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One of the most prominent companies employing this model today is US-based Rightscorp. By leveraging ISPs’ tendency to forward infringement warnings to users, Rightscorp attaches settlement demands to DMCA-style notices. When these reach the user they are currently invited to pay around $30 or face a potential lawsuit.
How many notices the company sends out is unclear but it’s likely to be millions overall, since according to the company’s most recent filing around 230,000 people have settled. It sounds like it should be a lucrative business but ever since the company was incorporated in 2010 the numbers haven’t added up. Indeed, Rightscorp’s latest filing, its 2015 Annual Report, indicates a crisis at the company.
The report begins with a positive, noting that in September 2015 Rightscorp entered into a representation agreement with Sony/ATV Music Publishing LLC. But that’s where the good news ends.
During the year ended December 31, 2015, Rightscorp generated revenues of $832.2K. That’s down 10% ($98.5K) when compared to the $930.7K generated in 2014. Not a great start and gets worse.
To begin, all of those revenues aren’t for Rightscorp to keep. The total is split with rightsholders, roughly 50/50, meaning that in 2015 Rightscorp paid almost $439K to its copyright holder partners, down from the $465.3K paid out in 2014. Sadly for Rightscorp the $392K in revenue left over isn’t enough to make ends meet, not by a long way.
In 2015 the anti-piracy outfit burned through more than $1.67m in wage and related expenses plus $216.3K on sales and marketing. Also causing problems are the costs mounting up due to various legal battles (1,2,3). In all, Rightscorp spent more than $951K on legal proceedings in 2015, up from $465K the year before.
When combined Rightscorp’s general and administrative expenses were close to $4.5m in 2015, up almost $737K on the previous year. As a result the company recorded a net loss of $3.43m, up from the $2.85m net loss recorded in 2014.
Furthermore, the company’s precarious position is only underlined with the revelation that 72% of its revenues are attributable to just two rightsholder customers, with one alone accounting for 58% of revenues.
While it’s fairly obvious that this model isn’t currently working, there seems to be no light at the end of the tunnel. Not only are Rightscorp’s costs going through the roof but its revenues are falling too, despite the company’s insistence that piracy is as prevalent as ever.
So how does Rightscorp explain the drop in settlements achieved? Well, this is where it gets interesting.
According to the company’s annual filing there are three key reasons, including an unwillingness by Internet service providers to forward Rightscorp settlement demands to their customers. If that is the case then the anti-piracy outfit has a huge problem, since without that mechanism it cannot cheaply contact alleged pirates with an offer to settle.
But while the ISP dilemma is clear, the other reasons provided by Rightscorp for falling revenues are less so.
The anti-piracy outfit additionally blames “changes in the filesharing software intended to defeat detection of copyrights being illegally distributed.” For a company specializing in anti-piracy technology this statement is terribly uninformative and gives the impression of a riddle designed to confuse.
So, since there have been no real changes in the way BitTorrent software operates since its inception, the truth must lie elsewhere. Reading between the lines this seems likely to be a reference to people using anonymizing techniques (VPNs, proxies etc) which make it impossible for Rightscorp to track them down. Not a good situation for shareholders.
Oddly, the language used by Rightscorp to explain the third reason behind its drop in revenues in no more clear. Blaming “the shutting down of some filesharing network infrastructure” for achieving fewer settlements, the company gives no hint as to what that might mean, especially since according to them file-sharing traffic is only on the increase.
With file-sharers seemingly hiding, ISPs passing on fewer notices, coupled with Rightscorp’s inability to control its costs, it seems unlikely that the company has much of a future.
“Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing,” the company concludes.
In recent years copyright holders have overloaded Google with DMCA takedown notices, targeting links to pirated content.
These requests have increased dramatically over the years. In 2008, the search engine received only a few dozen takedown notices during the entire year, but today it processes two million per day on average.
Copyright holders have used this increase to call for tougher anti-piracy actions from search engines and other intermediaries, claiming that the current system is broken. For its part, Google is concerned that the continued increase may lead to more mistakes.
This week, researchers from Columbia University’s American Assembly and Berkeley published an in-depth review of the current takedown regime, with one study zooming in on the millions of takedown requests Google receives every week.
Using data Google provides to the Lumen database, the researchers reviewed the accuracy of more than 108 million takedown requests. The vast majority of these, 99.8%, targeted Google’s web search.
According to the researchers their review shows that more 28% of all requests are “questionable.” This includes the 4.2% of notices in which supposed infringing material is not listed on the reported URL.
“Nearly a third of takedown requests (28.4%) had characteristics that raised clear questions about their validity, based solely on the facial review and comparisons we were able to conduct. Some had multiple potential issues,” the researchers write.
Among the “questionable” takedown requests are those that target websites that have been shut down over a year ago. As shown in the figure below, rightsholders such as NBC Universal continued to target websites such as Megaupload.com and BTJunkie.org long after they were gone.
“A few senders—generally targeting unauthorized file-sharing sites—continued to send requests targeting links that led to long-defunct sites, calling into question the checks they do to keep their automated algorithms accurate,” the researchers write.
Reporting dead sites
Other questionable notices were improperly formatted, included a subject matter inappropriate for DMCA takedown, or had potential fair use issues, among other things.
Joe Karaganis, co-author of the report and vice president of Columbia University’s American Assembly, informs TorrentFreak that the often automated notices are problematic because the increase in volume makes human review rather impracticable.
“The problem with automation isn’t that it gets stuff wrong. Human senders turn out to be even worse on average. It’s that automation scales the process up in ways that has made meaningful human review difficult or impossible,” Karaganis says.
“With notice sending robots talking to notice receiving robots, the step of actually looking at the targeted content often drops out of the equation. The main contribution of our study is to go back in to look at the targeted content and make those human judgments,” he adds.
The result of the high number of “questionable” takedown notices is that Google likely removes more content than it should. The company currently acts in response to 97.5% of the takedown requests, which means that the vast majority of the questionable notices are honored.
“At a minimum, Google takes a very conservative approach to these issues and yes, probably over removes content,” Karaganis says.
“They are not special in this regard. Given the risk of high statutory penalties if a service rejects a valid notice, most if not all of them err on the side of takedown. Some just categorically take down 100% of the requests they receive.”
The researchers include several policy recommendations on how the current takedown process can be improved. Among other things, they suggest making it more difficult for senders to issue questionable notices without risk.
In addition, they warn against the “notice and stay down” and automated filtering mechanisms copyright holders frequently call for, as these may increase the potential for abuse while hurting due process.
The report, first highlighted by the Washington Post, is very much in line with the position Google has taken thus far.
In that regard, it is worth highlighting that the research is in part funded by Google, who will undoubtedly deploy it in future lobbying efforts, much like the copyright industries do with the research they fund.
Google won’t have to wait long before it can put the study to use, as the U.S. Government is currently running a public consultation to evaluate the effectiveness of the DMCA’s Safe Harbor provisions. This includes issues around automated takedown requests and potential abuse, and the deadline for comments expires tomorrow.
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