The idea is a relatively simple one. Every day millions of pirates are downloading content online without permission, so tracking them down and asking them to pay a fine should enable rightsholders to make a few extra bucks.
Of course, there are countless millions of infringements every day so those small payments soon add up, an attractive proposition for people doing business with Rightscorp, the US-based anti-piracy company hoping to turn piracy into profit.
There’s little doubt that Rightscorp’s clients are making at least some money from the deal. To date the anti-piracy company reports closing more than 230,000 cases of infringement, so at $20 and more recently $30 a shot, that’s a bit more than chump change.
However, as Rightscorp’s most recent filing reveals, the numbers in the whole package simply don’t add up.
For the three months ended September 30, 2015 the company generated revenues of $215,196, that’s 13% down on the $248,387 it made during the same period last year.
Not great, but since copyright holders get roughly 50% of collected revenues, Rightscorp paid them $107,598, a nice little return for doing very little. That said, it’s less than the $124,194 they received during the same period in 2014.
After paying out 50% of its revenues, Rightscorp not only has to run a business with what’s left, but also turn a profit. To date the company has not been able to do that. Its latest filing reveals a continuation of that trend and a set of issues that could hinder the company on a long term basis.
The rot starts with the company’s basic running costs. For the three months ended September 30, Rightscorp’s bill for wages and related expenses stood at $345,449, an amount way in excess of its total revenues for the same period. That, however, is just the beginning.
As previously reported Rightscorp has managed to get itself bogged down in several legal battles and they are costing the company dearly.
“Legal fees related to various matters totaled $295,865 for the three months ended September 30, 2015, compared to $90,552 for the three months ended September 30, 2014,” the company reports.
Overall, Rightscorp’s general and administrative expenses for three months ended September 30, 2015 amounted to $1,116,589. That means that the company recorded a net loss of $424,168. Bad, but certainly an improvement over the same period last year when it lost $894,241.
The totals, however, paint a dismal picture. Although revenues were up in the first nine months of 2015 versus the same period last year ($756,916 vs $688,801), the company’s costs ($1,355,407 on wages, $3,967,527 general and admin) meant the company managed to lose substantially more money.
“During the nine months ended September 30, 2015, we recorded a net loss of $3,120,197 compared to a net loss of $2,299,522 for the nine months ended September 30, 2014,” Rightscorp reveals.
As noted above, legal fees are a major problem. After spending ‘just’ $326,985 in the first nine months of last year, during the same period in 2015 Rightscorp burned through $1,058,188.
But the costs incurred are only part of the problem. Rightscorp says the time being spent on legal matters is having a negative effect on its core business.
“The decrease in revenues [during the last quarter] was due to a disproportionate amount of time being spent by the Company supporting clients in legal matters,” the company says.
Overall, Rightscorp’s position this year thus far can be boiled down to one sad statistic – for every dollar paid in fines by pirates, Rightscorp loses $4. That’s definitely not turning piracy into profit.