In copyright enforcement circles the terms ‘piracy’ and ‘profit’ are often cited in close proximity. Entertainment companies bemoan the alleged profits made by ‘pirate’ sites at the expense of creators, while the same entities claim that piracy is killing their business, even while making billions.
Somewhere in the middle ground lie the groups that seek to turn piracy into profit by punishing the infringements of others. Traditional ‘trolls’ seek thousands from alleged Internet pirates via the courts, but companies such as Rightscorp Inc chase individuals for relatively tiny sums – $20 per shot – for unauthorized content downloads.
It’s a strategy the company insists will eventually pay off but if the latest set of results filed by the Los Angeles-based outfit are anything to go by, investors should be wary of holding their collective breaths.
In a call with investors yesterday things appeared to start reasonably well. Rightscorp President, COO, CTO, and CFO Robert Steele began by reporting how well the company had performed in the final quarter of 2014. Total revenues were almost $242,000, up 56% from the $155,300 achieved in the same period of 2013.
For the full year, things looked even better. From January 1 to December 31, 2014, Rightscorp pulled in close to $931,000 in revenues, that’s 187% up on 2013 when the company generated just $324,000. Steele said the growth in the company’s revenues can be attributed to two key areas.
Firstly, the growing number of copyrights for which the company has contracts to extract settlements from customers. On December 31, 2013, Rightscorp were detecting infringement on approximately 30,000 titles but by the same date in 2014 that had skyrocketed to around 230,000.
Secondly the company says it is getting more and more ISPs on board. It now claims to deal with 233 and has received settlements from customers of five of the top 10 US ISPs including Comcast, Charter, CenturyLink, Mediacom and Suddenlink. The idea is that more ISPs participating should mean more notices being forwarded and a more healthy bottom line for the company. But that’s only the theory.
The problem for Rightscorp is that when compared to the revenue being generated from infringements, its costs are astronomical. It pays out around half of its revenues to its rightsholder clients, which in 2014 amounted to $465,364. But when one looks at the bigger picture that’s much, much less than half of the company’s problems.
In 2014 the company spent around $139,000 on sales and marketing. Its wages bill increased from $637,000 in 2013 to almost $1.15 million in 2014. And last year its lawyers earned more too.
In 2014 the company’s legal bills neared $481,000, that’s up from $355,500 in 2013. The increase is attributed to legal action being taken against the company, including harassment cases currently in the pipeline.
All told, Rightscorp incurred operating expenses of $4,329,602 during the twelve months ended December 31, 2014, versus $2,134,843 for the twelve months ended December 31, 2013.
So, with revenues of approximately $931,000, that’s a loss of around $3.4 million for 2014. The company lost ‘just’ $1.81 million in 2013. Nevertheless, Rightscorp still see their situation as positive.
“We recorded our strongest year yet with an astounding 187% year-over-year growth,” Steele said. “We are confident that by focusing on these growth metrics, we will be able to capture significant growth ahead.”
The company’s latest 10-K filing paints a more gloomy picture, however.
“The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern,” the filing reads.
“The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. If the Company is unable to obtain adequate capital it could be forced to cease operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.”
While the company’s accounts give cause for concern, the precarious situation is only amplified when one examines Rightscorp’s over-exposure to a limited number of copyright-holder clients. In 2014 a total of 76% of Rightscorp sales came from one client, BMG Rights Management. The company’s contract with Warner Bros. accounted for a further 13% of sales.
If the former pulled the plug (and after a one year contract BMG only needs to give 30 days notice to do so) it could be game over for Rightscorp.
Tag: Comcast
Blackburn Bill Attempts To Gut New Net Neutrality Rules. You Know, For Freedom
During the last election cycle, Representative Marsha Blackburn received $15,000 from a Verizon PAC, $25,000 from an AT&T PAC, $20,000 from a Comcast PAC, and $20,000 from the National Cable and Telecommunications Association, according to the Center for Responsive Politics. Surely that funding is only coincidentally related to Blackburn’s recent decision to rush to the defense of awful state protectionist law written by the likes of AT&T and Comcast, preventing towns and cities from doing absolutely anything about their local lack of broadband competition.
That money surely is also only tangentially related to the fact that Blackburn has also just introduced the “Internet Freedom Act” (pdf), aimed at gutting the FCC’s recently unveiled Title II-based net neutrality rules and prohibiting the agency from trying to make new ones. Whereas most of us thought net neutrality is about protecting consumers and smaller competitors from the incumbent ISP stranglehold over the last mile, Blackburn’s website informs readers that net neutrality rules harm innovators, jobs, and err — freedom:
FCC Approval Of Zero Rating Shows Companies Can Still Violate Neutrality Under New Rules, They Just Have To Be More Clever About It
We’ve discussed more than a few times the awful precedent set by AT&T’s Sponsored Data effort, which involves companies paying AT&T to have their service be exempt from the company’s already arbitrary usage caps. While AT&T pitches this as a wonderful boon to consumers akin to 1-800 numbers and free shipping, as VC Fred Wilson perfectly illustrated last year, it tilts the entire wireless playing field toward companies with deeper pockets that can afford to pay AT&T’s rates for cap exemption.
So how will the FCC’s new net neutrality rules impact AT&T’s plans? There’s every indication it won’t. The rules are still a few years and a few legal challenges away from becoming tangible, and in the interim, the FCC is telling companies that none of the zero rated efforts currently in play should be impacted. Meanwhile, the Netherlands, Slovenia, Norway, Chile and now Canada all realize the threat posed by zero rated apps and have passed net neutrality rules that outlaw zero rating. The FCC, in contrast, has consistently implied it sees zero rating as “creative” pricing.
That’s given AT&T the justifiable confidence to sally forth with its dangerous precedent. After all, injecting a gatekeeper like AT&T (with a generation of documented anti-competitive abuses under its belt) right into the middle of the wireless app ecosystem won’t hurt anyone, and has nothing whatsoever to do with net neutrality.
Comcast Blocks HBO Go From Working On Playstation 4, Won’t Coherently Explain Wh
About a year ago we noted how Comcast has a weird tendency to prevent its broadband users from being able to use HBO Go on some fairly standard technology, including incredibly common Roku hardware. For several years Roku users couldn’t use HBO Go if they had a Comcast connection, and for just as long Comcast refused to explain why. Every other broadband provider had no problem ensuring the back-end authentication (needed to confirm you have a traditional cable connection) worked, but not Comcast. When pressed, Comcast would only offer a generic statement saying yeah, it would try and get right on that:
“With every new website, device or player we authenticate, we need to work through technical integration and customer service which takes time and resources. Moving forward, we will continue to prioritize as we partner with various players.”
And the problem wasn’t just with Roku. When HBO Go on the Playstation 3 was released, it worked with every other TV-Everywhere compatible provider, but not Comcast. When customers complained in the Comcast forums, they were greeted with total silence. When customers called in to try and figure out why HBO Go wouldn’t work, they received a rotating crop of weird half answers or outright incorrect statements (it should arrive in 48 hours, don’t worry!).
Fast forward nearly a year since the HBO Go Playstation 3 launch, and Sony has now announced an HBO Go app for the Playstation 4 console. And guess what — when you go toactivate the app you’ll find it works with every major broadband ISP — except Comcast. Why? Comcast appears to have backed away from claims that the delay is due to technical or customer support issues, and is now telling forum visitors the hangup is related to an ambiguous business impasse:
“HBO Go availability on PS3 (and some other devices) are business decisions and deal with business terms that have not yet been agreed to between the parties. Thanks for your continued patience.”
Since every other ISP (including AT&T, Verizon, and Time Warner Cable) didn’t have a problem supporting the app, you have to assume Comcast specifically isn’t getting something from Sony or HBO it would like (read: enough money to make them feel comfortable about potentially cannibalizing traditional TV/HBO viewers). It’s a good example of how crafting net neutrality rules is only part of the conversation. It’s great to have rules, but they don’t mean much if bad or outright anti-competitive behavior can just be hidden behind half-answers and faux-technical nonsense for years on end without repercussion.