What is Online Streaming Fraud?

Fraud costs streaming platforms $9.1 billion every year as bad actors develop tools to exploit sites at scale. Unchecked fraud leads to significant downstream costs, including disputed transactions and refund abuse. Additionally, it erodes user trust in the integrity and security of streaming platforms.

Understanding and addressing streaming fraud is crucial for businesses aiming to reduce revenue leakage, protect their brand, and ensure a secure and trustworthy experience for their customers.

This article explains what online streaming fraud is, breaks down the most prevalent types, how they impact streaming businesses, and how advanced fraud prevention strategies work.

What is Online Streaming Fraud?

Online streaming fraud refers to any unauthorized or deceptive activity targeted at streaming platforms and services, such as account takeover, payment fraud, or abuse of promotional offers.

Over 110 million U.S. households are subscribed to streaming services. Accumulating over half a billion subscriptions globally, these platforms make appealing targets for fraudsters.

Common Types of Online Streaming Fraud

There are many types of streaming fraud built around fraudulent activities like account takeovers through credential stuffing, payment fraud with stolen credit cards, abuse of free trials and promotions, and even content piracy. Here are the most prevalent forms of attack:

• Account Takeover (ATO) Fraud: Fraud rings use credential-stuffing botnets to break into legitimate user accounts. Once in, they can watch premium content for free while locking out legitimate users. Some fraudsters even change account details and resell the hijacked account on hacker forums.
• Payment Fraud: Perpetrators use stolen or fake credit card details to sign up for subscriptions. They gain access to premium libraries until the payments eventually fail or get charged back after a certain period. 
• Promo and Trial Abuse: Bad actors create accounts using fake identities in bulk to exploit free trials and promotional offers to continuously access content without having to pay for it. This results in short-term spikes in subscriptions, but does not convert to actual revenue.
• First-Party Fraud: Also known as “friendly fraud” or chargeback fraud, first-party fraud involves users disputing legitimate charges with their bank to force a transaction reversal after benefiting from the streaming services. For the platforms, this leads to lost revenue and chargeback fees from payment processors. 
• Abnormal Streaming: Fraudsters use bots to create accounts to inflate viewership. This messes up view counts and makes it hard to determine what’s actually popular. It also strains the streaming service to host these fake accounts. 
• Content Piracy: Content pirates access and illegally distribute copyrighted shows and movies in a way that does not generate profits for platforms that pay for rights to host and resell content. This is called displaced consumption.

How Does Online Streaming Fraud Impact Businesses?

Streaming platforms face many costs related to infrastructure, teams, content, and maintenance. When content is accessed in a way that does not generate revenue, it leads to losses for the streaming platform. Content piracy alone leads to $30 billion in annual losses. Let’s explore some other impacts on business:

• Distorted Analytics: The use of abnormal streaming generates misleading data about what real audiences watch. This can lead platforms to make poor content investment decisions catering to an illusion of viewer interest.
• Resource Drain: Fighting fraud takes time, money, and effort on fraud detection, chargebacks, and fixing issues instead of focusing on growing their audience or improving their services. 
• Customer Churn: When customers deal with fraud issues like account takeovers or suspicious logins, they lose trust and may unsubscribe. Sift research found that 80% of consumers would stop shopping on a site where they’d been a victim of ATO.
• Increased Compliance Risks: Streaming fraud can trigger legal and regulatory scrutiny, raising concerns with rights holders and content creators. This can complicate negotiations and damage key relationships essential for maintaining content libraries.

Challenges in Combating Online Streaming Fraud

Fraudsters are constantly finding new ways to exploit platforms, using tools like bots and AI to make their attacks faster and harder to detect. Platforms must strike a balance between maintaining strong security and delivering a smooth user experience, which makes it a challenge to stay ahead of fraudsters. Here are some of the biggest hurdles:

• Emerging Fraud Tactics: Whether it’s using deepfake video/audio to bypass biometrics or coordinating attacks across hundreds of fake accounts, the tactics are always evolving. Innovations like AI are creating new openings for large-scale automated social engineering.
• Resource Constraints: Unlike brand giants like Netflix, smaller streaming platforms may lack the financial muscle and technical teams needed to keep up. Implementing strong authentication protocols or advanced behavioral analysis requires additional resources.
• Cross-Border Fraud: Global platforms struggle with fraud that crosses into different geographic regions, where regulations and enforcement vary widely. Fraudsters exploit these gaps using VPNs and other tools.
• Fraud Collaboration Networks: Fraudsters work together, sharing stolen data, tools, and strategies. Some even sell “fraud kits” on deep web platforms or social media that make it easy for anyone to launch attacks.
• Limited Detection Visibility: Distinguishing fraudulent activity from legitimate behavior is increasingly difficult as attackers use advanced bots that mimic human actions, such as mouse movements and typing speed. This difficulty makes detecting and blocking fraud a growing challenge for platforms.
• Data Privacy Regulations: Regulatory bodies like GDPR and CCPA restrict how user data and activity can be analyzed for fraud prevention. They exist to protect users’ privacy, however, they also limit the platform’s ability to identify and block fraudulent activities, making it harder to separate genuine users from attackers.

Solutions to Prevent Online Streaming Fraud

Fraud prevention measures come with the risk of blocking legitimate customers by accident. The following preventive guidelines focus on avoiding fraud without affecting real customers:

• Protect Promotions and Trials: Verify user identities during sign-ups using tools like multi-factor authentication (MFA) through email or SMS verification. Device fingerprinting can also limit the number of accounts created from a single device, helping block fraudulent sign-ups while allowing genuine users.
• Enable Advanced Fraud Detection: AI has opened up advanced ways to spot suspicious behavior that might go unnoticed. Instead of reviewing transactions manually, fraud prevention systems automatically detect anomalies in usage patterns or content consumption trends indicative of botnets or hijacked accounts without adding user friction.
• Analyze User Behavior: Legitimate users have patterns in how they access streaming apps and services. Fraudsters tend to behave differently. Track metrics like devices used, login times, content search flows, simultaneous streams, and other habits to identify outliers. 
• Adopt Multi-Layered Protection: No single security measure can address all forms of fraud. A multi-layered approach combines authentication protocols, device fingerprinting, behavioral analysis, and payment verifications. This makes it much harder for fraudsters to bypass security while maintaining a smooth experience for users.
• Use Intelligence Platforms: Hackers often reuse successful tactics across platforms. Joining industry networks to share intelligence on emerging threats can help identify risks faster. Collaborative efforts ensure platforms stay ahead of evolving fraud tactics.

How Sift Can Help Prevent Online Streaming Fraud

As platforms grow, fraudsters use advanced automated tools to find and exploit weaknesses faster than manual reviews can address them. Preventing these attacks requires a multi-layered security approach, including verifying user authenticity, monitoring behavior patterns, and detecting anomalies.

Sift’s AI-powered platform uses a global data network and advanced machine learning to proactively prevent fraud. It benefits your streaming business with the following features and advantages:

• Global Data Network: Sift draws live fraud insights from analyzing over a trillion online events annually across industries. This approach helps reveal emerging attack patterns faster. 
• Dynamic Machine Learning Models: Sift instantly adjusts its multi-layered detection models without relying solely on historical patterns. The system incorporates the latest schemes like synthetic identities and can differentiate between regular users and fraudsters trying to bypass safeguards. 
• Instant Fraud Protection: The platform identifies and stops threats in milliseconds before attacks scale. Whether it’s a spike in fake account sign-ups or payment fraud through stolen cards, Sift detects and blocks fraudulent activity behind the scenes.
• Behavioral Analytics: The platform flags abnormal activity, such as unusual logins or device usage. This strategy helps identify compromised accounts before further abuse occurs.

Request a Sift demo and learn how to stop online streaming fraud before it impacts your streaming platform’s bottom line.