Anti-piracy firm Rightscorp is questioning its own viability after releasing some dismal first-quarter financial results. The company, which monitors and targets repeated copyright infringers with extralegal payment notices, reported an operating loss of $784,180 during the three months ended March 31, a slight improvement from the $930,000 loss a year earlier. Rightscorp only generated revenues of $68,283, a 78 percent drop from 2015 Q1’s $307,904, and its services accrued only $49,142 due to copyright holders -- a third of the $153,952 gathered during the first three months of 2015.
"These and other factors raise substantial doubt about the Company's ability to continue as a going concern," the company said in its 10-Q report, which later listed possible reasons for the sharp drop in revenue. "Management believes that the decrease in revenues was due to: a) changes in the filesharing software intended to defeat detection of copyrights being illegally distributed, b) less forwarding of the Company's notices by ISPs and c) the shutting down of some filesharing network infrastructure."
The first reason given references changing methods by internet users to shield their file-sharing activities, through VPNs, proxies and other programs. As for reason B, Rightscorp relies on ISPs to distribute the infringement notices, so if less are cooperating that would explain a dip in revenue.
The company said it had $180,344 in cash on hand as of March 31, and that was after it sold $500,000 worth of common stock in February. Management said they have enough to operate through the second quarter but that they’ll need to raise $1,000,000 soon to finish out the year. It expects to do this by borrowing and selling off more stock. "This forecast represents management's best estimate taking into consideration historic burn, expected revenue from the core business and revenue from new business initiatives slated for 2016," the company said. "In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources."
Rightscorp's outlook may be bad for rights holders, but it will surely be welcomed by those who label them "copyright trolls." The company is hired by intellectual property rights holders, including Warner Music and BMG, to help combat online copyright infringement. Its technology tracks the activity of IP addresses and targets repeat infringers with notifications seeking to collect $20 payments for each offense.