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Studios and content owners need to improve online user experience, including explaining digital rights management, or risk boosting illegal peer-to-peer (P2P) downloading, according to a new report.

Scottsdale, Ariz.-based In-Stat found that efforts to stop the 12 billion illegal P2P downloads occurring annually in the U.S. have come up short, despite expanded digital rights management (DRM) technologies used to enforce copyrights of video content, including copy protection, watermarks and digital fingerprinting.

The report, “Adopting Digital Rights Management,” found that broadband-enabled home in the United States download 14 billion videos each year, of which 85% are illegal.

Improved user experience and ability to transport digital content via multiple portable devices and home networks could slowly penetrate a small but active group of illegal file sharers.

The reports that migration of power user households from P2P to legal video services would generate $1.4 billion in subscription revenue and $1.1 billion in advertising revenue.

In-Stat believes watermarking will become the preferred technology to track licensed usage rights. While some file formats for digital media can contain additional information called metadata, digital watermarking is distinct in that the data is carried in the signal itself.

“What is needed is a new approach to monetizing digital content, including moving a relatively small group of consumer households that do the bulk of P2P downloading (power users) to legal services,” said analyst Keith Nissen. “The question is whether the video industry wishes to control its own destiny or get crushed by technological change, similar to what is occurring in the music business.”

source: Home Media Magazine