Irdeto announced on Monday that it is acquiring the antipiracy services company BayTSP.  Terms were not disclosed, but this is the culmination of a “strategic alternatives exploration” process that BayTSP had been engaging in for some time.

BayTSP monitors P2P networks, file-sharing services, and other places where unauthorized content might lurk and generates evidence that content owners can use to support legal action against infringers.  It uses a range of technologies, including sophisticated network traffic analysis and fingerprinting.  It has been one of a shrinking number of providers of such services as the industry has consolidated.

This is a good strategic fit for Irdeto in various ways.  First, BayTSP will boost Irdeto’s existing antipiracy services; this will strengthen the company’s competitive positioning particularly against NDS, which is known to have robust antipiracy services to complement its content protection technologies.  Second, BayTSP has made some recent forays into e-book antipiracy services, which will complement Irdeto’s own new content protection technology for the e-publishing market.

Yet the consolidation of antipiracy services within a major content protection company has interesting implications for the economics of content protection.  Typically, copyright owners pay for antipiracy services such as those of BayTSP, Peer Media, and Attributor, but downstream entities such as network operators, online retailers, and device makers pay for content protection technologies such as conditional access and DRM.  At the same time, pay TV operators are starting to launch services in which the content can go beyond the customer’s set top box, possibly onto their tablets, mobile handsets, and PCs.  The question is: do pay TV operators believe it’s their responsibility to protect the content beyond the STB?

Irdeto will have to decide the answer to this question.  Specifically: will it continue to charge content owners for BayTSP’s antipiracy services, or will it attempt to add to the fees it charges its operator customers?  To put it more cynically, have Hollywood studios encouraged Irdeto to acquire BayTSP (as they encouraged Irdeto to buy BD+ Blu-ray content protection technology from Rovi just three months ago) so that they no longer have to pay for it?

Seen in this light, Irdeto’s acquisition of BayTSP becomes part of the company’s overall strategy to offer more comprehensive and higher-grade content protection services to pay TV operators, on the theory that they will pay more to get better protection.  This is a risky strategy, but given the growing footprint that Irdeto has in the overall content protection market, it’s a risk that Irdeto can probably afford to take.