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It's Saturday, Feb. 5, at the Mandalay Bay Events Center in Las Vegas, and 11,000 screaming fans are watching as barefoot brawlers pummel each other senseless in the latest bouts of the Ultimate Fighting Championship, the popular mixed martial arts league. Edward Muncey is engaged in fierce hand-to-hand combat, but not in the ring; he's at a keyboard in a room a few hundred feet away that reverberates with the percussive roar from the nearby arena. Dressed in a black pinstripe suit, the UFC's vice-president of new media and technology pitches forward on an uncomfortable hotel chair before three computer screens, tensely trawling the Internet to find and shut down unauthorized live broadcasts of the evening's matches.
It's an almost impossible task. As the night progresses, unauthorized video streams of the event sprout across the Web like weeds on an endless lawn. Although Muncey has contracted with several anti-piracy firms around the world, he personally identifies more than 200 illegal broadcasts of the fight playing on a single site: Justin.tv, the live video streaming service, based in San Francisco. He's able to shut these down quickly using a Web tool that Justin.tv makes available to copyright holders. He has less luck with videos of the event he finds on SopCast.com, a Malaysian peer-to-peer network; vShare.tv, a Dutch streaming site; and dozens of other far-flung sites and blogs. Muncey and his team fire off hundreds of threatening e-mails to the operators of these websites, demanding that they take down the illicit feeds. Many comply, but others respond slowly or not at all. "It's like someone stole your car and is celebrating by doing a donut on the parking lot next door," Muncey says.
Sports leagues once viewed the Internet's disruption of other entertainment industries from a relatively safe perch. The Web was terrific for sharing digital music and television programs, but it wasn't really great for games in progress—when outcomes are still in doubt and fans are most interested. Now the technology has improved and pirates can easily divert authorized broadcasts from TV networks onto their own websites. They have powerful computers, fast broadband connections, and operations in countries such as China, Sweden, and the Netherlands, which have less rigorous copyright protection laws and anti-piracy enforcement. This past National Football League season, for example, fans could find and watch almost any game they wanted to see, as long as they didn't mind inconsistent video quality and the occasional inconvenience of having to find a new stream when the one they were watching shut down.
"We all knew this tsunami was coming," says Eric Goldman, an associate professor of law at Santa Clara University and an adviser to Justin.tv, who does not speak for the company. "Some of the businesses that leagues had in the past are going to get much harder to control."
It's not as if sports leagues haven't contended with piracy before. For years, rogue bar owners purchased pay-per-view or satellite feeds and displayed them to their clientele without making the proper payments. But this new kind of Internet piracy could be far more difficult to stop and strikes right at the heart of leagues like the UFC, which asks fans for $45 to watch a night of action on pay-per-view television—or via its own website. With thousands of Internet users able to watch a single unauthorized broadcast and countless illicit channels springing up across the Web, the potential financial losses for leagues such as the UFC are devastating.
The country's major sports leagues are all vulnerable, but in different ways. They make billions selling exclusive broadcast contracts to TV networks and high-priced stadium seats to fans, then go to great lengths to protect those lucrative businesses. For instance, in most cities, Major League Baseball does not allow fans to watch the games of their hometown team online, because local broadcasters fear it might damage the TV ratings of televised games. And the NFL blacks out games in the city of the home team if the stadium is not sold out. Piracy undermines the leagues' effort to create such artificial scarcities. It also gives a fan interested only in the Baltimore Ravens, say, a reason to avoid paying $300 a year or more for satellite provider DirecTV's NFL Ticket package, which includes every game each weekend.
Conversations with representatives of MLB, the NFL, the National Basketball Assn., and the National Hockey League suggest that Internet piracy of live games is a growing problem. The NFL says it took down 4,130 unauthorized live streams of its games during the 2010 season—a 67 percent jump from the total in 2009. "It's a game of Whac-A-Mole," Gary Gertzog, the NFL's senior vice-president of legal and business affairs, says of sites that allow users to stream games live. "We tell them to stop, they agree to stop, we look later, and they are back at it. This is not where we want to see growth."
To slow that growth, sports leagues, like media companies also tormented by digital pirates, are fighting back any way they can. They've teamed up in an industry coalition, they've filed lawsuits, and they're lobbying for more aggressive copyright legislation. On Jan. 24, in a move reminiscent of Viacom's (VIA.B) unsuccessful 2007 lawsuit against YouTube (GOOG), Zuffa, the Las Vegas-based owner of the UFC, sued Justin.tv in federal court in Nevada, alleging that the four-year-old venture-capital-backed startup wasn't doing enough to keep infringing material off its website. (A Justin.tv spokesman would not comment on the suit.) Most intellectual-property experts believe Justin.tv complies with the 1998 Digital Millennium Copyright Act (DMCA), which says website owners are protected if they move expeditiously to take down infringing content when notified by a copyright holder. That doesn't satisfy Dana White, the pugnacious president of the UFC, who is most critical of streaming sites that run ads alongside his copyrighted video. Says White: "The people I want to see obliterated are the guys making a business out of stealing our stuff."
Earlier this month, at the urging of all the major sports leagues, Uncle Sam jumped into the ring. On Feb. 2 federal investigators seized the domain names of 10 foreign-owned sites that had become hubs for sports fans looking for free sports broadcasts online. From that day on, when fans visited sites such as ATDHE.net, based in Sweden, or Rojadirecta.org, based in Spain, they were greeted by a Web page featuring the insignias of the Justice Dept., Homeland Security Dept., and National Intellectual Property Rights Coordination Center. "This is a first step. It's a disruptive tactic," says James Hayes, special agent at Homeland Security, who led the operation.
It may also have been a symbolic one. Within a few hours the pirate sites had moved to new Web addresses, outside the reach of U.S. authorities. Their owners were openly sharing the new URLs with their followers on Twitter, and some were boldly promising they would carry live feeds of the upcoming UFC fight. "What keeps us up at night is piracy," admits Lawrence Epstein, UFC's general counsel. "If we have an Achilles' heel, this is it."
Last August, Muncey set out with a UFC colleague to understand the mind of the Internet pirate. The pair flew to Phoenix and met with Hazim Gaber, the former operator of the video site WatchTVSitcoms.com, who had recently been convicted of another crime—selling counterfeit cancer drugs—and had agreed to cooperate with investigators and copyright owners as a condition of his 33-month prison sentence.
Gaber, 22, a native of Edmonton, Alta., was led into a windowless room in the U.S. Federal Building wearing handcuffs. He immediately recognized the names of Muncey and his colleague from the numerous cease-and-desist letters they had sent him over the previous three years, which he had studiously ignored. In the ensuing discussion, Gaber gave the UFC officials a reason for optimism. He said the legal threats from sports leagues always felt hollow, and that he would have stopped posting unauthorized video if he had ever actually been sued.
Muncey says the league was emboldened by Gaber's insights. In addition to suing Justin.tv, it recently filed a series of other lawsuits against sites allegedly promoting unauthorized streams of its fights. Epstein hints that the company is currently busy preparing others. "We need to see people in handcuffs," he says.
A second target could be the online advertising networks that display ads on video sites without regard for the legality of the material on those sites. After Gaber suggested that the league "follow the money" and pursue such ad networks, the UFC met with executives from a Las Vegas online ad company called CPAlead, whose banner ads regularly appeared on martial arts enthusiast sites that hosted the league's copyrighted video without permission. Since that meeting, the UFC says it has not seen CPAlead's ads. John T. Bryant, a CPAlead representative, says: "These aren't the types of things that CPAlead condones or supports."
Despite that success, the UFC faces an uphill battle. Many of these sites, based in countries with lax copyright enforcement, are unwilling to cooperate with U.S. companies. And given the decentralized nature of the Internet, they may be impossible to eliminate altogether.
One variety of pirate video source, the so-called link site, does nothing but present a handy menu of pointers to other Web pages where Internet users can watch live games for free. These sites, such as ATDHE, Channelsurf, and Rojadirecta, do not host any video themselves, and their owners express indignation when asked about piracy. "We just inform about sports events available on the Internet," writes Igor Seoane, the 27-year-old founder of Rojadirecta, in an e-mail to Bloomberg Businessweek. "Those events are there with or without Rojadirecta, most of them linked by any search engine. We do not think it is our responsibility to make even economical efforts to help copyright owners." Seoane says a Spanish court dismissed a copyright case against his site in 2008. He also brags that he links to 1,000 games every weekend.
The operators of other linking sites are not quite as strident. In January, ATDHE ranked as the 687th most popular site in the world, according to tracking firm Alexa. Its owners did not respond to multiple requests for comment. On one recent evening, shortly after it had reestablished itself at a new Web address (following the U.S. government intervention), the ATDHE site featured links to live broadcasts of every NBA and NHL game, in addition to several big college basketball games and international soccer matches. NetResult, an anti-piracy firm based in the U.K., has sent numerous takedown notices to the site's Internet service provider, PeRiQuito AB, which also hosts The Pirate Bay, the notorious BitTorrent file trading service, according to Christopher Stokes, chief executive officer of NetResult. The ISP declined to take action against ATDHE because it said no illegal streams were coming from the site.
Sites such as Rojadirecta and ATDHE would have nothing to link to if it weren't for the sites that actually host live video and allow it to be played by any Internet user. These sites, like Justin.tv, Ustream, and dozens of others around the world, characterize themselves as "YouTubes of live video." Many promote the ability of their users to broadcast, say, their child's school play, then stream it to relatives around the world, who can all watch at the same time. But these sites are also magnets for users who post live copyrighted broadcasts such as TV shows and sporting events. This can be as simple as purchasing a $50 HDTV adapter, which plugs into a computer's USB port and allows the PC to receive live TV. Deploying so-called screencast programs that make copies of everything on the PC screen, a user can then capture a channel carrying a sports event and stream it over a live video site.
Some of these video hosting sites, such as Zonein.tv and vShare.tv, both based in Holland, appear to be oriented solely toward this kind of illicit use. They publish no contact information or details about their owners and are largely unresponsive to takedown requests, sports leagues say. (Muncey, of the UFC, says someone representing vShare.tv once wrote to the league demanding a payment of $5,000 per month to hire someone to scrub the site of the league's material.)
The video hosting sites in the U.S. are generally more responsive to copyright owners, and most offer tools to allow leagues to quickly close down streams of their broadcasts when they find them. Sports leagues in particular praise Ustream, based in San Francisco, which they say has employees manually review channels that are suspected to contain copyrighted content (streams that suddenly attract large audiences, or are initiated by new users, are flagged). Justin.tv, on the other hand, does not conduct such manual reviews and frustrates executives at the sports leagues, which say its users have gotten adept at quickly republishing unauthorized broadcasts as soon as they are removed.
All leagues say they actively monitor these sites for their content, but policing them has become arduous and expensive, and new sites are springing up all the time. Veetle, a live video startup run by former Stanford students and based in Palo Alto, Calif., pledges to abide by the DMCA by promptly removing infringing content whenever it is asked. During the UFC match, Muncey and his team identified 26 live streams of the fight on the site, and Veetle quickly complied with takedown requests.
"Our goal is to have content owners be able to identify potentially infringing content and take it down in an expeditious fashion," said Bo Yang, chief executive of Veetle, in an interview a few days after the fight. As Yang spoke, this reporter was able to watch an unauthorized stream on Veetle of the Los Angeles Lakers playing the Memphis Grizzlies. The Lakers were ahead, 48 to 45, in the second quarter.
Sports league executives naturally like to point to their limited victories in combating the pirates. A Chinese website called TVAnts.com once bedeviled MLB by posting live feeds of many games during the 2009 season. Officials from baseball's MLB.com subsidiary investigated the site and found that its domain name was registered to a computer science professor at Zhejiang University on the east coast of China. When the site was unresponsive to takedown requests, the league wrote a letter to the university president. The school responded politely, disclaiming any involvement and offering assistance, and the site disappeared soon after.
Still, sports leagues acknowledge that their own enforcement efforts will never fully vanquish the piracy threat. Executives at the major sports leagues also expressed little interest in suing the individual fans sitting at home watching these streams. For one thing, this would require leagues to somehow force the video sites to disclose their users' identities. Instead, the leagues are leaning hard on legislators to increase the criminal penalties for copyright infringers and to improve the tools at the disposal of law enforcement. One of their goals, to the alarm of advocates of an unregulated Internet, is to limit the safe harbor protections given to website operators under the DMCA.
"How does the DMCA even apply to live events?" asks Epstein, the UFC's general counsel, as he sips an energy drink at the fight in Las Vegas. The DMCA calls for sites to take infringing material down "expeditiously" when notified by copyright holders. But, Epstein argues, that's meaningless for live sporting events, where people can get the full value of a match after watching only the final few minutes.
Sports leagues have recently offered their enthusiastic support for a bill, proposed by Senator Patrick Leahy (D-Vt.) in September, called the Combating Online Infringement and Counterfeits Act, or COICA. The law would give the Justice Dept. a new set of legal tools to go after "rogue sites" that are violating copyrights or facilitating the sale of counterfeit goods. Among the new tactics proposed, federal officials could compel Internet service providers to block U.S. Web users' access to overseas piracy sites and force ad networks and payment processors such as Visa (V) to stop doing business with them. The bill unanimously passed the Senate Judiciary Committee last year. A new version of it is expected to get a hearing by the full Senate this year.
Internet civil liberties groups have vigorously objected to the proposed law for a variety of reasons. They say it would undermine the world's trust in the U.S. stewardship of the domain name system and deprive websites of due process. The law, they add, would potentially harm all but the savviest Internet users, who would easily circumvent it by using foreign-operated Internet services to access blacklisted sites. "The bill gives a tremendous amount of power to the government without the appropriate safeguards," says Kurt Opsahl, a senior staff attorney at the Electronic Frontier Foundation, a digital rights advocacy nonprofit. Recently, opponents of the bill say, there was a fresh illustration of the futility of the bill's approach. "We've seen the problems the government has had in trying to shut down WikiLeaks," says Goldman, of Santa Clara University. "WikiLeaks has proved COICA is ill-fated."
Aside from backing new legislation, sports leagues are looking to new anti-piracy companies such as Vobile, based in Santa Clara, Calif., to solve their piracy problem. Vobile analyzes and creates a "digital fingerprint" of live broadcasts from TV networks and sports leagues. Then cooperative websites and ISPs create their own fingerprint of the video streamed by their users and search Vobile's database, flagging any videos that generate a positive match and blocking any that are unauthorized by the copyright holder. The MLB and NBA have both used the service while the NFL has dropped it, because "the technology has not worked as well as they said it would," says the NFL's Gertzog.
That leaves the leagues, for the time being, with little recourse other than letters, lawsuits, lobbying—and the kind of laborious and perhaps futile enforcement efforts of Edward Muncey at the UFC bout in Las Vegas. That night, Muncey spends close to five straight hours at his Dell laptop, which is so overrun with malware from visiting illicit pirate websites that it crashes frequently. As the night grinds on—and despite his best efforts—the league's piracy problem grows worse. When the main card begins at around 9:15 p.m., matching two middleweights, Brazilians Anderson Silva and Vitor Belfort, Muncey grumbles, the Web "lights up like a Christmas tree" with unauthorized streams of the fight.
The much-hyped fight, though, proves anticlimactic. The fighters circle each other warily for three minutes, and then abruptly, Silva delivers a single kick to Belfort's face, dropping him to the ground and ending the evening. The crowd erupts in violence-induced ecstasy, but in the adjoining room, Muncey doesn't even look up from his computer. He's fixated on Justin.tv's website, where at the conclusion of the event there are still 17 live feeds of the fight listed prominently in the sports section. Although the point is now moot, Muncey keeps submitting takedown requests. "This makes me sick inside," he says.