Pirated Streaming TV Services Eating At Cable Profits, Study Finds

The prevalence of television piracy services are growing in North America—about 6.5 percent of all households using devices—and cable companies are starting to feel the effect, according to a recent study.

A report published by Canadian networking equipment firm Sandvine found there are about seven million people in the United States and Canada who are subscribed to pirate TV services that offer cable-like solutions for a fraction of the price—though such services carry the catch of likely being illegal.

According to Sandvine, the typical pirate TV services—also known as Internet Protocol Television or IPTV—usually costs consumers about $10 a month, compared to about $50 per month for the average cost for a basic cable package from a telecommunications company.

The company estimates that if those people using pirated services, who are generating about $840 million of revenue per year for the piracy providers, switched to one of those standard cable packaged, it would create $4.2 billion of revenue for North American cable providers. While it’s unlikely all seven million would make the switch to a legitimate service, it is clear that the piracy services are cutting into the bottom lines for telecom companies.

For cable providers, the IPTV services present a particular problem because they can successfully replicate the cable offering while providing access to channels that might cost extra on a typical cable package. Sports and premium TV channels like HBO or international channels are regularly available for no additional fee, while cable providers require viewers purchase special packages to access that content.

As pirated services continue to grow, cable and satellite services are feeling the pinch of consumers moving to streaming services, legitimate and otherwise. Eighty-eight percent of U.S. households had cable packages or pay-TV services in 2010. That figure dropped 84 percent in 2014 and is now down to 79 percent according to Leichtman Research Group.

Not only are consumers who are using pirated services hitting the pockets of cable companies, but they are also likely costing them money with the amount of data usage that the streaming services account for.

"Our research reveals that across multiple tier-1 North American fixed access networks, 6.5 percent of households are communicating with known TV piracy services, and these services accounted for more than 6 percent of downstream traffic in the peak evening hours," Sandvine's new report said.

That six percent of downstream traffic may seem like a fraction of total web usage but IPTV services have already overtaken traffic from BitTorrent downloads, which account for 1.73 percent of downstream traffic during peak hours. BitTorrent downloads have typically been the primary form of piracy prior to the availability of streaming options.

For the sake of comparison, YouTube made up 17.5 percent of all downstream traffic while Netflix accounted for more than one-third of all internet activity at 35.2 percent. So while IPTV trails legitimate streaming services, it’s continuing to grow.

Sandvine determined the usage of pirated services by analyzing network traffic over a 30-day period to determine the frequency with which consumers were connected to known pirated TV services during that time.