Facts and figures of Pay-TV signal piracy in Latin America and the Caribbean
Pay-TV signal piracy is a multi-billion-dollar problem in Latin America and the Caribbean. It poses daunting challenges for pay-TV operators, programmers, governments and consumers alike. In fact, the Alianza Contra la Piratería de Televisión Paga en América Latina (Alliance Against Pay-TV Piracy in Latin America), or ALIANZA, estimates that, when all forms of piracy (except the online variety) are taken into account, users of stolen and underreported pay-TV signals exceed subscribers of any legitimate pay-TV service in the region. About 29% of the approximately 86-million Latin American and Caribbean households (HHs) with pay-TV enjoy it through signal piracy, excluding its online variety. Estimates for online piracy in South America point to about 110 million individual users. This memo describes the most common types of signal piracy and highlights estimates of its cost to and negative impact on the pay-TV industry, programmers and governments.
- TYPES OF PAY-TV SIGNAL PIRACY
Today, pay-TV signal piracy stands out as the No. 1 competitor of pay-TV operators and programmers in Latin America and the Caribbean. ALIANZA has identified five main types of pay-TV signal piracy that currently impact the Latin American and Caribbean market. They differ by (1) methodology; (2) driver of the illegal conduct (i.e., consumer, provider); and (3) equipment or tools required to provide or access the stolen signals.
As shown in Figure No. 1, above, “hook-up”, retransmission, FTA and online piracy are all forms of signal theft, in which a consumer obtains illegal or unauthorized access to pay-TV signals or audiovisual streams. Underreporting occurs when pay-TV operators license signals properly but underreport the number of subscribers to their services and, as a result, pay lower intellectual property royalties and lower taxes and fees than otherwise due. In cases of underreporting, unlike signal theft, end users do not take actions enabling piracy and may not even be aware of the improper use of the pay-TV signals they receive.
- PENETRATION OF PAY-TV SIGNAL PIRACY
By its very nature, estimating the extent of piracy and illegality is a challenging task. However, ALIANZA has developed models to do so that are considered accurate in the industry.
“Hook-up” piracy, retransmission and underreporting: These are the most traditional forms of pay-TV signal piracy in Latin America, the Caribbean and elsewhere. To estimate the penetration of these forms of piracy, ALIANZA relies on market research conducted by Business Bureau (BB). With over 25 years’ experience in the industry, BB conducts telephone surveys throughout the region. Overlaying this information with demographic and other market information, it has developed estimates of the number of HHs enjoying pay-TV services. By comparing these numbers to subscriber numbers officially reported by pay-TV operators to national regulatory agencies, as well as privately reported to programmers, BB is able to derive an estimate of how many recipients of pay-TV services benefit from piracy in the form of illegal connections (“hook up”), retransmission or underreporting.
FTA piracy: BB’s experience shows that users of FTA services have greater awareness of the illegality of these services, and therefore are much less likely to respond affirmatively to telephone inquiries about whether they receive pay-TV services. Therefore, BB does not provide estimates of FTA services. However, ALIANZA, through its investigation of the importation and sales of illegal FTA receivers, as well as through the intelligence gained by it in a number of important enforcement actions against servers used to illegally distribute transmission keys, has developed its own internal estimates of the penetration of FTA piracy. Based on such investigative and intelligence information, ALIANZA estimates that there are at least 4 million HHs receiving pay-TV signals through illegal FTAs.
Online piracy is completely outside the scope of BB’s audits and ALIANZA’s estimates; it is not included
in this section. For purposes of clarity, Figure No. 2, below, shows the interrelationship between and the magnitude of the two major types of pay-TV signal piracy, namely, signal theft (except online piracy) and underreporting.
According to BB’s and ALIANZA’s estimates, by September 2015, the total pay-TV market in Latin America and the Caribbean consisted of over 85 million HHs, and 29% of those (~24.7 million HHs) are pay-TV signal piracy users. A breakdown of these estimates is detailed in Table No. 1, below.
The signal theft portion of the piracy phenomenon, estimated at ~15.8 million HHs, comprises:
1. ”Hook-up” piracy and retransmission, both estimated by BB at ~11.8 million pirate HHs; and
2. FTA piracy, estimated by ALIANZA at ~4 million HHs.
Underreporting, consisting mainly of HHs that are not reported by legal pay-TV providers as subscribers but that in fact receive the service and pay for it, is estimated by BB at ~8.9 million HHs.
- LOSSES CAUSED BY PAY-TV SIGNAL PIRACY EXCLUDING ONLINE VARIETY TO PAY-TV INDUSTRY
The Organization of American States (OAS), through its telecommunications advisory body (CITEL), recently acknowledged that “subscription satellite television has been negatively affected” by the widespread use of signal theft devices “to the extent of putting its future development at risk.”
CITEL has urged its member states to “set forth provisions to prevent importation, marketing and use” of such signal theft devices. Table No. 2, below, shows BB’s estimates of pay-TV providers’ total annual losses caused by signal theft, excluding online piracy. According to those estimates, pirate providers operate an illegal market of approximately $4.8 billion—an industry that does not create formal employment, does not pay taxes, fees, or royalties, does not provide quality services and does not reinvest in innovation and better content.
BB estimates programmers’ losses by assuming that the programming cost is 25% of the subscriptions earned by pay-TV providers. Table No. 3, below, summarizes BB’s results and shows that programmers lose annually a total amount of almost $1.8 billion due to pay-TV signal piracy, excluding its online variety
Read the full report here