‘Fining’ File-Sharers Makes Anti-Piracy Company Lose Money

Financial results published by anti-piracy group Rightscorp shows that while turning piracy into profit is a nice idea, it's not lucrative for everyone. A loss of $2.04m in 2013 means that for every single dollar of settlement revenue sent back to companies like Warner Bros., Rightscorp lost close to $13.

rightscorpFor the past six years or so the idea that piracy can be turned into profit has been gaining traction. After Internet users sharing copyrighted material without permission are identified, they can be contacted and pressured into settling what might otherwise be an expensive lawsuit.

Discovering the real-life identities of pirates is not cheap, and that’s where US-based Rightscorp spotted a gap in the market. By attaching settlement demands to DMCA notices that ISPs are compelled to forward to alleged pirates, Rightscorp can reach alleged infringers without even knowing who they are.

Once a warning letter enters the email inbox of an account holder, he or she is invited to visit the Rightscorp website to settle for around $20.00. Some people simply ignore the warnings and nothing else happens. Others choose to pay $20 for say, a single music track, but sometimes discover that Rightscorp has more demands for the rest of the tracks in the album lined up at $20 a pop.

But while collecting $20 for sending an email might sound like a winner, financial results for 2013 just published by Rightscorp paint a pretty miserable picture.

For the year ending December 31, 2013, Rightscorp reports total revenue of just $324,016. So, presuming all of that revenue came from $20.00 settlements, around 16,200 infringement notices were paid during the 12 month period, or around 311 per week.

While this might seem like a decent return for just sending emails, they don’t just appear out of thin air. Rightscorp has costs, lots of them in fact.

When an Internet user settles with Rightscorp some of this money goes back to companies such as Warner Bros., who give permission for the anti-piracy company to exploit their content to generate revenue. According to Rightscorp, during 2013 it paid a total of $161,868 to these companies. When we compare that amount with total revenue of $324,016, we can see that Rightscorp gives away $10 from every $20 settlement.

On paper it’s money for nothing for the copyright holders, but Rightscorp’s $10 cut just isn’t balancing the books due to the large costs of running the business. Under ‘General and administrative expenses’ the company says it burnt through $1,663,921 in 2013, with ‘sales and marketing’ and ‘depreciation and amortization’ coming in at $275,616 and $33,438 respectively.

Add those all together and Rightscorp cost $2,134,843 to run in 2013, yet it brought in just $324,016, a shortfall of more than $1.8 million. After other adjustments the bottom line shows a loss of $2,042,779 for the anti-piracy company, an amount that would take their share of another 204,278 settlements to balance, providing no other costs increased.

While the company has expansion plans for Canada and has filed for patents to extend its monitoring services to Europe, China, Israel, Japan, Brazil, and India, the elusive aim of turning piracy into profit is still some way off.

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