Every year major film and music companies, along with the artists they represent, lose millions of dollars to internet piracy. Between now and 2016 alone, an estimated $2.3 billion in illegal downloads will take place on the internet, usually with little or no consequence to the downloader?and sometimes to the great financial benefit of the unauthorized download sites that sell heavily-trafficked and highly profitable ads on their sites.
As I wrote in part one of this series, a small company in California called RightsCorp, Inc. , trading over-the-counter under the symbol RIHT, is already executing a paradigm-shifting approach to stop this rampant pirating and monetize the process at the same time. Strikingly?unlike the vast majority of over-the-counter issues?RightsCorp is rapidly growing its revenue stream in the process, in addition to actively expanding its portfolio of copyright-represented properties and proprietary patents protecting its technology.
If it sounds too good to be true, well, it isn?t. In fact, RightsCorp already has a deal in place with Warner Brothers to pursue and protect the copyrighted music of dozens of that company?s high-profile artists?as well as agreements with other giant industry players, including Round Hill Music, Shapiro/Bernstein, The Orchard and BMG Rights Management. For reference, BMG alone is the world?s fourth biggest music publisher, repping such household name artists as Bruno Mars, John Legend, David Bowie and MGMT.
RightsCorp?s approach is both simple and elegant. Its technology system monitors peer-to-peer file sharing networks. When it detects copyright infringement activities of the works controlled by the companies it works with, it records the date, time, copyright title, and other unique identifiers of the action. When it detects someone illegally distributing those items through an Internet Service Provider RightsCorp does business with, RightsCorp advises them of the violation and requests a $20 settlement for the copyright holder. If the ?pirate? declines to pay the $20, they become liable for a larger fine and being dropped by their Internet Service Provider.
To get just a snapshot of the massive market RightsCorp is primed to exploit, file sharing traffic has grown by 40% and illegal movie downloads have grown a gargantuan 800%. . In 2013 alone, an estimated 143 billion separate illegal downloads took place. Even software giants like Microsoft and Adobe are vulnerable, with industry estimates placing the number illegal downloads of those companies? software products at more than 80% of the total! That easily translates into tens of millions of dollars per year.
Judging from recent trading action in RIHT shares, market participants are beginning to stand up and take notice. Just about a ?zero trader? since the company?s October financing deal was reached, trading interest picked up slightly in RIHT in January, after shares had been trading in a tight and uneventful $0.50 ? $0.75 channel for about three months, cracking the $0.80 cent mark briefly only once before pulling back. That?s changed recently?especially over the past five trading sessions at the end February?when more than 1 million RIHT shares changed hands on three occasions, and almost that many on the other two.
Ultimately, RIHT shares topped out at $0.92 each, before pulling back to their current level of around $0.80. The issue?s total float size is listed as 68.8 million shares.
Right now, RightsCorp has several significant things going for it that you rarely find in the over-the-counter equity universe. The company?s revenue stream is growing relatively exponentially for a small concern, as is the number of copyrighted works RightsCorp monitors, and its client list already includes some of the entertainment industry?s heaviest hitters. And currently RightsCorp has absolutely no direct competitors.
In short, the sky truly could be the limit for RightsCorp if the company continues to prove and fine-tune its business model, and maintains the backing of leading entertainment industry companies and internet service providers. What?s more, with the explosion of all things digital across the internet, there will invariably be an expanding universe of intellectual property that requires protection, which could translate into increased sales and profits for this compelling, potentially high-growth company.
Warren Gates, Senior Analyst, Oakshire Financial
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