Of Brands, Digital Pirates -- And Shame


Some of the biggest brands in the world are paying to advertise on the digital-piracy Web sites that draw millions of consumers and are the scourge of Hollywood studios, cable and broadcast networks and other producers of original content.

A new report out this morning names 31 major brands — from Amazon (NASDAQ:AMZN), American Express (NYSE:AXP) and AT&T (NYSE:T) to Samsung, Toyota (NYSE:TM) and Wal-Mart (NYSE:WMT) — whose paid ads appeared on “multiple occasions” on illegal, copyright-violating download sites in the past month.

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The University of Southern California’s Annenberg Innovation Lab, which released the report Thursday, also singles out the 10 worst offenders among online ad networks that pay the pirates millions of dollars to run the brands’ ads. Among them: Yahoo (NASDAQ:YHOO) and its Right Network.

The report deploys a new weapon in the assault on online piracy: public shame. The USC Annenberg lab’s director, Jonathan Taplin, hopes that publicly identifying the offending ad-nets will persuade them to block pirate sites entirely. Last month, the lab put out the first top-10 list, culled from 110 ad networks it tracks. Today’s release is the second.

But this is the first time the Annenberg lab singles out big brands for letting their ads run on pirate sites, whose sole source of income is ad revenue. They include carmakers (BMW, Buick, GM, Honda, Lexus, Mazda, Mercedes-Benz, Nissan), insurers (Nationwide, State Farm, Progressive), credit-raters (Transunion, Equifax), and fashion names (Victoria’s Secret, Converse).

The most unlikely member of this Hall of Shame: Walt Disney Co (NYSE:DIS) — itself a victim of millions of illegal digital downloads.

The brands’ likely defense is that the ad networks they hire place a flurry of millions upon millions of display ads on millions of different Web sites. Miscues happen. Who can keep up? Yet the ads, magically, don’t end running on, say, porn sites — somehow the ad-nets are able to avoid those sites entirely.

“We were amazed that very major brands were putting their ads on these pirate sites — and none of those brands were on porn sites,” says Taplin, director of the Annenberg Innovation Lab.

The problem: Nobody cares all that much about copyright-infringement, but let your brand pop up next to a bare breast and there’s hell to pay. The online ad networks, Taplin says, “are trying to make a calculation of how much they can get away with, without crossing a line. And a lot of them have decided that these pirate sites are fine.”

And illegal-download sites — some 150,000 of them — draw millions of consumers. The notorious Kim Dotcom, the obese and boastful owner of the Mega download site that authorities shut down in the Netherlands last year, claimed 100 million members and is said to have reaped $300 million in six years — most of it, presumably, in payments from these ad networks.

That rankles Taplin, who had a long career as a music manager, movie producer and media banker before going academic in 2005. “These people are like parasites, the people who run these pirate sites,” he says. “They take out money from the creative economy, and they don’t put anything back in.”

Taplin, age 65, produced Martin Scorcese’s “Mean Streets” and “The Last Waltz” in the ’70s; did media mergers for Merrill Lynch in the ’80s; and founded a before-its-time video-on-demand service in the ’90s. One of his first jobs was as a road manager for the iconic singer Levon Helm of The Band, who died last year. After Helm was diagnosed with throat cancer in 2002, he had to go back out on tour for income because his royalties had been wiped out by Limewire and other free download sites, Taplin says.

“That seemed unfair to me, quite honestly,” he said.

Noting the devastation that illegal downloads did to the music business, Taplin says, “Eventually the film business will be in the same space, because of broadband.”

One download site, known as filestube, gets takedown orders from copyright holders for two million movies and TV shows in a year, he adds.

Cut off the ad flow, though, and the pirate sites could wither. Taplin says the effort may be winning converts.

Google’s Doubleclick network made the top-10 list of offending networks in the Annenberg report released last month — but this month Google didn’t show up at all. A few months ago, Taplin says, Google (NASDAQ:GOOG) began taking new steps to stop sending ads to pirate pages. OpenX, another big ad-net, also has cracked down and has fallen off the top-10 list.

“But another big player hasn’t changed at all. I think they don’t really care, maybe I’m wrong,” Taplin says.  He’s too polite to name names on this point ... but Yahoo now has made the shame-list top-10 two months running.