Rightscorp Revenues Collapse, Pirates Too Hard to Track

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Anti-piracy outfit Rightscorp has just turned in another set of dismal results. During the past three months revenues plummeted 78% versus the same period last year with the company recording a net loss of $784,000. Pirates, it appears, are becoming harder to track and threaten.

According to the world’s leading entertainment industry companies, piracy continues to run riot on the Internet. Movies, TV shows, music and software are downloaded in their millions every day, with most anti-piracy measures a mere band-aid.

As a result companies have sprung up to take advantage of this situation, with U.S.-based Rightscorp a prime example. Rightscorp sends DMCA notices to ISPs in the hope they’ll forward them to their pirating customers. Attached to each one is a demand for around $30 to make a supposed lawsuit go away.

While Rightscorp were originally less offensive than some of the larger copyright trolls in the United States, it didn’t take long for their “speeding ticket” type model to start developing into lawsuits, against both regular users and even Internet service providers such as Cox Communications.

Unfortunately for the company this aggression doesn’t appear to be paying off. Rightscorp has never made a profit and in 2015 had its worst year yet after turning in a net loss of $3.5m. The first three months of 2016 are not only worse, but can best be described as dismal.

In its latest quarterly report Rightscorp says that during the three months ended March 31, 2016, the company generated just $68,283 in revenue. To put that into perspective, in the same period last year the company pulled in $307,904. That’s a decrease of $239,621 or 78%.

So what justification does Rightscorp give for losing eight-tenths of its business? Well, as per its 2015 summary the company’s explanation is somewhat vague so we’ll have to read between the lines.

Reason A: Changes in the filesharing software intended to defeat detection of copyrights being illegally distributed

Seemingly deliberately cryptic, this seems to reference file-sharers hiding their online activities, probably though the use of VPNs, proxies and other anonymous technologies.

Reason B: Less forwarding of the Company’s notices by ISPs

If ISPs really are forwarding less notices, Rightscorp are in serious trouble. The company relies on this mechanism to reach alleged file-sharers and if it cannot do that, its business model lies in tatters.

Reason C: The shutting down of some filesharing network infrastructure.

Again, the company gives no details, but it’s certainly possible that the demise of several large torrent trackers during the year made Rightscorp’s job of harvesting IP addresses a lot more difficult since they now have to rely more on BitTorrent’s DHT (1,2).

TF spoke with someone who was close to one of the largest now-defunct trackers who gave us his theory.

“With enough requests, you could find every IP address sharing a torrent via a tracker. Not so with DHT,” he explained. “You could do it with DHT but it would take days, by which time most people have already drive-by-downloaded the file and stopped seeding.”

Since Rightscorp deals mainly with small music downloads the time people spend on a torrent is already much shorter than for movies. It therefore makes sense that the expanded amount of time to track them via DHT could be hurting the company.

Of course, falling revenues are not only a problem for Rightscorp, they’re also a problem for the company’s copyright holder partners. Rightscorp pays out 50% of the revenues it collects to record companies such as BMG, but no one will be getting rich after the first three months of 2016.

“For the three months ended March 31, 2016 we accrued $49,142 due to copyright holders. For the three months ended March 31, 2015 we accrued $153,952 to copyright holders,” the company says.

That decrease of 68% is a pretty poor result, particularly since Rightscorp struggles to maintain even five major clients. Even if the profits were split equally that would be just over $3,000 per month each. With smaller clients on board too, that amount diminishes even further.

But of course that’s not the full picture, Rightscorp has lots of costs too. In the first three months of the year legal fees amounted to $127,617, wages and related charges topped $303,000, with sundry other costs building to a grand total of $961,105.

As a result the company recorded a net loss of $784,180 during the past three months. At this rate the company will lose another $3.1m this year, unless it can stop people from hiding with VPNs, force ISPs to cooperate more, or find a better way to harvest IP addresses.

None seem likely at this point.

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