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If all goes according to plan, Italy’s Piracy Shield IPTV blocking system will be retired at the end of the year. In its place, Piracy Shield 2.0, a tech platform likely to be billed as the most formidable anti-piracy system on the planet. Year one running costs of two million euros will be paid by Italian taxpayers, rather than the main beneficiaries, some of the world’s most famous football clubs.

Like many sensible businesses, paying as little tax as legally possible is a priority for corporations in the entertainment and professional sports sectors.

The difference with many of these giants is that some governments work quite hard to ensure that goal is met.

In the UK, tax breaks are on full display at Companies House; when a foreign company engineers, let’s say, a £6 million annual loss when making a movie, the government swoops in with a tax bill that credits £6 million. Or £10 million, or multiples of that over several years.

Since the end result is often a carefully crafted loss, despite massive contributions from the public purse raised through various taxes, no corporation tax is paid, even when a movie goes on to generate a billion at the box office. In Italy, where the government goes to great lengths to accommodate their business requirements, top tier football clubs are in debt to the public purse due to hundreds of millions of euros in unpaid taxes.

IPTV Pirates Blamed For Huge Sums in Lost Revenue

With the leading Italian clubs still spending at unsustainable levels, complaints over lost revenue due to IPTV/streaming piracy continue. Top football league Serie A currently claims that IPTV/streaming piracy costs football around €330m per year, an amount that’s ultimately blamed on Italian football fans and their love of TV piracy devices, locally known as ‘pezzotto’.

That €330m per year headline figure helped to push through new legislation last year that in part supports the operations of the Piracy Shield IPTV blocking system in use today. Its mission is to degrade pirate IPTV supply to the extent that fans are herded back to legal yet expensive subscription packages, thereby reducing the claimed €330m per year piracy deficit to something more reasonable.

Taxpayers’ ~€2 Billion Contribution?

Of course, other factors have also been at play. For the last four years, a government initiative called the Growth Decree aimed to attract foreign talent to Italy with lucrative tax breaks. The main beneficiaries were some of the world’s richest football players and associated staff, who through the scheme paid tax on just half their income rather than all of it. Their new football clubs also benefited by not having to pay the going rate when signing players from abroad.

This recently abolished scheme cost Italy over €670m per year in tax revenue, the New York Times reported last December. To put that figure into perspective, that’s more than double the amount Serie A claims to lose every year due to Italians’ piracy habits.

Legality quite clearly sets these activities apart and one certainly doesn’t justify or cancel out the other. Yet in the cold light of day, some might argue that there are some similarities. In any event, money leaving the public purse to support commercial interests seems here to stay.

Piracy Shield 2.0

As previously reported, the Piracy Shield blocking system currently in place is struggling. The scale of the blocking and number of ISPs expected to connect to the system is causing the system to time out. As a result, upgrades are urgently required and if everything goes to plan, the old system will be retired at the end of the year to make way for Piracy Shield 2.0.

As reported by La Repubblica (paywall), telecoms regulator AGCOM will continue to oversee the system which currently focuses on the protection of live sports, mostly football. With the addition of movies in the near future, other rightsholders are set to become more closely involved; many are likely to be benefiting from current blocking already since most IPTV services carry sports and movies.

Increased Performance, Increased Costs

Running costs for the new blocking system are expected to reach two million euros a year. La Repubblica reports that the money will be used to “strengthen and maintain” the Piracy Shield system which will operate from the cloud via agreements with Amazon and/or Microsoft.

An undisclosed amount will be used to subsidize the costs associated with blocking incurred by ISPs. Currently shouldered by the ISPs themselves, the costs include staff overtime, among other things. When the new system comes into play, it appears that two thirds of their costs could be covered, with the remaining third continuing to be funded from any company profits or by passing costs onto internet subscribers.

The State Pays, Profits Already Destined Inwards

The two million euros each year required to run Piracy Shield will be paid by the state using funds generated through various taxes, with personal income tax the greatest source of income. In 2021, taxes on corporate income and gains amounted to just 4% of total tax revenues in Italy.

La Repubblica reports that Piracy Shield is seen as a tool to help ensure the stability of the football business. It cites unnamed government sources reporting that DAZN may be close to breaking even. To reach that target it reportedly needs to add 150,000 subscribers and hopes are being pinned on Piracy Shield to nudge fans in their direction.

“When DAZN reaches breakeven, having reached certain turnover thresholds, its additional profits will be shared with the Lega Calcio [football league], and therefore with the clubs,” La Repubblica notes.

Cash flow is clearly important for maintaining a healthy football ecosystem; the direction, perhaps even more so.