TV piracy services are being used by about 6.5 percent of North American households with broadband access, potentially costing legitimate TV providers billions of dollars a year, a new analysis found. Pirate services that offer live TV channels are apparently responsible for more downstream traffic each night than torrent downloads.

Based on these figures, there may be 7 million US and Canadian subscribers to pirate TV services that generally cost about $10 a month, the report by Sandvine said. That amounts to $840 million of revenue a year.

We don't know how many people using pirate services would purchase a traditional cable or satellite TV package if the piracy option didn't exist. But if all of those people instead purchased a legal TV package for $50 per month, that would amount to another $4.2 billion revenue a year for North American pay-TV providers, the report said.

"Our research reveals that across multiple tier-1 North American fixed access networks, 6.5 percent of households are communicating with known TV piracy services, and these services accounted for more than 6 percent of downstream traffic in the peak evening hours," Sandvine's new report said.

Sandvine is a vendor that sells equipment to consumer broadband providers to help them manage network congestion. Sandvine's findings are based on a 30-day period in August and September. The 6.5 percent figure "is a measurement of subscribers who were communicating with known IPTV services during that time," and could include people with active subscriptions as well as "people who have dormant subscriptions, or may just subscribe to day passes" to watch certain content, a Sandvine spokesperson told Ars.

Replicating live TV experience

The pirate services attempt to "replicate the live television experience offered by cable and satellite providers," Sandvine wrote. That includes live sports events, which can often only be viewed legally by purchasing a traditional pay-TV subscription.

Besides live sports, Sandvine found significant usage of pirate TV services to view premium television (like HBO's Game of Thrones), news channels, and international content.

The number of cable and satellite TV subscriptions has been dropping for years due to rising prices and Internet-based alternatives, both legal and otherwise. While 88 percent of US households subscribed to a pay-TV service in 2010 and 84 percent did so in 2014, just 79 percent subscribe today, Leichtman Research Group recently found.

Pirate TV services can charge much lower prices than cable and satellite companies because they aren't paying programmers for content, Sandvine noted.

Sandvine has been analyzing Internet traffic for years, but this is the first time it studied this type of TV piracy service. Sandvine said it identified the top TV piracy services using its own network data and by reading online forums where Internet users share information about which services they use. Here's an example from a subreddit devoted to IPTV services.

There are numerous services "where a subscriber can go to the site, provide payment, and automatically provision thousands of channels from around the world," the Sandvine spokesperson told Ars.

Sandvine doesn't know how the 6.5 percent and 6 percent figures compare to previous years when the company wasn't tracking these services. Usage is still low compared to legitimate streaming services like Netflix, but the company said it "believes that these video and television piracy services represent a real threat to the revenue streams of CSPs [communications service providers]."

Beyond BitTorrent

With more than 6 percent of downstream traffic in peak evening hours, the IPTV services apparently take up a greater share of peak Internet traffic than BitTorrent downloads, a major source of pirated TV shows and movies. BitTorrent transmissions accounted for 1.73 percent of peak downstream traffic in North America in a Sandvine study last year, while Netflix accounted for 35.2 percent and YouTube for 17.5 percent.

Those numbers are for home Internet services and do not include mobile broadband. BitTorrent also accounted for 18.4 percent of upstream traffic during peak usage hours, but uploads are a much smaller portion of Internet usage than downloads. In aggregate, BitTorrent accounted for 2.9 percent of peak Internet bandwidth usage.

As TorrentFreak pointed out, the Sandvine data indicates that "IPTV piracy generates more Internet traffic than torrents."

Updated figures for BitTorrent, Netflix, and YouTube aren't available yet, but the Sandvine spokesperson didn't expect any major changes since last year.

Boxes keep streaming when customers aren't watching

Users of pirate TV services often buy set-top boxes that are pre-loaded with media software, or they install media player software on another device, the Sandvine report said.

Sandvine said it doesn't know how many hours of video users of pirate services are watching. The 6 percent figure actually overstates the amount of TV pirate subscribers are intentionally watching because of what Sandvine calls a "phantom bandwidth problem."

"The set-top boxes designed to consume pirated video and TV services appear to have little concern for network utilization," Sandvine wrote. "Based on Sandvine's testing, many of these devices will stream continuously unless the box itself is physically powered off. This constant streaming results in a tremendous amount of 'phantom' bandwidth, a term we used to describe data that is transmitted but not viewed by anyone."

Sandvine said its data indicates that the percentage of Internet traffic taken up by TV piracy services "increases in the late evening hours as Netflix users turn off their streams and the poorly engineered TV piracy boxes continue to stream."

If a pirate TV user has their set-top box tuned to a high-definition channel that streams at 4Mbps, "over the course of a month that set-top box could consume over a terabyte of data," Sandvine wrote. This is a problem for Internet users who may go over their data caps without realizing what is causing the high usage.