Some segment of every population will always seek a free hack. That’s human nature. And although broadcasters haven’t felt it much in the past, rampant piracy of their content is threatening their future.

Why? Well, the main reason is because broadcasters’ business models are changing, and pirates like that. Another reason is because pirates can. They make themselves capable of stealing the new, more expensive content. Pirates say it’s challenging and fun to figure out ways to “outsmart the smart ones,” and some even turn the practice into a profitable business for a reasonably long time.

Thus, especially as more – and more valuable—broadcast content finds its way toward mobile devices and onto the Internet, hundreds of millions of broadcasters’ dollars are at the mercy of these content thieves.

Satellite, Cable and Telco Pirates

Piracy among today’s multichannel pay TV providers appears greatest among cable analog subscribers and would-be EchoStar subscribers. As seen recently by EchoStar’s mid-September announcement of its extensive efforts to crack down on signal thieves north of the U.S. border, EchoStar is hoping to take some control of the problem in the form of enforcement exercises. Just as serious for EchoStar, in part because of the DISH leakage, satellite rival DirecTV has already gone more than a year beyond the typical 18-month hack cycle that was last stopped by Rupert Murdoch in April 2004, via the implementation of a still-secure P4 smart card. After nearly fifteen card swaps in the U.K. with his pay service, BSkyB, Mr. Murdoch definitely knows his pirates.

On the cable side, analog systems remain greatly at risk, while digital systems remain generally unhacked. For digital, this has to do with the complexity of the encryption built into the new boxes. Additionally, in the future, digital cable providers are positioned to do card swaps to deter future theft of services. Analog, on the other hand, suffers from people who crawl up telephone poles to disconnect filters and boxes that get altered. At its worst, The Carmel Group estimates that several years ago more than $2 bil. annually was lost to cable hackers.

For telcos, they, like broadcasters, have not yet felt the true threat of the piracy scourge. Yet as they create new content and new content delivery models, the hackers will move toward them, as well.

For Broadcasters

Broadcasters, adding new digital subscription (pay) models, will encounter a new protocol: As they seek to control their content, they will begin using encryption. Encryption in turn triggers pirates to begin stealing broadcasters’ subscription video content delivered via the Internet, digital multicast or to more and more mobile devices (such as cell phones). To the pirates’ way of thinking: Why pay $1.99 for an episode of the Desperate Housewives, delivered to a cell phone or MP3 player, when some challenging (and entertaining) creative mischief can develop processes that make that content come to some (or many) for free? In that vein, a lot of piracy today gets done in the labs at college campuses, by real college researchers.

Working with Hollywood studios, especially, the next generation of broadcasters will have to work to create educational, enforcement and technical incentives aimed at shifting the would-be pirates’ motivation from one that encourages theft to one that instead encourages payment for services rendered. Although paid-for content from broadcasters remains rare, the Internet and multicasting infrastructures may well create many lucrative pay-TV content opportunities, which tomorrow’s broadcasters must begin protecting now.         

For Hollywood, one of its more memorable lines of the past several decades was, “If you build it, they will come.” The same mantra applies to thieves trying to steal subscription broadcast content, wherever it exists: If broadcasters create it, the pirates will come.
 
Notes respected piracy expert, Jim Shelton, “The next generation of broadcasters will have to work closely with a pretty sophisticated group of studios and operators, and start early, if they are going to manage the Monster of Piracy.”