UFC’s policy on pirated streams only hurts themselves

The UFC announced Feb 10 that it had taken down and seized the records of cagewatcher.eu, which had illegally streamed two UFC pay per view events over the past few months.

“UFC has obtained details of the streaming site’s userbase, including email addresses, IP addresses, user names and information pertaining to individuals who watched pirated UFC events including UFC 169,” stated a release by the UFC. “Also recovered were chat transcripts from the website. Using this data, UFC will work with Lonstein Law Office to prosecute identified infringers.”

Lonstein Law Office has represented the UFC in anti-piracy matters since 2007, including a number of lawsuits against web sites, as well as a single successful suit against an individual who watched a pirated stream of a UFC pay per view broadcast.

Since the UFC became a profitable entity sometime after its explosion of popularity in 2005 with the debut of The Ultimate Fighter, the company has created a long history of pursuing people who attempt to pirate UFC pay per view broadcasts. In 2008, for example, according to lobbying reports, UFC spent $280,000 lobbying the US government on anti-piracy issues. In 2009, it was $320,000.

In December 2009, UFC CEO Lorenzo Fertitta testified at a hearing of the US House Judiciary Committee, where he claimed that the UFC was losing millions of dollars due to piracy. The argument that the UFC is losing millions due to piracy has been repeated by company officials before and after Fertitta’s testimony.

Early in 2010, UFC shut down Rage-Streams.net, and subsequently claimed it would go after consumers of pirated streams, too.

In July 2010, Zuffa announced that it had reached settlements with 500 business and individuals regarding online piracy of its events over the previous two years.

The same month, UFC announced that they had issued subpoenas to Justin.tv and Ustream.tv to force the two sites to reveal the identity of a user who uploaded two UFC events earlier in the year.

In August 2010, UFC took down the site Wrestle-Zone.net. In September of that year, UFC sought an injunction to stop Livevss.tv and Livess.net from streaming UFC 120. In the latter case, the UFC claimed that by featuring ads on his site, owner Daniel Wallace was earning income from the pirated streams. UFC demanded $150,000 per infringement from Wallace and from the owners of Wrestle-Zone.

Zuffa filed a lawsuit against Justin.tv in January 2011. The suit related to the UFC 121 broadcast from October 2010 which was rebroadcast by Justin.tv users on that web site. Justin.tv was able to successfully dismiss most of the trademark claims all of the Communications Act claims made by Zuffa in the suit.

UFC has also been tough on bar owners who show UFC events without an appropriate license. A bar license to show UFC events costs between $500 and $1,500 depending on the size of the bar. Damages asked for by the UFC in lawsuits filed against bars who do not purchase the appropriate license are many times the cost of an individual license.

The UFC claimed in 2010 that on January 2, 2010, more than 360,000 people watched a pirated stream of UFC 108 and on February 21, 2010, more than 78,000 watched a pirated stream of UFC 110. UFC 116 was allegedly viewed by 250,000 on a single bit torrent stream.

UFC has successfully obtained a judgment against at least one individual in regards to pirated streams of UFC pay per views on greenfeedz.com. The individual, who was located via his IP address with his service provider, Time Warner, failed to respond to the UFC’s complaint and a default judgment was issued, including damages of $6,000 and $5,948 in attorney fees.

Greenfeedz streamed UFCs 130 through 142. Zuffa LLC, parent company of the UFC, obtained IP addresses of everyone who watched one of these shows via an illegal stream on Greenfeedz.

The judgment was entered against the Time Warner customer based on his failing to defend, rather than the merits of UFC’s suit.

“We believe that we’ve got an obligation to go out there and try to protect the intellectual property and protect both our rights and the rights of our fighter-partners,” UFC chief legal counsel Lawrence Epstein told MMAJunkie.com after the UFC was able to shut Greenfeedz down.

“When people start going to jail,” UFC President Dana White has said regarding past suits, “people will stop doing it.”

“I have a very hard time finding a theory of liability for someone who merely watched an illegal broadcast. That’s like saying if a bar was illegally publicly presenting a movie or an NFL game, that everyone in the bar would be liable,” First Amendment attorney Marc Randazza told TorrentFreak, a bit torrent news web site, in March 2012.

Suing consumers is a bad idea, even if the UFC doesn’t consider these people to be genuine fans.

Zuffa’s stance on pirated streams recalls DirecTV’s pursuit of consumers who purchase smart cards to watch pirated streams of DirectTV broadcasts. Through 2003 and 2004 DirecTV was targeting web sites who disseminated software that allowed people to program smart cards to watch pirated signals of DirecTV broadcasts. DirecTV also went after individuals who purchased these cards and used this software, as well as hardware used to program the cards.

DirecTV had no way of determining who was receiving their broadcast signal. So, in order to develop a list of individuals who were using smart cards, the company raided people who were reselling equipment used to program smart cards. In turn, they sent threatening letters demanding $3,500 in remuneration to everyone on the resellers’s customer list. DirecTV threatened to sue if individuals didn’t pay. The company mailed tens of thousands of letters and claims to have filed suit against over 25,000 individuals who the company suspected of receiving pirated streams (including OJ Simpson, of all people).

Of course, this ended in a number of lawsuits, mainly because, according to ex-employees of DirecTV, between 5-10% of those targeted by the company did not use smart card equipment to receive pirated DirecTV broadcasts.

A number of RICO suits were filed against DirecTV in Colorado and California alleging that DirecTV’s actions were extortion and part of an organized crime racket. At least one ex-employee sued DirecTV, the result of which many of the company’s aggressive tactics at pursuing individuals they claim to be pirates came to light.

Most of these lawsuits were dismissed. But the damage to DirecTV wasn’t done in the courtroom, it was done in the media. Numerous media outlets picked up the story, including the Chicago Tribune among other major newspapers, alleging that many of DirecTV’s suits against individuals were dismissed.

Another industry where legal measures pertaining to piracy is common is the video games industry. These sorts of legal measures have engendered a great deal with resentment between consumers and the companies that engage in such measures.

An example in the video games industry would be Electronic Arts (EA), a major video game development and publishing company that has been aggressive in using digital rights management (DRM) software to protect its games, often damaging the company’s public perception and subsequently its sales.

Sales of EA’s SimCity in March 2013 were probably affected by the company’s desire to protect the product from piracy by way of forcing users to be connected to the internet in order to play the game, even if the player utilized no features in the game that required an online connection. The constant internet connection would block people from being able to run a pirated version of the game.

The problem for EA is that the massive amount of users who played the game at release crashed their online servers, making the game unplayable for a length of time. Problems with the release of an online platform, be it video games or video, are not uncommon, a recent example being WWE’s problems in its first few days of the WWE Network at the end of February. But in this circumstance it was considered especially frustrating for SimCity players since the only reason they needed an online connection was to prevent piracy, as an internet connection was otherwise unnecessary to play the game. Commentators and journos in the video games media referred to the game as a “disaster”.

That SimCity sold enough units to cause their servers to crash would, at first blush, seem to indicate that the negative publicity surrounding the game’s release had little effect on sales. In July 2014, the game reached 2 million units sold, the majority of them video digital download. But that figure doesn’t include the massive amount of refunds and coupons that EA had to hand out to frustrated consumers. SimCity’s DRM features were removed in January 2014.

A similar situation that has probably cost a massive corporation a ton of sales would be Microsoft’s release of the Xbox One this past November. Early in 2013, Microsoft announced a series of DRM measures, including an “always-online” feature for the new Xbox that worked in a similar manner to SimCity’s anti-piracy measures, plus other features that made it difficult for consumers to share games, or to purchase used games.

Suffice to say, Microsoft’s anti-piracy measures did not sit well with its consumers. After Sony released a television commercial mocking Microsoft’s anti-piracy measures, public perception began to focus on Sony reclaiming the top spot in the so-called console wars after the PlayStation 3 was outsold by the Xbox 360 over the past decade. The Xbox 360 outsold the PlayStation 3 in North America 46.36 million to 28.32 million (although sales worldwide were nearly identical, largely due to Xbox’s lack of penetration into the Japanese market). However, sales of the PlayStation 4 currently outpace sales of the Xbox One in North America by 2.75 million to 2.43 million, and worlwide by 5.85 million to 3.54 million. The reasons for PlayStation 4’s success relative to the Xbox One are varied, but one of those reasons is the resentment of Microsoft’s consumer base towards the company’s draconian anti-piracy measures.

SimCity’s 2 million sales and the Xbox One’s 3.54 million sales doesn’t include the externalization of sales damage. What that means is that even if SimCity or the Xbox One itself may have sold reasonably well despite their negative publicity and poor reviews, consumers will still be weary of subsequent releases by EA and Microsoft should those releases feature DRM measures. If EA releases another game featuring similar DRM measures, for instance, one would expect consumers to pass on purchasing the game, or at least wait to see if the game’s DRM measures negatively affect game play. The Xbox One’s sales, on the other hand, are probably already affected by Microsoft’s anti-piracy policies, causing the product release of the Xbox One to stumble out of the gate relative to the successful launch of the PlayStation 4.

So what does DirecTV, Xbox One, and Electronic Arts have to do with the UFC? The point is that individuals who watch pirated UFC broadcasts are also likely buying other UFC products, be it other pay per views, Fight Pass, or merchandise, or are watching free UFC broadcasts on Fox Sports 1, and other stations internationally.

The problem is that not every consumer of UFC’s product is going to purchase every pay per view. People will frequently skip pay per views they feel are not worth their money, which is why buy rates fluctuate greatly from show to show based on who is fighting in the main event, as well as who is fighting on the undercard. Some of these people who choose to skip a few pay per views are going to watch pirated streams for free in order to keep up with the product. It is likely that the people who go out of their way to watch pirated streams are probably the UFC’s biggest fans, despite Zuffa’s assertion that these people are not fans at all.

The bottom line is sales. If the UFC was able to prevent all of their shows from being pirated in a way so that it was impossible to broadcast or view a pirated stream of a UFC pay per view, buy rates probably wouldn’t increase, or would only increase marginally. That’s because the people who are watching pirated streams are doing so probably because they believe the particular show they are pirating isn’t worth paying money to see. If they unable to see it for free, that doesn’t mean they are going to be willing to see it for $60.

The next problem with suing individuals is that it isn’t going to scare anyone from watching pirated streams. It is virtually impossible to shut down piracy on the internet, so resorting to suing individuals in a manner similar to what DirecTV has done in the past is desperate. Even if Zuffa is willing to lose quite a bit of money in legal fees to try and frighten consumers from pirating UFC broadcasts, the amount they lose in public relations greatly outweighs whatever benefits Zuffa attains from this losing battle. They aren’t going to shutdown piracy, and suing parts of their consumer base is just going to engender resentment towards their product, and possibly damage sales in the future.

Kirk Hendrick, UFC’s chief legal officer, has also claimed that the UFC is losing “millions and millions” of dollars annually due to piracy. Frankly, no, they aren’t. Hendrick’s opinion is based on the faulty assumption that people who watch pirated streams would purchase pay per views if pirated streams were otherwise unavailable. As discussed above, that is unlikely. These sorts of comments by Zuffa officials puts them in opposition with their own consumer base, which is the last place a company wants to be when that company is marketing a product to this consumer base.

Zuffa’s argument that people who watch pirated broadcasts of UFC shows aren’t their customers is a way of escaping the illogical position of suing your own customers. Suing customers who watch pirated UFC streams, but spend money on other UFC products, would likely engender resentment among these customers towards the UFC. Thus, it is easier for Zuffa to claim these people aren’t their customers and that they are justly pursuing thieves, putting a more justifiable public spin on pursing legal action against the public itself.

Jeremy Wall

Jeremy Wall has been covering combat sports since 2002. He is the author of UFC's Ultimate Warriors: The Top 10, released in 2005. From 2004 through 2006 he was the lead reporter for MaxFighting. After stepping away from MMA for a few years, he returned in 2013, launching the combat sports industry blog MMAChronicle.com. Jeremy holds an Honors Bachelor of Arts from Western University and attended law school at Dalhousie University. He also holds the Series 7, Series 63, and Canadian Securities Course investment designations.