Copyright thieves' cyberlockers slurp MILLIONS from honest creators, study finds

An economic study of direct download locker sites has found most are used for copyright infringement – and calculates that they're highly profitable. The study looked at download sites like Mega, Rapidgator and Depositfiles, and streaming lockers like Movshare.net, Flashx.tv and Streamcloud.eu.

The study, carried out by NetNames on behalf of the Digital Citizens Alliance, examined the 15 most popular download lockers and the 15 most popular streaming lockers in an attempt to quantify the profits they gain, using info gleaned from busted lockers, inside info from the sites' own hosts and advertising companies, as well as published rate cards. (Ad rates for 4Shared and DepositFiles are already public).

On average, the lockers are reckoned to reap $3.2m annually from advertising. One site was estimated to have gathered as much as $17.2m. When costs are deducted, the virtual chop-shops see a profit margin of some 63 per cent, with the most profitable boasting margins of over 80 per cent.

Most of the sites' revenue, 70 per cent, comes from subscriptions – which offer freetards speedier access to pirated movies and filth – typically for around $10 a month. The Mega network of sites, promoted by previously-convicted German fraudster Kim Dotcom, who was a director of the reincarnated version, charges £137 a year. Just under 30 per cent of the lockers' revenue (29.4 per cent) came from advertising.

On average 78 per cent of the material on the lockers infringed copyright, the study's authors found, with the figure as high as 87.4 per cent for TurboBit.

The result could have been higher but the authors didn't count copyright-fringing pornography - 13.2 per cent of material found on the lockers was identified as porn. The biggest lockers don't return a penny to the creators.

The overheads of infringement

The largest cost that the download lockers face is paying for affiliate schemes (37.3 per cent of costs), while for streaming lockers it's staffing (44 per cent). The affiliate schemes pay uploaders for providing them with the infringing material – the process can be automated by scraping popular links from torrent sites like The Pirate Bay. One ad network, Propeller Ads Media, which is incorporated in the British Virgin Islands, serves the ads for 17 of the 30 lockers studied.

"Some people like look at these sites through rose tinted glasses, and argue they're for sharing amongst friends. But it's all about money and the generation of revenues. It's all about downloading, it's not about backing things up," says David Price, Director of Piracy Analysis at brand protection outfit NetNames, which backed the study.

The dodgy chop-shops differ from legitimate cloud storage services in other ways, too.

"Cyberlocker is making money from the downloader, not the uploader," notes Price. "With Dropbox or Google Drive, they are making their money from the uploader, someone who wants to store files and sync them across devices. The legitimate services control their services, have bandwidth limits, and monitor for infringing content".

In addition, the founders of DropBox are easy to find. Not so with the cyberlockers. In the same way as Propeller Media, the infringing sites use complex corporate structures based offshore in locations including the British Virgin Islands, the Seychelles, and Cyprus.

The study's authors gleaned info from hosting sites and ad networks – and extrapolated conversion rates from Kim Dotcom's busted Mega networks.

Whither the moneymen?

Anti-piracy groups can often be found chasing yesterday's pirates, which, while still significant, only account for part of the damage to the legitimate digital economy. With whacking individuals out of favour with politicians, copyright groups are targeting the lockers' credit card companies. The authors query why rogue sites find it so easy to get financial support from such companies. Price asks:

"PayPal has done a pretty standup job these past three years preventing their own services being used by these sites. If PayPal can do it, why can't Visa and Mastercard stand up and enforce their own anti-piracy policies?"

The study is backed by the Digital Citizens Alliance, which fought dodgy online pharmacies and other scams. It's supported by several internet security companies, and Microsoft. You can study the numbers yourself, here (PDF, 50 pages). ®