Pay TV Piracy: Avoiding Actionable Neglect (Or Worse)

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Attacks by pirates on North American pay-TV vendors have been a serious problem for decades.

Yet there are steps and methods that pay TV operators — whether cable, telco, satellite and/or Internet-Over-The-Top (OTT) providers like Netflix, Best Buy, WalMart, and Hulu — can and must take to minimize the practice/threat of the old piracy industry adage, “What man makes, man can break.”

Historical Context

Cable once had a rather significant piracy problem, because analog systems were relatively easy for would-be or actual customers to hack into. That changes when a customer is upgraded from analog to digital because cable operators are able to control the problem of piracy within a digital system by use of two-way addressability with a landline connection.

DirecTV, during its first decade, also experienced a significant piracy problem, due in large measure to its use of off- the-shelf smart cards. Yet, once DirecTV in early 2004, under then incoming owners Rupert Murdoch and News Corp., switched to a customized integrated security chip its piracy problem was promptly eradicated. Indeed, the DirecTV piracy fix that, via traditional wisdom, was supposed to remain secure for roughly 18-24 months, has instead lasted more than six years and there are no signs of pending weakness.

Dish Network, on the other hand, has never had a custom card solution. It has always used the cheaper, yet traditionally harder to police, off-the-shelf smart cards. Up until about a year ago, Dish had been hacked to the tune of an estimated two million pirate users, according to figures gathered by The Carmel Group and its partner, Shelton & Associates.

In Canada, Dish Network’s cousin, Bell Satellite, has faced similar problems fighting piracy, in large measure because it utilizes EchoStar set-top boxes, and the same conditional access system provided by Nagravision. Indeed, Bell Satellite is currently being sued in Canadian federal courts by major cable operator Videotron, for having acted neglectfully (or worse) to permit piracy during the past decade or more (see footnote below).

OTT providers today are far less worried about piracy than they are about just making their new systems work, and acquiring new users. Yet, when their viewer numbers increase to the point where it makes sense for pirates to invest in finding ways to break those OTT systems, then the tables will turn. Those scenarios are likely at least a couple of years away for most OTT providers.

Where Piracy Stands Today

Because of its success transitioning from analog to digital, the cable industry in North America today generally remains quite secure from attacks upon its hundreds of systems on the continent, especially as the transition from analog to cable proceeds apace. This security is likely to continue, especially because, with more than 60 million U.S. pay TV subscribers, there is so much at stake for the cable operators.

DirecTV, as well, seems to have a solid handle on its piracy picture. However, the larger DirecTV becomes relative to subscribers and other financial measures, the more the DBS leader becomes a greater target (with greater rewards) for the successful hackers.

Dish and its Canadian relative to the north, Bell Satellite, are currently relatively secure. However, they more than digital-cable industry or DirecTV, remain more vulnerable because of the anti-piracy hardware and software they currently deploy.

As for the OTT providers, they likely will attract more than their fair share of hackers looking to find their ways into their systems. They will be attacked for no other reasons than that they are new systems that offer new routes to piracy. Indeed, many hackers will presume that because they are new, these video providers are less likely to have spent the time and the money to understand and properly deal with the threat of piracy.

Jimmy Schaeffler is chairman and CSO of Carmel-by-the-Sea-based consultancy The Carmel Group.

(Footnote: The Carmel Group and Shelton & Associates have been retained by Videotron to represent it and its litigation partners as consulting and expert witnesses in the case, Videotron, TVA et al vs. Bell ExpressVu.)