Anti Piracy
& Anti Counterfeit Blog

What Red Points learned about counterfeit and piracy in 2016

Posted by Laura Urquizu on Tuesday, Jan 10, 2017

2016 saw no signs of slowing down in terms of piracy and counterfeiting.  As these issues seem to continue growing despite the best efforts to stop them, we created this article in order to highlight and review what we believe are some interesting cases on the subjects.

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Some say imitation is the best form of flattery, but how much is too much before it turns into a problem? Counterfeiting has become a common crime these days, costing billions of dollars each year and jeopardizing companies and businesses around the world. Although many are making their best efforts to fight it, counterfeit goods are becoming more and more common every year, and 2016 was no exception. Now that this year is coming to an end, we would like to share what we have learned from 2016.

The Amazon controversy

In October Amazon was caught in a scandal after finding out that 90% of the Apple accesories they were selling were fakes. Fake products on Amazon are not a new phenomenon, considering the company relies on 3rd party sellers, some of whom often engage in this practice. What makes this case so interesting is that, even though Amazon claim to have a strict anti-counterfeit policy, they could not initially explain why fake products were being sold as genuines by one of their own retail units.

In an attempt to reduce this the company adopted a 'Brand Gating' policy, which consists of asking for special documents and charging fees to online sellers that want to sell certain brands. Although Amazon hopes this will make it harder for counterfeiters to sell fake products, smaller to medium size sellers believe this will only affect them, as counterfeiters will always find a way to continue in business.

It remains to be seen if Amazon’s anti-counterfeit measures will be enough to satisfy brands. 2016 will be the last year that Birkenstock sell their products on Amazon after the company publicly terminated their business on the Ecommerce site after their concerns over counterfeits were not resolved. Amazon have taken serious steps to prevent a mass exodus of important brands, we will be able to measure the effectiveness of their anti-counterfeit strategies in 2017.

Fake alcoholic drinks

Any business that generates revenues is a target for counterfeiters, and the alcohol industry is no exception. The international demand for European brands has resulted in the explosion  of markets of fake wines and spirits in emerging countries like China and India. This costs the EU economy approximately €3 billion a year, as well as hundreds of jobs in the food and beverage industry.  This affects directly not only wine producing countries such as Spain and Italy, but also whisky producers, like Scotland.  

Besides their economic impact, counterfeit alcoholic drinks bring serious health consequences due to the materials used to make them, which often include poor quality ingredients and even toxic substances. With the lack of regulations, and with counterfeiters making their products look more and more like genuine drinks, this has become a problem, not only to brands, but to consumers too. Unfortunately, the forecast is not looking any better either, as this issue saw its starting point in 2016 and shows no sign of slowing down in 2017.

The OECD/ EUIPO report

The 2016 counterfeit report by the OECD and EUIPO states that around 2.5% of global imports involve fake products. This means that each year almost half a trillion dollars come from imports of counterfeit goods. Everything from handbags and clothes to auto parts and even pharmaceutical products are prone to counterfeiting, and what may seem to many like a small issue is hurting not only big brands and companies, but also small manufacturers and even consumers. And what's worse, the majority of the revenues that come from these activities end up supporting organized crime.

In terms of products, footwear is the most counterfeited item and American, Italian and French brands are the most affected due to their popularity. As for the source of these products, we find emerging economies like Singapore, Turkey and particularly China to be the top producers of fake goods.

The repercussions of counterfeit goods come not only in economic matters but also in safety and health. On one hand, this costs millions of dollars to producers and hundreds of jobs to industries and at the same time it exposes the public to dangerous products that are subject to no checks and follow no regulations. This report supports the findings of others conducted in previous years; counterfeits are a growing problem and there are no signs of production doing anything other than increasing in the coming year.

Nowadays it seems telling an authentic product from a fake one is almost impossible. Counterfeiters have managed to reach every market and it appears nothing is safe from being copied. Far from being over, this issue continues to grow, making 2017 a key year for brands.

But counterfeit is not the only problem. With the rise of Internet and online platforms, piracy has grown to become the number one enemy of the film, television and music industries. Every day more and more people are turning to streaming and downloading sites that, with just a click away, provide an enormous variety of contents for free. And while it's difficult to put a number on the losses online piracy has caused to the creative industry, this has become a globally known issue everyone has an opinion on.

The Netflix Phenomenon

2016 has been a good year for Netflix. With more users than ever, it has become the number one entertainment site and now it looks like the days of looking forward to going to the cinema have been left behind, as today we have access to a number of high quality movies from the comfort of our own homes. For a reasonable fee, sites like Netflix provide endless options to its users through streaming, the most recently popularized service that brings the cinema experience to mobile devices.

But the growing demand of online content has also led to the proliferation of sites that provide these services without having to pay for them. This affects the movie and TV industries directly, as it now accounts for the majority of TV and film piracy. And these sites are not only violating copyright laws and hurting legitimate businesses, they are also profiting through advertising, subscriptions and fees that some  charge for a content they themselves did not pay for.

With the rise of these illegal sites, a question is raised on whether Netflix has made piracy worse, as its services make it easier for users to stream content directly to their computers and mobile devices and pirates are taking advantage of consumers familiarity with this kind of platform and are imitating it. Netflix and other online services are seeking to satisfy the growing on-demand needs of TV and film audiences, however it appears that audiences that are accustomed to watching media online are also contributing and partaking in the non stop searching and streaming of media illegally as well, which leaves the media industry still facing the piracy  challenge in 2017. Pirate sites appear nowhere close to going out of business and people’s demand doesn’t seem to be slowing down anytime soon, and although the piracy problem may be changing shape it appears that legal online streaming services are not the solution the industry hoped they would be.

Piracy in numbers

With the Internet providing a borderless environment where everyone is connected, pirate sites have become more common in the digital world, granting full access to hundreds of hours of unpaid content. But even though we are not new to piracy, today it is still difficult to put in numbers the magnitude of this issue.

In 2016 it is estimated that the top 10 countries with the highest piracy rates are all in Europe and that there are more than 75 billion visits to film and TV piracy sites every year. Streaming has become the number one form of consuming pirated content, with more than 50 billion visits to streaming sites each year, and is followed by torrents, the second most popular choice.  As with the non-tangible consequences this has brought to the entertainment industry, the totality of the amount lost on revenues and profits remains unclear, although it's estimated it has surpassed billions of dollars.

With the continuously growing amount of legal streaming options, it is hard to understand why pirate sites are still receiving thousands of visits everyday, and although the efforts made until now to stop this have won a few battles, the war against piracy is far from being over.

Pokemon Go

Without a doubt, 2016 was a year of many great things: Netflix added offline downloads, climate change was finally taken seriously and Pokemon GO was released into the wild. Needless to say that of those three things, it was the last one that caused the most excitement. Everywhere around the world groups of people of all ages were caught by the bug, and could often be spotted wandering around and following instructions from their phones, which comes as no surprise considering that, since its release date, the app has reached over 500 million downloads.

Pokemon Go was first launched in July in US, Australia and New Zealand’s app stores and within hours of its official release, false versions of the game became available everywhere from torrent sites to Telegram groups and 3rd party app stores. The majority of these apps contained malware that granted hackers complete access to all the information the app user had on their phone; address, contacts, personal e-mails/sms and even the ability to run other applications, but that didn’t stop people from quickly downloading these unofficial versions, completely unaware of the risks they represented to their privacy.

After a few months of intense Pokehunting the game’s peak has passed, leaving record-breaking numbers and forgotten Pokemon behind. With the promise of a better, updated version for the upcoming year, it’s yet to be seen if Pokemon Go will be here to stay.

Movie and Content piracy has been around for a long time now and, far from its modest beginnings, it has become a global issue that cost billions of dollars to the entertainment industry every year. In a digital world with no borders it seems the efforts to stop piracy fade away as quickly as new illegal options emerge and with the start of a new year, the challenge to solve these issue continues.

About the author

Laura Urquizu

Post Written by Laura Urquizu

Red Points' CEO Laura Urquizu has over 20 years experience as an executive and board director in banking, venture capital and startups. She has worked with companies like Arthur Andersen, Caja Navarra, Corporación CAN and Inspirit. Laura is a respected expert in the startup field and innovation-based businesses.