Rightscorp Discovering That Harassing Broadband Users Isn't The Cash Cow It Thought It Would Be

from the and-how-is-that-working-out-for-you? dept

Thu, Mar 19th 2015 2:43pm — Karl Bode

For a few years now, Digital Rights Corp (aka Rightscorp) has been trying to turn copyright infringement notices into a revenue stream, sending accused pirates letters telling them they can avoid court battles if they just pay a $20 fee (per infringement). The idea was to engage in a "friendlier" form of copyright trolling where the demands were so "reasonable," most users would quickly settle up. But like so many copyright trolls before it, Rightscorp's behavior has been sloppy at best, with the company often trying to navigate dubious DMCA legal loopholes in the pursuit of cash.

Apparently, the company's methods aren't just legally dubious, they're unsurprisingly unprofitable. We'd already noted a few times how the company's shady tactics -- and the lawsuits (pdf) in response to those tactics, which include violating federal robocalling laws -- were putting the company on unsound financial footing. Now, new SEC filings confirm as much.

According to 10-K documents filed with the SEC earlier this month, the total loss from Rightscorp operations for 2014 was $3,398,873, with revenues of just $930,729 for the year. "As of December 31, 2014, our accumulated deficit was approximately $7,093,377," states the filing, adding that the company lacks the revenue to allow it to "continue as a going concern." Rightscorp stock price, meanwhile, similarly isn't much to write home about. Not so viable for a company that on a recent earnings call declared itself "one of the only viable solutions to the multi-billion dollar problem of peer-to-peer piracy."

There's not much going on there if you're an investor looking for growth. The IP section of the filing notes that Rightscorp has 7 US patent applications on file. Next to most of the patent applications, Rightscorp itself says "this application currently stands rejected by the USPTO," "the rejection is a Final Rejection," or "this provisional application is now expired." Similarly, Ars Technica notes that while Rightscorp continues to expand its ISP relationships from 50 to 233 cooperating ISPs, most of those ISPs are tiny and its overall broadband user coverage is small:

"However, that's not a very meaningful increase. While Rightscorp may have gone from 50 to 233 ISPs, most of those are very small providers, with at least some of them being individual universities who forward notices to students. The amount of the US population who have Internet service providers that cooperate with Rightscorp remains stable at about 15 percent."

And while many small ISPs play along, a number of mid-sized ISPs like Grande Communications and Windstream have increasingly been standing up to the company, lamenting it "abuses the subpoena power of the federal courts" in California and elsewhere. Meanwhile, most of Rightscorp's already limited finances are coming from two companies: Warner Bros. and BMG, which accounted for 76% and 13% of the company's sales last year, respectively. In the end, maybe harassing broadband users isn't quite the cash cow Rightscorp expected and the company may want to explore some additional revenue generation options. Perhaps used car sales or home theater installations?

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Filed Under: copyright, copyright trolling, shakedown
Companies: rightscorp

18 Comments

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Roger Strong (profile), 19 Mar 2015 @ 3:06pm

Somewhere the CEO of Rightscorp is looking at his accumulated deficit and wondering, "What would John DeLorean do?"
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Anonymous Coward, 19 Mar 2015 @ 3:40pm

"Hollywood accounting" tax shelter. Actual costs maybe $50K.
Enabling to write-off the $7M. Whenever you see a business apparently losing heaps of money, it's a tax scam. Don't weep for them.

So don't be gleeful. They're not going to starve and are probably coming out ahead. Wouldn't even surprise me if this is intended.

If only someone at Techdirt knew how modern rapacious economics works, not the mercantilism of two centuries ago...
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pouar (profile), 19 Mar 2015 @ 4:40pm

Must be piracy eating up all our profits again.
/sarcasm
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BentFranklin (profile), 19 Mar 2015 @ 4:51pm

Someone please buy their domain in bankruptcy auction and put it to good use.
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David, 19 Mar 2015 @ 5:50pm

The "Lost" Revenue
The argument against Piracy is that it costs the industry millions of dollars per year in "losses" - money which they would have received had piracy not taken it from them.

Yet, when it comes to actually getting that money, it turns out those millions of dollars simple aren't there.

The would have a much better outcome if they just chalked up "piracy" as a portion of the "marketing" budget.
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Anonymous Coward, 19 Mar 2015 @ 6:22pm

Rightscorp Discovering That Harassing Broadband Users Isn't The Cash Cow It Thought It Would Be

Awwwwww, isn't that special.
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madasahatter (profile), 19 Mar 2015 @ 7:38pm

Re: The "Lost" Revenue
Entertainment money comes from most people's discretionary funds. Money spent on a movie is not available for a book or game. At some point, there will be no sale because there is no money available. Either one then "pirates" or goes without. The effect is the same no sale.
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madasahatter (profile), 19 Mar 2015 @ 7:38pm

Re: The "Lost" Revenue
Entertainment money comes from most people's discretionary funds. Money spent on a movie is not available for a book or game. At some point, there will be no sale because there is no money available. Either one then "pirates" or goes without. The effect is the same no sale.
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NoneOne, 19 Mar 2015 @ 8:14pm

Rightscrap
Their new slogan should be "Rightscorp! we flush money down the toilet!"
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Bob Webster (profile), 19 Mar 2015 @ 10:55pm

Sue 'em!
Considering their precipitous stock price decline, it seems like some upstanding citizen would file a class action lawsuit against Rightscorp for neglecting to notify shareholders of known risks and adverse business conditions.
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Ninja (profile), 20 Mar 2015 @ 6:06am

Perhaps used car sales or home theater installations?

I can imagine them selling some very legitimate used Ferrari or something...
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Mason Wheeler (profile), 20 Mar 2015 @ 6:52am

Re:
Get Christopher Lloyd to build him a time machine, obviously.
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Anonymous Coward, 20 Mar 2015 @ 7:20am

Re: The "Lost" Revenue
But piracy is costing Hollywood millions. The piracy of companies like Rightscorp and others who feed on their fear.
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Paul Keating (profile), 20 Mar 2015 @ 10:15am

Fund Raiser!! Kickstarter
How about a funding project to acquire as many shares as possible and then take control of the company so that this can stop!!!!!

Everyone buy shares and either participate in the annual meeting or enter into a proxy/voting agreement to take control.
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That Anonymous Coward (profile), 20 Mar 2015 @ 5:01pm

I wonder how the lawsuits will affect their bottom line.

All that is missing now is a tone deaf quote from the leadership how they feel the USPTO made the wrong decision and they will keep enforcing their patents until SCOTUS rules in their favor.

I suggest that WB & BMG might want to look at the history of those they hire, and question the wisdom of pouring more money into the black hole. There have got to be better write offs you can get that will not open you up to lawsuits or more ridicule for having hired a bumbling bunch of idiots to sabotage your shitty reputation further. Unless you really want to win the trophy away from the cable industry.
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Pragmatic, 23 Mar 2015 @ 6:50am

Re: Re:
Great Scott!
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Pragmatic, 23 Mar 2015 @ 6:51am

Re: Re: The "Lost" Revenue
Not to mention that of the **AAs. $2M for subs? I don't think so!
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Anonymous Coward, 9 Apr 2015 @ 11:53pm

Re:
out_of_the_blue just hates it when due process is enforced.
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