downloads. "Look at Napster today. There was a survey that asked people if they would rather pay $20 for a CD or download it for free. Most said 'free'. But when they were asked what if they only had to pay one dollar, most said they would pay. So I think most people want to do the right thing, but it comes down to cost benefit analysis."