C&P: Getting a "Free" Bird Posted By: Mr.Hide on 07-25-2007 hxxp://www.multichannel.com/blog/30000203.html#90012209 In the more than three years since April 2004, when Rupert Murdoch shut down the more than two million pirates attacking his newly-acquired DirecTV, the DirecTV system has remained “hack free.” This is another way of saying no one has yet found a way to break into the system that secures the DirecTV boxes and signals. Yet, like water that flows into and eventually around a dam, that most-effective 2004 DirecTV shutdown was the bane of rival EchoStar, because it meant pirate resources were consequently shifted from DirecTV to the now more vulnerable DISH Network. Since 2004, there has been a large expansion in the number of pirates that target the Digital Broadcast Video (DVB) set-top box standard that supports the DISH Network programming. These pirates use the so-called Free-To-Air (FTA) set-top boxes to view, for free, subscription TV services for which the overwhelming majority of normal, legal DISH Network subscribers pay monthly. FTA pirates tapping into the 13 million legal subscriber DISH Network, as well as into EchoStar’s progeny, the 2.3 million legal subs Canadian Bell ExpressVU (BEV) system, have now distributed their illegal services and products to an estimated two million illegal TV households in the U.S. and Canada. This is at an average hardware unit price of around $200, accounting for almost $350 million in total cumulative revenues. The top three distributors of FTA devices for the EchoStar and BEV systems are, in order, Sun Valley, CA-based PanSat; South San Francisco, CA-based C@@lsat; and Mississauga, ON, Canada-based Fortec. Among just these top three FTA providers, they have already distributed an estimated 1.385 million units, representing sales of well over $200 million in estimated cumulative revenues since 2004. The Carmel Group believes that eight FTA manufacturer/distributors – PanSat, C@@lSat, Fortec, ViewSat, DreamBox, Ariza, DigiWave, Metabox -- account for three-quarters of the FTA business in North America. In short, FTA today in North America is big business. Take the NFL Sunday Ticket that is carried on BEV in Canada, and the level of hacking is even more disturbing. So, just what is FTA? Well, sometimes it’s extremely helpful to compare domestic U.S. practices and infrastructures to those in other parts of the world. Perspective, understanding and point of view are just a few of the resulting benefits. Free-To-Air in Europe today is a thoroughly legitimate infrastructure, supporting an estimated 30 million to 40 million unscrambled subscribers, who buy their systems for several hundred Euros each, then watch advertising-supported free TV from their homes in Europe. This way, they get scores of channels -- albeit almost all ad-supported -- without having to pay a monthly subscription fee. Indeed, when one travels through continental Europe, the strong majority of the dishes mounted on houses in continental Europe are from the FTA ad-based business model. In North America, there are a fair number of FTA programming channels, but unlike the general fare in Europe, the North American versions offer mostly free ethnic and religious programs, which are of interest to only very limited audiences. Such limited programming sources are hard to see as justifying the more than two million FTA boxes sold in North America to date. The way piracy works in North America, consumers turn their FTA receivers into FTA units that steal DISH Network. Also, because DISH Network utilizes the universal DVB standard, and DirecTV does not, Dish is more vulnerable. Conversely, pirates can’t steal high definition signals from DISH, yet. Once the FTA manufacturers get their hardware into North America and into the hands of North American consumers, their success depends substantially on the support they provide customers. “FTA support,” in this case, means providing the best scripts (or codes to open the boxes to “free” programming), the best picture quality, the fastest response after an operator’s Electronic Counter Measure (ECM) has disabled all FTA units, and the best features and functions, including program guides, and doing so at the best price. That is the battle ground among the different FTA competitors. As it relates to providing the needed code to consumers, a one-time script writer, nicknamed Blacklist, is a good example of its importance to the manufacturers. Blacklist worked for a time with the then-leading FTA manufacturer, Blackbird. As a result, Blackbird retained the Number One spot for FTA sales for the time it was associated with the effective script writer, Blacklist. Blacklist was known to have done a most effective job of releasing pirate scripts for Blackbird’s FTA units. Indeed, later, when Blacklist switched to a Blackbird rival, PanSat, the latter’s sales shot up and PanSat then became the Number One North American FTA seller. The Carmel Group believes today that the FTA manufacturer, Oceanside, CA-based ViewSat, is one of the top four FTA sellers, in large measure because of its superior customer service and support. Where is this all going? Whichever manufacturer provides the best piracy support, best features and functions at a price below $200.00 a unit, is going to sell a lot of receivers. This means companies like DISH Network in the U.S. and Bell Express Vu in Canada are losing a lot of subscriber revenues. Moreover, as noted above, the FTA manufacturers and others associated with the multichannel TV piracy business, are delivering a lot of ill-gotten gains. --Written with Sean Badding Jimmy Schaeffler is the chairman and chief service officer, and Sean Badding is the president and senior analyst, of The Carmel Group.
