Rightscorp Boss Signs Deal That Could Be Bad News For Pirates

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The new CEO of failing anti-piracy Rightscorp has signed a deal that will see him being paid large sums of money if he can turn the company around. How that will be achieved remains to be seen, but with the pool of file-sharers getting smaller and ever-harder to track, a more aggressive approach may help the company reach its goals.

Anti-piracy outfit Rightscorp is famous for tracking pirates on BitTorrent networks and sending them bills attached to ISP DMCA notices. They ask for a relatively small amount, around $20 to $30, in the hope that people settle quickly.

Unfortunately for them, the company is a miserable performer and has lost millions over the past few years. On a good day its stock is worth around $0.04. On a bad one, barely half of that.

Last June, Rightscorp announced that it had hired a new chief financial officer. Cecil Bond Kyte, a former CEO and Chairman of Save the World Air, Inc. (STWA), was said by the company to possess unique and valuable skills, particularly in the fields of company management experience and capital raising.

“Under his stewardship, STWA grew from roughly $10 million in market capitalization in 2007 to an in excess of $350 million by 2013,” Rightscorp said.

At the time, the CEO of Rightscorp was Christopher Sabec. However, on February 14, 2017, Sabec resigned to take up the position of company president. Immediately, Cecil Kyte took over as CEO.

One month later and Rightscorp’s new CEO has signed a rather interesting deal with the company. In a March 18 filing, Rightscorp reveals it has entered into a three-year deal with Kyte, which on completion will renew every year. However, it’s the financial aspects that are perhaps most interesting.

Kyte will initially receive an annual base salary of $150,000. However, that will increase to $250,000 if the company can generate $100,000 in gross monthly revenue for three consecutive months.

Rightscorp is due to publish its latest set of financial results, which may reveal some improvement. However, during the three months ended September 30, Rightscorp struggled to generate just $139,834 in total, around $46K per month. On that basis, Kyte needs to double turnover to get his $250,000 salary.

The incentives do not stop there, though. If the company’s new CEO can guide Rightscorp beyond $2,500,000 in gross revenue in any one year period, he can take home a salary of $350,000. That will increase to $500,000 “upon the Company’s receipt of an aggregate of $10,000,000 in cumulative gross revenue.”

Although his $50k signing bonus will have been welcomed by Kyte (not to mention the five million shares of common stock he’ll receive “upon execution of the employment agreement”), achieving these kinds of figures seems like a big ask.

In the year ended 2014, Rightscorp had revenues of $930,729 but made a loss of $2,852,705. In the year ended 2015, Rightscorp generated lower revenues of $832,215 but somehow managed to lose even more – $3,434,567. Interestingly, however, Kyte’s deal doesn’t appear to be linked to Rightscorp turning a profit in any way, since it’s a turnover-focused arrangement.

That being said, with so many shares involved it’s clearly in Kyte’s interest to see Rightscorp develop into a successful company, but can that be achieved? A few clues exist.

Last March, when the anti-piracy outfit was explaining away another set of terrible results, it made several observations.

First, that there had been “changes in the filesharing software intended to defeat detection of copyrights being illegally distributed.” That was interpreted as a reference to increased uptake of anonymity services, such as VPNs. If Rightscorp is looking for an improvement in this area, it probably needs to reassess.

Second, the company said that the “shutting down of some filesharing network infrastructure” had made it more difficult to track pirates. Rightscorp didn’t elaborate, but it’s possible that the demise of several large torrent trackers during the previous year made Rightscorp’s job of harvesting IP addresses a lot more difficult.

Third, the company said that fewer ISPs were passing on its notices, but this is an area that might potentially offer Rightscorp a ray of hope. Although the battle is still ongoing, Rightscorp customer BMG has booked some significant legal wins against Cox Communications in the United States, something which might persuade other ISPs to play ball with Rightscorp in the future.

The other big unknown is whether Rightscorp will change its business model or, more specifically, the pricing structure for its fines.

As the company notes, the pool of torrent users it can track for payment is currently diminishing. While there are still plenty to go at, trying to extract $40, $50 or $60 from each pirate (instead of $20 or $30) would do wonders for turnover with little to no extra costs involved.

And, with other companies getting involved in the space demanding around $300 per shot, an inflated Rightscorp ‘fine’ might start being perceived as a bit of a bargain, if pirates begin to take them seriously.

Only time will tell how Kyte’s influence will play out in public, but with Rightscorp’s annual results due very soon, it’s expected that the company could be very close to reaching its do-or-die moment. In avoiding the latter, it could be pirates that suffer.

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