| Sept 14
Sept 14 A small number of U.S.-based startups
are harvesting data about the hundreds of millions people who
illegally stream movies, TV shows and music in a bid to create a
new advertising market.
Whether major brands are willing to pay for the opportunity
to market to consumers who steal content -- an industry taboo to
date -- will determine the fate of this cottage industry.
The new businesses measure and track the digital footprints
of illegal downloaders. While the concept is still in its
infancy and has been greeted with skepticism among some media
insiders, a handful of firms are making early inroads.
The biggest of these startups, Tru Optik, signed a deal
earlier this year to share its data with New York media agency
Mindshare, a division of GroupM, which is owned by WPP,
the global advertising and public-relations company.
Three-year-old Tru Optik has assembled a database of the 500
million people who illegally view or share shows and movies via
BitTorrent and other file-sharing platforms. That data is
combined with other user data, including the websites they
visit, zip codes and purchasing history.
Mindshare uses this information to better identify new
genres of movies and shows to help its media clients advertise
to fans of these genres, said Sameer Modha, who oversees
customer data strategy at Mindshare Worldwide.
For example, Mindshare recently noticed from the data that
there is a fan base for shows and movies from several different
genres, including Westerns and science fiction, that all
featured "protagonists who are isolated in some dystopian
Mindshare can use this customer segmentation to help media
clients market relevant shows and movies. But Modha stressed
that Mindshare does not advertise directly to illegal viewers,
and said that understanding their behavior is not the same as
"If I go interview people who steal cars, am I condoning car
theft or am I just understanding the phenomenon?" he asked.
That question gets to the heart of an ethical debate around
these startups and piracy.
Some major industry players, including the National
Association of Broadcasters (NAB), told Reuters they find the
enterprise distasteful but have yet to take any legal action
against this new approach.
"Our members will continue to resist business partnerships
with companies who condone content theft and piracy," said
Dennis Wharton, spokesman for the NAB, which represents TV and
Tru Optik's CEO, Andre Swanston, says the company does not
endorse or condone piracy. Its database allows brand advertisers
to reach these downloaders - identified by IP address and other
anonymous data points, but not by name, according to the company
- with targeted ads on the websites they frequent. No ads are
placed on sites where pirated content is shared or on pirated
content itself, according to the company.
"I don't think it's legitimizing these people because these
are already legitimate consumers," he said, noting that the
illegal downloaders also are heavy buyers of media. "By
providing media companies with better audience data and the
ability to market to these viewers, Tru Optik believes it is
helping clients mitigate piracy and better monetize its
content," Swanston said.
The U.S. Copyright Act prohibits unauthorized use of
intellectual property, and anyone who illegally downloads
content could face fines or even prison. The law does not
address the activity that Tru Optik and the others are pursuing,
namely providing information about these consumers.
The NAB and other industry groups are not lobbying for
regulatory or legislative changes to curtail this fledgling
business. The Federal Trade Commission, which oversees
advertising, has not addressed the issue and did not return a
request for comment for this story.
So for now, one of the biggest obstacles for the startups
may be the comfort level of would-be customers.
Their pitch is based on compelling statistics.
About 70 percent of consumers under 30 in the U.S. and
Germany, for example, have copied, shared or downloaded files
illegally, according to a 2013 study by Columbia University and
research institute American Assembly.
Plus there is evidence these viewers spend more on media
than their peers. A 2014 survey of 2,500 users of BitTorrent, a
protocol that allows people to share files, are 170 percent more
likely than others to pay for digital music.
Tru Optik has signed up about 20 customers, Swanston said.
The Stamford, Connecticut, company has 20 employees and works
out of a former YWCA that has been retrofitted into a loft-style
office, complete with games and a ping-pong table. It's backed
by two venture firms -- Cambridge, Massachusetts-based Progress
Ventures and Connecticut Innovations of Rocky Hill, Connecticut.
Besides its work on peer-to-peer file sharers, Tru Optik
provides clients with analytics on viewership of streaming
platforms, including Roku and Apple TV.
Another Tru Optik client, streaming service YipTV,
discovered from the database that 25 percent of illegal viewers
of the "El Classico" soccer matches between FC Barcelona and
Real Madrid were women who also like novella-type movies, said
YipTV CEO Michael Tribolet.
So the West Palm Beach, Florida, company launched a campaign
marketing its sports offerings to these viewers. It saw a 35
percent increase in subscriptions, including a 10 percent
increase in female customers, Tribolet said.
A MUSICAL VARIATION
Santa Monica, California-based Muzit, which has six
employees, is working with recording artists who want to reach
consumers who have illegally downloaded their songs, said CEO
Tommy Funderburk, who is also a rock singer. The company would
not disclose how many clients it has.
U.S. rock band The Mavericks last year ran banner ads on
several websites, inviting fans to provide an email address for
the chance of winning a guitar signed by the band.
"Many of these people are fans and potential customers,"
New York City-based PeerLogix, which has six clients so far,
according to the company, is pursuing a similar model. It works
with brands and music, TV and movie producers who want to
advertise their content or products to the people who are
illegally viewing the content.
A TOUGH SELL?
Some media and advertising industry executives said they
doubt these businesses will take off. Because entertainment
companies have long called for tougher anti-piracy laws, they
said, lining up with companies seeking to profit from illegal
downloads could undermine their credibility.
Ashwin Navin, CEO of Samba TV, was the co-founder of
BitTorrent, a pioneering platform for illegal viewing and
sharing of content. He called the effort to create an
advertising market aimed at pirates "a tough nut to crack."
"Either treat them as nefarious actors or not," he said.
David Morgan, chief executive of Simulmedia, a New
York-based ad tech firm, notes it is against the ethos of the
way media companies think.
"The entertainment industry is fundamentally built on the
creation and monetization of unique intellectual property," said
But to Tru Optik's Swanston, it's only a matter of time
until the industry embraces this big market.
"Anyone not tapping into this immense source of audience
data is at a huge disadvantage to their competitors," he said.
(Editing by Eric Effron and Edward Tobin)