Wholesalers and retailers sell monthly subscriptions to stolen content as well as devices that often contain malware.
At least 3,500 online marketplaces generate about $1 billion in revenue every year in the US by selling stolen digital content to about 9 million customers, according to a new report. This study of pirate subscription internet protocol television (PS IPTV) describes this industry as well-organized and profitable with low entry costs and high margins.
"Money for Nothing: The Billion-Dollar Pirate Subscription IPTV Business" from the Digital Citizens Alliance and NAGRA examines the industry, how it works, and what the profit margins look like. These entrepreneurs steal movies, streaming content, and entire television series and resell monthly subscriptions to customers.
Many retailers have only several thousand customers each and can still make a healthy profit. NAGRA analyzed the operations of a medium-sized reseller with about 5,000 subscribers who paid about $120 per year. That works out to $600,000 in revenue per year.
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Pirates also use ads to finance their operations and sell devices loaded with apps that have stolen content. To round out their illegal ecosystem, some of these distributors include malware in these devices and steal their customers' data and other assets.
Customers of these illegal PS IPTV services are putting their home networks at risk. NAGRA also found that the distributors of these devices often turn over the Internet connections of their customers to other groups that could use them for illegal activities, such as accessing child pornography, committing fraud, or participating in cyberattacks.
Piracy-driven malware exposes users to software that can:
- Hold their data for ransom by encrypting it
- Steal personal data to sell to cyber criminals
- Use the device's resources for cryptocurrency mining
- Launch denial of service (DDoS) attacks
Finally, NAGRA found that some pirate services distribute adult content as well as banned and unlawful content. The researchers found that almost half of the pirated content services included Al-Manar in their channel list, which was designated in 2004 by the US government as a global terrorist entity. The channel is banned in the US and in a number of European countries.
The report found that it's relatively cheap to set up a pirated content service. One popular encoder is $3,000 and can simultaneously acquire 20 HD live channels and re-encode them on-the-fly for IPTV re-streaming.
The report authors also found that legitimate businesses may be supporting these content thieves including:
- Payment processors
- Hosting providers and content delivery networks
- Website services
- Social media marketing
The report authors concluded that:
"...the sheer scope and size of the streaming piracy ecosystem should trigger alarm among policymakers, law enforcement, consumer protection groups, and the technology and financial services industries, and spark a serious discussion about what efforts are needed to diminish this growing problem."
To track this illegal enterprise, NAGRA crawls thousands of websites and online marketplaces that sell subscriptions to PS IPTV services across the world. NAGRA tracks data on the services, including language, price, channel lists, and geographical market. NAGRA has acquired, tested, and monitored hundreds of PS IPTV services. The organization also gathers metrics on how popular these storefronts are based on multiple internet sources, including Google, Bing, Alexa, Facebook, Twitter, YouTube, LinkedIn, and major app stores.
The Digital Citizens Alliance is a nonprofit that educates consumers and policymakers about Internet security. NAGRA is the digital television of the Kudelski Group and provides monetization platforms for digital content.
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