Illegal Downloads 150x More Profitable Than Legal Sales

Unlike most people might think, piracy is not necessarily a bad thing for copyright holders. In fact, German pirate-tracking outfit DigiRights Solutions shows that copyright holders can earn 150 times more money from illicit downloads than from iTunes and other legal stores.

TorrentFreak has reported before how pirates have been turned into cash cows by the copyright mafia. However, reliable statistics on how much money the entertainment industry and anti-piracy outfits make from illicit downloads have not yet been disclosed, until now.

The German-based anti-piracy outfit DigiRights Solutions (DRS) recently published an interesting PowerPoint presentation (in German) which shows how copyright holders can make millions from pirates. The document reveals some rather shocking statistics that show how illicit downloads are more profitable than legal downloads.

The presentation starts with some basic information on the various file-sharing networks, and details how the company’s software can detect illegal downloads and automatically send out requests for damages to alleged pirates. Their setup is similar to those at DigiProtect and Logistep who run comparable operations all over the world.

After finding out the addresses of alleged file-sharers they send out requests for damages directly, usually in the range of a few hundred dollars (or in the UK, around £600) per infringement. Thus far, little has been known about the actual profits generated by these operations, but this is exactly what the last part of the DRS presentation covers.

DRS says it generally sends out emails to alleged file-sharers requesting them to pay €450 (650$) per offense. According to the company they get to keep 80% of the money, leaving 20% for the copyright holders. The anti-piracy outfit claims it uses the money to cover their IT costs, administration costs, attorney fees and other costs.

So, for every illegal download the copyright holder gets €90 (130$), and that is where the presentation turns into a marketing talk where the company explains how piracy can be turned into profit. They start by comparing the profitability of legal and pirated downloads.

A legal online purchase of a song brings about €0.60 into the pockets of the copyright holders compared to the €90 per alleged file-sharer that pays up. So, the copyright holders get 150 times more from pursuing filesharers than from selling actual music, the company claims.

However, not everyone who receives a letter will pay up, but DRS says that an impressive 25% of all recipients do without asking questions. This figure is much higher than most people assumed previously.

But we’re wondering off here, let’s talk business.

DRS states that it’s realistic to track and pursue about 5,000 filesharers per month per title. Considering that 25% of those people pay the €90, then the copyright holders would have to to make about 150,000 online sales. Which is equal to the number of sales that are required for a Gold record award in Germany.

Ca-ching!

Companies like DRS have managed to build business models around piracy where the only purpose is to exploit copyright. Thus far they have been active in the UK (with ACS:Law) and Germany, but it’s just a matter of time before they expand their hunting grounds.

DRS and partners are by no means interested in protecting the rights of artists or how to deter people from sharing copyrighted work, it’s a solid cash machine. Undoubtedly it also raises questions whether these extortion practices should be allowed, or whether local governments should intervene.

Thanks Gulli.

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