Sandvine: Pirated live TV could cost service providers $4B in revenue in 2017

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Sandvine identified two main sources of pirate TV access: purpose-built set-top boxes and Kodi.

Pirated live TV has become an ever-growing issue for video providers and content owners, one that Sandvine said could result in the loss of $4 billion in revenue this year alone.

In its latest Global Internet Phenomena Spotlight report focusing on paid subscription television piracy services report, Sandvine revealed that 6.5% of households in North America are accessing pirated live television services each month.

With the live pirate configuration, television piracy aims to replicate the live television experience offered by cable and satellite providers. And it is seeing increased adoption in developed markets.

“Continued adoption of pirate video and television streaming services could lead to increased cord-cutting and create ‘cord-nevers,' people who never sign-up for a standard TV subscription,” said Lyn Cantor, CEO of Sandvine, in a release. “This will significantly impact CSPs’ revenue and profitability, undermining the business models that keep them operating.”

RELATED: Charter loses 104K pay TV subscriptions in Q3; Rutledge blames content creators for fomenting piracy

What makes pirate TV elements difficult for pay TV operators is that many of them stream 24/7, regardless of whether users are watching or not. This results in many users generating over 1 TB of “phantom bandwidth” across their network each month.

One of the most recent examples of widespread piracy was the Mayweather vs. MacGregor boxing match in August. According to Sandvine’s research, the bout accounted for 80% of all pirate streams the evening it occured, and the event may have been watched by 1% of all households in North America.

“On one portion of a tier-1 North American fixed access network, at its peak, the pirated UFC and PPV channels for the Mayweather/McGregor fight accounted for almost 80% of all pirate TV traffic,” Sandvine said in its study.

Sandvine identified two main sources of pirate TV access: purpose-built set-top boxes (STBs) and Kodi. STBs are designed to recreate the experience of using an STB with a traditional cable or satellite television subscription. Kodi may offer a less robust user experience, but Sandvine said that the fact that Kodi software is compatible with many devices that are already in the homes of subscribers makes Kodi a convenient mechanism for using a TV piracy service.

Already, cable operators like Charter are feeling the pain of pirate TV.

Tom Rutledge, CEO and Chairman of Charter, said during the company’s third-quarter earnings call that a good portion of the 104,000 pay TV subscribers it lost was partly due to video piracy.

“You have 35 million one-person households in the U.S,” Rutledge said. “The multiscreen products sold to those households also them to purchase one product and share it with multiple users.”

Premium television, live sports, news and international content are the main drivers of pirate television usage.

Besides service providers, content creators that produce the original programming are also hurt by pirate distribution. Sandvine said that “if the television revenues of CSPs decline,there is less money for to invest in original programming, which in turn could lead to fewer jobs in the entertainment industry.”