German Pirate Party Scores Another Electoral Victory: Gets 4 Seats In State Parliament

News Corp. Accused Of Hacking Competitors Smartcards To Increase 'Piracy' Of Satellite TV Rivals

from the all's-fair-in-murdoch-land dept

Tue, Mar 27th 2012 4:03pm — Mike Masnick

Four years ago, we wrote about claims that News Corp. had hired hackers to break the encryption on DISH Networks' satellite TV smart cards, and to "flood the market" with those cards, thereby increasing "piracy" of DISH's service. News Corp., of course, owned DISH's main competitor, DirecTV. The whole thing seemed really bizarre, and we were skeptical. This kind of thing only makes sense if you actually believe that "piracy" like that directly takes away money from the company whose service is hacked. But, it seems just as likely that flooding the market with hacked smartcards would take away business from both DISH and DirecTV in the cases where it was a true substitute (rather than going to people who would never pay for either anyway). Either way, that case ended with a jury finding News Corp guilty... but of just hacking one smartcard, for which the company was fined a grand total of $49.69... and another $1,000 for "damages." Honestly, I'm not even sure that makes sense, because if it just hacked a single smartcard, it sounds like it may have just been for reverse engineering purposes.

Of course, in the intervening years, News Corp.'s name has become a lot more closely tied to the word "hacking" thanks to the News of the World scandal where reporters regularly "hacked" into voicemails (and, by "hacked" I really mean used a widely known loophole that makes it easy to listen to many people's voicemails). So with news breaking that News Corp. is again being accused of hacking, a lot of people are thinking about the recent scandals -- but the details suggest that this may have been identical to the DISH/DirecTV story above, but with a UK focus. Basically, News Corp's subsidiary NDS is accused of hacking ITV Digital, a UK competitor to News Corp's Sky TV.

In this case, there are some more details, where it certainly suggests that at least someone at News Corp. was working closely with some hackers to publish the codes necessary to make unauthorized smartcards for ITV. ITV eventually did go out of business, and of course the article linked above quotes an exec there insisting that such "piracy" was "the killer blow for the business, there is no question."

Again, this doesn't make much sense to me. Even if all of these actions were done via News Corp., how does that actually help News Corp? People who got the hacked ITV smartcards weren't going to buy Sky TV services either. The whole thing seems pretty strange, suggesting it was either exaggerated, or whoever at News Corp. decided this was a reasonable strategy didn't even think about how getting more hacked smartcards would likely be a challenge for Sky just as much as it was for ITV.

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Filed Under: competition, hacking, james murdoch, piracy, rupert murdoch, satellit tv, smart cards
Companies: directv, dish network, itv, news corp., sky tv

43 Comments

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blaktron (profile), 27 Mar 2012 @ 4:05pm

They think Piracy is destroying all business, so more competitors piracy = faster dying competitors in their minds.

Little do they know they are only helping to put their competition in front of prospective buyers....
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Anonymous Coward, 27 Mar 2012 @ 4:16pm

Correction
This kind of thing only makes sense if you actually believe that "piracy" like that directly takes away money from the company whose service is hacked.

Actually, it also makes sense if you believe that NewsCorp believes that "piracy" takes money away... which, from their public statements, they do.
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bob, 27 Mar 2012 @ 4:25pm

Duh?!
Even if all of these actions were done via News Corp., how does that actually help News Corp? People who got the hacked ITV smartcards weren't going to buy Sky TV services either.

First, I have no idea what News corp may or may not have done. Nor do I know anything about their subsidiaries, but I need to respond to this lack of business acumen: if people can get SkyTV for free, fewer people will pay for SkyTV. Fewer people paying mean lower revenues, something that will hamper the company and maybe even kill it. (One other satellite TV company in Europe died due to rampant piracy.)

If SkyTV disappears, then life is easier for News Corp. Heck, it might even become a monopoly. And you agree that monopolies are bad, right? You're constantly upset about the monopoly that copyright grants, even if you don't understand just how limited it may be. So maybe now that you understand how piracy can lead to a monopoly, you might be more cheesed off at piracy. But I doubt it.
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Torg (profile), 27 Mar 2012 @ 4:28pm

Re: Duh?!
"If SkyTV disappears, then life is easier for News Corp."

False. News Corp owns SkyTV.
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Mike Masnick (profile), 27 Mar 2012 @ 4:28pm

Re: Duh?!
If SkyTV disappears, then life is easier for News Corp

bob, I know reading comprehension is not your strong suit, but SkyTV *is* News Corp.

#bobfail
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Anonymous Coward, 27 Mar 2012 @ 4:29pm

Re: Duh?!
"First, I have no idea"

You could stop there, next time. Might save everyone the trouble.
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Joseph Kranak (profile), 27 Mar 2012 @ 4:33pm

They don't understand
The fact that anyone thinks this would be a sensible strategy really shows how they don't understand the difference between rival and non-rival goods. If I "steal" something that is non-rival, such as an mp3, no one loses anything. Sure, if I was going to buy it otherwise, they might, in a sense lose a sale, but in another sense, they never had that sale to begin with. It's like how teachers always say that at the beginning of a semester, you start out with 0 points, and you have to earn points to achieve a good grade. You don't lose points on a test, since you never had them to begin with. A case like this, in which leading customers to pirate a competitor's satellite leads to no profit to the other competitor illustrates this point.
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silverscarcat (profile), 27 Mar 2012 @ 4:37pm

Re: Duh?!
Hey, bob, what have I told you? *Waggles finger*

802 failed arguments (aka losses) and 0 successful ones (aka wins).

Give up before you hurt yourself.
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TtfnJohn (profile), 27 Mar 2012 @ 4:40pm

Following on the heels of the News of the World scandal and the previous run at cracking paycards for DISH this doesn't surprise me at all.

Murdock's empire, as far back as its beginnings in Australia has been accused of paranoia when confronted with competition. And that Murdock has been a take-no-prisoners competitor.

The Murdock empire's paranoia around piracy does show that he believes that piracy will be then end of the world as he knows it. That his business would enable it to try to destroy and competitor isn't surprising. I wouldn't have to matter if SkyTV would do any better as a result all that matters in Murdock's world is that there's one less competitor out there. It doesn't need to be rational.

(When I say Murdock I'm not talking about the old man himself but the culture he's created in his empire that allows such things to flourish.)
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ChurchHatesTucker (profile), 27 Mar 2012 @ 4:56pm

...and, by "hacked" I really mean used a widely known loophole...

That's 99% of hacking, so there's no need to qualify it.
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Grae (profile), 27 Mar 2012 @ 5:13pm

Re:
Indeed. Techdirt's own Tim Cushing covered this himself earlier this month.
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gaeliclad (profile), 27 Mar 2012 @ 5:21pm

THE main reason itv digital failed was financial,they spent too much money buying up the rights to lower league uk football matches which no one wanted to watch ,sky tv had a better range of
channels ,hollywood movies and better sports packages,top tier ,league 1 soccer matches.OBVIOUSLY piracy did not help them to get new customers.
BY the way canal plus france had a similar encryption card which was also hacked some people say by the same hacker .I THINK they brought a legal case against news international,
but it was dropped ,news international bought vivendis , or canal plus, s digital tv service in italy.
see here for a more detailed article
http://www.guardian.co.uk/media/2012/mar/26/ondigital-beaten-fair-or-undermined
you might say news international outspent itv,
they had more channels, better movies, better sport ,
so in the long run itv digital was bound to fail.
There was not the market for two large
scale satellite tv broadcaster s in the uk ,especially after sky tv bought up the rights to
most major sports including soccer .
IF You were cynical you might say pirate cards
were in skys interest AT that time because
the reduced the amount of paying subscribers to
itv, leaving sky tv the only choice if you wanted
to subscribe to sports/movie channels at that time.
I PRESUME sky tv got a better deal in the long
run, there was no other sat tv company bidding
against them regarding buying up uk sports/ movie
rights .
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gaeliclad (profile), 27 Mar 2012 @ 5:31pm

IT seems a bit suspicious one company is alleged to be inplicated 3cases of hacking tv subsciber
cards.
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gaeliclad (profile), 27 Mar 2012 @ 5:37pm

IT S like cable tv companys in the us ,in certain markets they drop the price ,other financially weaker companys in the area , go out of business , cant compete with a low price,eg eliminate competition in a market .Then
after a certain time raise your subscription price.
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abc gum, 27 Mar 2012 @ 5:38pm

Re:
"he believes that piracy will be then end of the world as he knows it"

and he is totally fine with it ending the world of others ... just not him
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Big Al, 27 Mar 2012 @ 6:16pm

Re: Duh?!
OK - despite the fact you substituted Sky for ITV, you've probably pretty much nailed the exec-think at NewsCorp.
If we can ruin one competitor, then their paying customers will have to come to us.
This has absolutely nothing to do with the ones who would never have paid and everything to do with limiting the choices of paying customers
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Anonymous Coward, 27 Mar 2012 @ 6:23pm

Just on a point of order: Bob was right, he just got the names mixed up.

Let's say I am selling eggplants, and my neighbour farmer is also selling eggplants. Now, the market for eggplants is fixed, and my production is limited by what the soil can sustain. Assuming that people have to eat a certain minimum number of eggplants a day, why would I destroy my neighbours fields?

If the eggplants makes it confusing for you, just think of it this way: What is the value of a pirated smart card when the service provider of the pirated service no longer exists?

After ITV pirates lose the service, where will they get the service from? The (now) monopoly provider of course, who can charge for the privilege what s/he will.

In other words, this whole hair-brained scheme only makes sense if your intention is not to harm your competitor, but to drive them under completely.
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Phil, 27 Mar 2012 @ 6:43pm

Hack one smart card, pay $50 fine and $1000 in damages. Share a song online, pay $150,000. Seems reasonable.
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Anonymous Coward, 27 Mar 2012 @ 6:46pm

No those people might not have been going to get Sky TV. However the people that got the hacked cards, hurts iTV as it will stop some people buying iTV. When iTV dies, it allows Sky TV to put their prices up because they have no major competition and the current iTV subsribers would also likely switch to Sky rather than go without pay TV.
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gaeliclad (profile), 27 Mar 2012 @ 6:49pm

It makes sense to carry out that strategy if it destroys their profit margins ,meaning you can take over the pay tv market as seems to have happened in italy.ie you now have a monopoly with no one bidding against you when it s time to buy rights to broadcast sports at least on satellite in certain countrys.
A SMART card for itv digital is now worthless as the company is no longer broadcasting.
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Bikerelc (profile), 27 Mar 2012 @ 7:47pm

Logical
This is a perfectly logical strategy. Since you know for sure that their customer base will be lowered. This reduces the enemies funds and with this type of system once they shut down the feed or pirate alternative to your system also shuts down. In other words by helping your competition's customers pirate, you kill a customer and then get all the pirates after your competitor stops providing the steal-able signal. Now with the monopoly you gouge your loyal customers, those from the competition, the pirates from the competition and the people that left you to pirate from the competition.
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Anonymous Coward, 27 Mar 2012 @ 7:57pm

On a short term basis, where for example you know your rival has limited resources, helping to starve them of cashflow will put them out of business before they get up to speed.

Once they do go out of business, you have no competition left in your niche and you win all the business.

I imagine that's the thinking and it could be argued that it worked.
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Anonymous Coward, 27 Mar 2012 @ 8:01pm

Re: Logical
and that's the fundamental difference between that situation and modern digital internet piracy. They aren't competitors, they aren't in it for the money and they aren't going anywhere.

What internet piracy does do, is show you where there are markets that you aren't addressing as opposed to another business competing in the same area as you, attempting to do what you do while you attempt to do what they do because neither of you has any vision.

As internet piracy cannot be beaten because it is not primarily driven by any interest in profit, it makes sense to take advantage of it and learn from it, what it is that your customers actually want. Then give that or even more than that to them and profit.
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A Guy (profile), 27 Mar 2012 @ 11:19pm

Re: Duh?!
Ignoring the fact you cannot get the names of the companies straight...

Giving free access to a competitor will advertise that service to others. Some of those may pay at a later date. Some of those may suggest the service to a friend, or they may just see it and order it anyway.

NewsCorp is actively sabotaging their own business by giving potential customers more exposure to their competitors.

Also, assuming that willingness of a consumer to access the signal without paying is company agnostic, why wouldn't newscorp subscribers jump ship just as fast?
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Anonymous Coward, 27 Mar 2012 @ 11:24pm

http://www.directvdefense.org/

Am I the only one who remembers a few years back when DirecTV was threatening lawsuits against people who bought smart card development hardware?

They would get customer lists from vendors (not sure how they did this, if it was via subpoena or just threat of lawsuit, but I imagine companies don't like to give away customers lists), and then send a demand letter to every customer on the list.

As you can imagine, smart cards being a standardized piece of tech, they threatened a lot of innocent people like developers who were just trying to develop smart card applications. It eventually wound down after they got their asses handed to them by an appeals court.

I did not remember DirectTV being owned by News Corp, but it goes some way to explain where News Corp. got the idea and it whether it makes sense or not, that they did in fact have a paranoia about piracy in the satellite TV market.
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blakey, 28 Mar 2012 @ 12:15am

Re: Duh?!
i think you are right in that that is what News Corpse thought. Actually it may have helped ITV Digital in the same way that piracy of Windows gained it new markets in the long run. ITV Digital could have released a second generation box (as most do) and nullified the card - then they would see who liked the service enough to buy.
But, by the sounds of it, the real problem was nobody liked the service. Piracy was not the problem, News Corpse was not the problem (though i hope they all get arrested for this too), bad service was the problem.
Perhaps, or maybe you are right, but no one knows for sure.
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WibbleMyfins, 28 Mar 2012 @ 1:27am

Correction
A small correction. ITV Digital went out of business. ITV is still going strong and has never gone out of business. In fact until recently it was part owned by Sky until they were forced to sell it on competition grounds. IMHO though the reason they went bust is that they negotiated bad deals for sports deals. For some of the football games they were showing it would of been cheaper to take every viewer to the game in a limo and pay for them to watch it from the executive box than it was paying to broadcast it.
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Anonymous Coward, 28 Mar 2012 @ 1:49am

What makes me laugh in all of this is that Mike seems totally unable to grasp the effects of piracy on the marketplace.
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Anonymous Coward, 28 Mar 2012 @ 1:54am

Will Newscorp might not have a motive but NDS might against its competitors. Like hacking the card so that DirecTV keeps NDS and doesn't go to a different one (like Nagara).

Another angle is that if your competitor is hacked easily nobody will try to hack YOU! You don�t get grief (penalties and bad press) about your system being a leaky as a sieve. Also, at that time they had just come out with a new card if I'm not mistaken, that card was promising the end of all hacks... it REALLY needed to deliver too..... don�t you think?
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Cardman, 28 Mar 2012 @ 2:10am

NDS
I know NDS and I know for a fact that people in this organization did communicate and did work with the hackers including passing them trade secrets like the former Sky card ASIC code.

NDS certainly do have the equipment to open up an ITV Digital smartcard but then so did many others. It is also true to say that Mediaguard piracy did exist long before ITV Digital used this system. So it was only a question of who provided these codes and why? NDS were certainly in a prime position being a NewsCorp company in brotherhood to Sky Digital.

Let is never forget that Sky Digital were in War with ITV Digital back then with a battle over both subscribers and media. Any one country can only support one monopoly and when there are two in hostile competition then Hollywood gets rich while the weaker of those two die. Sky gets many subscribers when ITV Digital is dead and even anti-piracy action would increase Sky subscribers.

So yes Sky did aim to put ITV Digital out of business just like they once did with BSB. There is nothing unlawful about competition of course, even if the media market supports bloodbaths, but hacking your rivals smartcards and releasing the keys would be unlawful.

I have a good feeling that NDS is guilty when some of those people were skilled hackers with very expensive workstations to back them up. One does not get to live in the hacker world without trade of knowledge. NDS did trade and I know that like I know my own nose.

RIP Werner G. Seitz. Gone but never forgotten. He was one of our old school hackers and a very friendly and helpful guy.
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Cardman, 28 Mar 2012 @ 2:38am

Re:
Piracy did not kill ITV Digital and I know that better than anyone. Sure it did not help but the numbers did not come close enough to exceed about 3% of their problems.

Don't bother to listen to Simon Dore. ITV Digital near the end were keen to blame everyone else for their problems except their own management and service failure.

What really killed ITV Digital was the media war with Sky Digital when bidding for exclusive media pushed up prices. That ended when ITV Digital overpaid for division one football and then could not honour the contract.

The other big problem was that this was a digital terrestrial start-up service and the multiplexes were broadcast at a much lower power than with analogue. They also did not use the current encoding method back then and the better error handling rate. So many people did buy a receiver package only to find out they had shit reception and I know people who have worked miracles to bounce signals off of neighbour's walls and such.

So ITV Digital were losing between 70% to 80% of their subscribers who did not renew after 12 months. Many certainly did switch to Sky who offered hundreds more stations and a better service anyway.

In the end what I find funny is that ITV Digital did sue me due to being the market's largest blank smartcard supplier (some were misused for ITV Digital piracy) but I could not really receive the ITV Digital service here due to the weak signal and the large number of trees in the road behind my house. Beyond some testing once I soon gave up even with TWO ACTIVE ITV DIGITAL SUBSCRIPTIONS. I had Sky, I had cable TV and I got those ITV Digital packages in a promotion so I did not care much.
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Cardman, 28 Mar 2012 @ 2:46am

Re: Correction
Yes and ITV did object to the then ITV Digital using ITV in their name without approval. I seem to recall an ITV service take over (Granada?) triggered that name change.

What I love most years later is that PG Tips won at action the old ITV Digital toy monkey which they have used in their TV adverts ever since. Keep it up PG Tips.

Cardman 1
PG Tips 1
ITV Digital -2
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Anonymous Coward, 28 Mar 2012 @ 4:45am

Re: Re: Duh?!
Mike, I hope you don't mind. I am so going to pirate that "#bobfail" bit. Lol. That was unexpected but damn funny.
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Anonymous Coward, 28 Mar 2012 @ 4:47am

Re:
What makes me laugh in all of this is that YOU seem totally unable to grasp the effects of dictating terms to the marketplace on a market that sees that's no longer how things work, then demanding to the market/consumers that they stop changing/moving forward/innovating, all while treating them like criminals (even the ones who aren't).

It makes you look silly and stupid to point out the shortcomings of others when yours are far worse.

But anything to go "aha got ya Mike", right?
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Anonymous Coward, 28 Mar 2012 @ 6:27am

I got a great idea on how we can get more subscribers, make our competition's service free!
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Anonymous Coward, 28 Mar 2012 @ 6:59am

"So maybe now that you understand how piracy can lead to a monopoly, you might be more cheesed off at piracy."

The free distrubtion of information will lead to a monopoly!.....
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Anonymous Coward, 28 Mar 2012 @ 7:01am

Re:
reply fail :(
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Anonymous Coward, 28 Mar 2012 @ 7:04am

Re: Logical
The problem is, as was pointed out int he article, it would not only hurt the competition. Freely available free satellite TV would diminish the overall market for paying satellite customers, from all satellite providers. The only real kick in the ass to the dish is that they have to support the freeloaders.
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Anonymous Coward, 28 Mar 2012 @ 7:26am

I agree except...
Mike I agree with your theory on the hacking claim equally hurting BOTH companies so it's unlikely that News Corp employed such a strategy to hurt DISH or ITV except in one situation. If the company being hacked is dramatically weaker than the one doing the hacking, flooding the market with hacked cards would hurt both companies but eventually be more devastating for the weaker one. Although the News Corp subsidiaries would also take the hit, if they are able to withstand it and the other company cannot, in the end they eliminate the competition by driving them out of business and once the service dies the hacked cards become useless. As ITV went under, it is entirely possible that this was the intended outcome here.
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Anonymous Coward, 28 Mar 2012 @ 7:28am

Re: Re: Duh?!
Oh this is "classic bob".
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Anonymous Coward, 28 Mar 2012 @ 7:29am

Re: Re: Duh?!
Hey, maybe we need a tally site that show stats on this. What do you think?
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toyotabedzrock (profile), 28 Mar 2012 @ 5:13pm

Artificial
Newscorp had the money to survive the loss of revenue and likely had exclusive content.

The hack may have prevented ITV from getting access to premium content as well.
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Anonymous Coward, 28 Mar 2012 @ 8:25pm

Re: Re: Re: Duh?!
Obviously Skytv is a cancer on News Corps books. The next to go is Faux News.
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