Custos uses bitcoin to tackle piracy

The Motion Picture Association of America (MPAA) recently released its latest Theatrical Market Statistics Report, revealing that global box office revenues reached US$38.3b in 2015, up 5% on 2014. The United States and Canada generated US$11.1b, while international box office revenues hit US$27.2b.

Despite the impressive growth, piracy is still an issue. During his keynote speech at CinemaCon in April, Chris Dodd, Chief of the MPAA, stated that tackling the issue would add a healthy US$1.5b to the movie industry’s bottom line.

Christine Peterson, Director for Intellectual Property and Innovation at the MPAA, also addressed the issue, in a request for public comment last October: “Online content theft continues to pose a significant and ever-evolving challenge. Content thieves take advantage of a wide constellation of easy-to-use online technologies, such as direct download and streaming, to create sites and applications with the look and feel of legitimate content distributors.”

Direct downloads predominantly take place on peer-to-peer networks (P2P), which were popularised in 1999 by the file sharing platform Napster. Although they can be used for legitimate purposes, they have been subject to scrutiny, and involved in numerous legal cases surrounding copyright law. Movies, songs, art and many other forms of creative expression have been shared on these networks.

In 2014, the Wolf of Wall Street grossed US$392,000, but was downloaded over 30 million times. The top ten downloaded movies last year all cracked 30 million downloads. Interstellar brought in $675,120,017 at the box office, and was downloaded 47 million times.

Piracy detection services are available, for those who can pay a price. Excipio uses technology to detect copyright infringements that are permissible in court. “The NARS (Network Recording and Supervision) software we use for detection has been completely redeveloped by specialists who have many years of experience in the field of detecting copyright infringements on the Internet. In particular the forensic experience gained from numerous court cases.”

While a company such as Excipio may have the technology to track torrents, the method of peer-to-peer distribution is not an illegal mode of exchange in itself. As a result, piracy tracking companies need to ensure that what they are tracking is in fact an illegal copy and not considered to be under the Fair Use Policy.

The industry also has to contend with sites that host content, or sites that aggregate links to content. These sites attract customers who want to anonymously download and/or stream copyright infringing files. Uploaders are attracted to these sites as there is a profit to be made. NowVideo, for example, pays approximately US$20 per thousand views for uploaded content.

According to a report compiled by NetNames and Digital Citizens Alliance, 30 direct download and streaming sites took in close to $100million in total annual revenue last year, and generated average profit margins of 63 to 88 percent, from a mix of advertising and subscription.

Custos Media Technologies, a startup based in Stellenbosch, South Africa, is tackling the problem from a different angle, by using the bitcoin blockchain. Custos embeds watermarks into the digital content, which are subtle and difficult to remove. If the content is leaked by the intended recipient, typically a reviewer offered a pre-released version of a movie, there is a small bitcoin reward that can be collected by the first person to find it.

“Effectively, Custos’s technology turns the downloaders against the uploaders – thus identifying the original infringers.”
— – Custos

When a media downloader, or bounty hunter, claims the bitcoin in a Custos watermark the transaction can be seen on the blockchain in around 10 minutes, and Custos will then be able to notify the media provider.

As a result, the original source of the content could then be subject to legal penalties, or lose their access to any future content. “In this manner, authorised media users are strongly discouraged from actively sharing files or carelessly leaking them, while at the same time, they need not be inconvenienced by cumbersome security measures,” states Custos.

If caught, and proven guilty, the punishment for facilitating downloading stolen content is hefty. It can cost up to five years in jail and/or fines of up to US$150,000 per file.

“Media creators or distributors who employ this system can reduce the likelihood that content is shared without authorisation, reducing the availability of pirated content for free. They may also benefit from the ability to identify copyright infringers and hold them accountable.”
— – Custos

The Custos solution received a top-five prize from the competition SeedStars World last year, as well as US$140,000 in funding from rom Innovus, the Technology Transfer Office of Stellenbosch University, where the product was conceptualised.

The company recently completed a second-round seed investment of just under US$265,000, part of which came from Digital Currency Group (DCG), based in New York. “We are excited to see the Custos team developing an innovative application of bitcoin technology to solve a problem that is very costly to content producers,” said Barry Silbert, Founder and CEO at Digital Currency Group.

The company is now primed to focus on high-risk media producers “for whom piracy can literally cut tens of millions of dollars from their production budget when a title is leaked,” states Custos. The product offering will also be expanded to independent movie producers, a market that Fred Lutz, Custos COO, believes is particularly susceptible to theft. “A pirate leak can make the difference between being able to pay their employees and going bankrupt.”