How to keep digital pirates at bay?

In an ever-evolving digital era, harsh penalties cannot stem the tide of piracy, but a delicate balance of supply and demand calms the waters

Featured faculty: Tony Ke
Written by Sally Ho

Amid the dominance of streaming platforms, digital piracy, or the unauthorised and illegal downloading or streaming of movies, music, and other copyrighted content, has been a persistent headache for the entire creative industry. A data company, MUSO, reported that visits to digital piracy websites have surged from 130 billion in 2020 to 216 billion in 2024.

Piracy websites offer free illegal content to watch and download, while monetising the visitor traffic through sponsored ads to generate revenue. Most jurisdictions treat such commercial piracy as a criminal offence and punishable by fines, imprisonment, or both. However, shutting down piracy websites has been an uphill battle for law enforcement.

Authorities have been blocking many piracy websites to protect copyrighted content, but piracy firms frequently change their web domain since they can host their servers anywhere to evade detection. Therefore, regulators are now trying to curb piracy from the demand side by introducing penalties aimed at users.

“To understand anti-piracy policy, you have to model a strategic ‘cat-and-mouse’ game, where penalties change piracy firms’ technological advancements and consumer behaviour.”

Professor Tony Ke

A notable example is the US Prioritising Resources and Organisation for Intellectual Property (PRO-IP) Act, which imposes US$1,000 to US$200,000 civil penalties, and France’s Regulatory Authority for Audiovisual and Digital Communication (ARCOM) Law, with a €1,500 or around US$1,750 fine for downloading, copying and streaming illegal content.

“These demand-side regulations are unique to digital content, as digital consumption can be traced by regulators more easily than physical transactions, making it feasible for law enforcement to identify users who download or stream pirated content,” says Tony Ke, Professor of Marketing at the Chinese University of Hong Kong (CUHK) Business School.

However, piracy firms constantly assist their users in hiding their digital footprint through encryption, automated random IP addresses, virtual private network providers, and many more. Most users are aware of this support, as the piracy firms make anti-tracking methods apparent on their websites, providing a sense of security from law enforcement.

This dynamic can explain why, despite high penalties, users continue to flock to piracy websites in large numbers, as measured by Google Trends below. An important question then emerges: Do penalties for digital piracy consumption actually work?

In his new study, Regulating digital piracy consumption, Professor Ke, in collaboration with his PhD student Chen Jieteng and Gao Yuetao of Xiamen University, suggests that penalties may, in fact, increase piracy rather than curb it. In some cases, heavier penalties can even encourage more piracy.

A cat-and-mouse game in anti-piracy policy

“To understand anti-piracy policy, you have to model a strategic ‘cat-and-mouse’ game, where penalties change piracy firms’ technological advancements and consumer behaviour,” Professor Ke says. “In this model, consumers understand the penalties, but pirate platforms also respond by investing in anti-tracking tools that make enforcement less effective.”

Specifically, the researchers design a model consisting of copyright holders that offer high-quality content and set a price, piracy firms that host a free and low-quality pirated version, the regulator that sets a penalty on consumers who get caught accessing pirated content, and consumers whose preferences depend on product quality, price, and the expected penalty.

“Demand for piracy often arises when copyrighted content is unavailable elsewhere,” Professor Ke adds. “Consumers with medium incomes are prone to piracy and willing to risk penalties due to budget constraints, while still seeking access to diverse content. The piracy firm’s anti-tracking technologies significantly influence their behaviour.”

Through various analyses, the study suggests that regulators should carefully balance the level of penalties with the cost and availability of anti-tracking technology. “When investing in anti-tracking technology is relatively cheap and easy for piracy firms, the regulator should avoid harsh penalties since doing so can trigger even stronger anti-tracking investment,” says Professor Ke.

The model shows that when the anti-tracking technologies are affordable, piracy initially declines as penalties increase. However, sufficiently high penalties can induce piracy firms to invest in anti-tracking technologies that help users evade detection, ultimately leading to higher levels of piracy consumption. In this context, regulators should target a moderate penalty that is just good enough to deter piracy, and tolerating a small amount of piracy can actually lead to better overall outcomes.

“However, in a scenario where investing in anti-tracking technologies is costly for piracy firms, higher penalties can be effective and may even deter demand and supply altogether,” says Professor Ke. In this case, the risk of being caught is higher and steep penalties can reduce piracy significantly.

Implications for content platforms and regulators

For content platforms and the creative industry, counterproductive regulation can be discouraging, as they might face uncertain returns on investment that affect their decisions in producing new content. Therefore, policymakers need to design not just the level of penalties, but also the strategic responses of piracy firms carefully.

“A more effective approach is to balance demand and supply-side actions,” Professor Ke adds. “On the demand side, piracy can be reduced by making legitimate options more attractive, affordable, convenient, and widely accessible, rather than relying on penalising users. On the supply side, enforcement should focus on deterring piracy firms and the infrastructure that enables large-scale piracy.”

Technology plays a pivotal role in enabling piracy firms and consumers alike. In a digital world where anti-tracking tools are increasingly sophisticated, effective regulation may require moderation, creativity, and a deep understanding of the ecosystem, rather than pushing for heavy fines.

“Additionally, digital tracking is constrained by data privacy regulations, and tech companies offer opt-out choices for such tracking features, so policymakers also need to take into account these limitations when designing effective enforcement,” Professor Ke adds.

He also notes that some platforms may have realised the complexity of the cat-and-mouse game in digital piracy and now offer “freemium” structures that combine free access with advertising. This new strategy opens an avenue for further research to understand how these models affect consumers’ willingness to pirate.