SkyBOX: Pirates - Top and Bottom

[Gregg Lengling]

A $6.5 billion lost each year in the cable biz? $5
billion for the sky guys?

We've been thinking a lot about pirates _ and the cost
of piracy - lately. That's the subject of our next
BRIDGE report (due out this week). And much of the
information in it, such as the estimated annual loss
figures above, is downright scary.

To put it together we talked to platform providers,
retailers, equipment manufacturers and, of course,
pirates. We considered not only the size of the problem
but _ far more importantly _ the possible cures. Of
course there are cures. But, as anyone who¹s studied
the problem knows, every cure so far has a shelf
life. Often a very short shelf life. So in the end,
the most reliable cure is human. Retailers and
customer service reps reporting suspicious activity.
Undercover investigators. FBI agents and the like.

Then we picked up a newspaper where we happened to read
of some very large stock sales made by Jean Marie Messier,
then head of Vivendi, just before that stock plunged
into the gutter. (This revelation came shortly after
one French observer opined that Vivendi was "unlikely
to be impressed by such opportunistic and discourteous
negotiating tactics" as John Malone's lawsuit against
the French group for allegedly misleading the market
about its financial condition. Love that French sense
of honor.)

Then we thought of that very courteous, old-world
gentleman, John Rigas, allegedly siphoning billions
out of Adelphia. We considered Steve Case buying Time
Warner with what now appears to be accounting tricks
and a vastly inflated stock. We thought of the serial
accounting restatements at Charter.

Put together it seems to us that the biggest pirates
are not selling smart cards or splitting cable wires.
The biggest problem is at the top. And we¹re unlikely
the find any real solutions at the bottom unless we
can find some very visible deterrents for piracy at
the top.

So what do you think the odds are for that?

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