Pay-TV pirates of the Asia-Pacific: piracy in various forms is costing the Asian pay-TV industry—from channel operators to last-mile operators—at least $970 million a year. It's also impacting foreign investment and tax revenues, and funding crime syndicates and terrorist groups. The good news: regulators may finally be starting to take pay-TV piracy seriously

Telecom Asia, Dec, 2004 by John C. Tanner

CLSA's Dewhurst notes that the industry is perhaps putting too much focus on customer piracy, which is in fact just one element of piracy that only accounted for $154 million in lost revenues this year. He adds that educating the consumer only addresses one aspect of the problem, which is where the customer knowingly does something wrong.

"In other cases, the customer doesn't even know the service is illegal or that the operator is getting their satellite channels illegally," he says.

Indeed, unauthorized operators are costing the pay-TV industry much more money-at least $256 million annually. That includes both operators operating without a license and licensed operators that downlink satellite channels without paying for them.

Other types of piracy include under-declaration of subscribers by operators (typically in an attempt to lower licensing fees from channel operators--$32 million), ad masking (the practice of operators selling local advertising space over advertising already sold by the channel operator--$17 million) and satellite overspill (i.e. pointing your satellite dish in, say, Singapore to a satellite and downlinking channels intended for operators in Thailand--$3 million).

The amount of these types of piracy varies from market to market. For example, Thailand has twice as many illegal pay-TV subscribers as legitimate subs, due mostly to illegal cable systems outside of Bangkok. In the Philippines, unauthorized access by users accounts for 77% of piracy. Taiwan loses $113 million annually to a mix of piracy activities, including unauthorized operators, subscriber under-declaration and ad masking. Hong Kong's piracy mainly comes from overspill and pirated cable set-top boxes.

Interestingly, India's piracy problems are so vast and idiosyncratic that it's a pay-TV piracy category unto itself. It's also by far the largest, logging over $564 million in piracy losses a year--more than all other categories in all other markets combined.

"There's a huge gray market in India where dollars are not being reported by the channel operators, the MSOs or the last-mile operators that actually go door to door and collect the cash," says Dewhurst. "That alone is costing India's pay-TV industry $507 million a year."

One reason India gets its own category, Dewhurst explains, is that the gray market stems from the legacy of how India's the pay-TV market has developed.

"In 1991 during the first Gulf War, CNN ran its Middle east footage using a satellite that sits over the subcontinent. Small cable operators were formed in India to pass those signals on so people could know what was going on. A professional pay-TV infrastructure was later built on top of that, but they found that they couldn't eradicate the old structure, because that's what people were used to, and were forced to adopt the market practices at the last mile."

Not just revenue leakage

While the CLSA/CASBAA report may go a long way in illustrating the scope of the problem, the immediate question is: What can be done about it?