June 29, 2009

Inside Market Data

Survey: Piracy Costs Data Industry $8b

The financial information and analysis industry is losing an estimated $8 billion of subscription revenue each year as a result of subscribers sharing login information and content "scraping," according to a survey conducted by Burton-Taylor International Consulting LLC.

The  survey polled 80 senior-level managers at data, news, analytics and research providers, as well as end-user firms, who estimated that 37.4 percent of user IDs and passwords are shared between licensed and unlicensed users, and that 34.4 percent of the user population views content illegally scraped from subscriber-only Internet sites.

According to the survey, 23.7 percent of those users that share logins might be willing to subscribe to the service if approached-since users who share logins are more likely to be using the content for legitimate business, and may therefore be more willing to pay for access if approached because they have a real business need for the data-which would represent approximately $2 billion in new revenue "without the data provider having to develop a new product, build in new enhancements or hire new staff," says Douglas B Taylor, managing partner at Burton-Taylor.

"It's not just about policing the industry, but the reality is that the industry is bigger than previously thought, that more opportunity exists to sell data products, and that there is more revenue out there to be captured," Taylor says.

To address this, data vendors could choose to adjust their commercial policy and alter their pricing models or re-package their products as a compromise, Taylor says, and could start with a softer approach to remediation to avoid potentially negative confrontation, before escalating to more severe approaches such as blocking users' access to content.

He says tolerance levels may vary between data providers. For example, some providers might decide to include a "follow-the-sun" clause for sharing at a small additional fee, whereby staff in different geographical regions could use the same login, provided that multiple users do not access the same service at the same time, while a more specialized data provider may take a stricter line.

"The vendors supplying unique or value-added content have an advantage. Protecting and commercializing their advantage helps prevent the commoditization of their products," Taylor says.

However, he says there is a higher chance of recovering revenue lost as a result of login-sharing than from content scraping, since the prevalence of screen-scraping bots suggests that even if a scraper is stopped, they could easily find a different way to obtain the data. Screen scrapers typically use the data they obtain to populate their own subscription Web site or data product, he says. One anonymous respondent states in the survey that the "biggest offenders" are data providers who steal from each other for data quality assurance purposes.

Taylor says that data piracy tends to be more pervasive in Asia, Europe and the Middle East than in the US, since account managers in North America tend to be more aggressive about recovering lost revenue due to piracy than their European counterparts.
by Vicki Chan