November 22, 2004
Volume 6, Issue 12
Welcome to Digital Static
Please warmly welcome Digital Static, LLC to the Content Group. We look forward to providing valuable services to this newest DCIA Member and supporting its contributions to commercial development of the distributed computing industry.
Digital Static proudly presents 2084, the world's first "Multimedia Music Artist." He produces songs. He produces multimedia commercials. He writes songs. He is a lead vocalist. He is the world's first "New Age Producer," creating revolutionary new music and multimedia products.
2084 is a super-talent who was selected as a finalist for Best Use of Technology by an Artist in Billboard's inaugural Digital Entertainment Conference & Awards 2004 (DECA), which was co-sponsored by the DCIA and Member Alston & Bird.
The creative properties emanating from Digital Static's Detroit-based studio will revolutionize both the music and new media industries. Having been selected as a DECA finalist, 2084 is ready to set the world on fire.
Digital Static is currently seeking investors and strategic partners in the music, new media, publishing, film, games, and digital entertainment industries.
Grokster Turning Radio Dial
By Ben Fritz in Variety
As it continues to battle Hollywood in Congress and the courts, peer-to-peer company Grokster is launching its first service that doesn't enable piracy, an online radio network.
Operated in partnership with P2P radio company Mercora, it will allow users to create an Internet radio service out of their personal collections of digital music files.
Application enforces rules to keep users in compliance with copyright law prohibiting on-demand radio without special licensing fees. Users aren't allowed to stream more than four songs from a certain artist within a three-hour period, for example.
The service also tracks streams and pays royalties to publishers and performance rights holders.
It's similar to a service Mercora already offers directly to consumers. Since its launch in June, though, Mercora has been largely a niche product with just 200,000 users. Co-branded offering with Grokster will give it access to the millions who download the P2P application each month.
Grokster Radio by Mercora is the first non-controversial offering from the P2P company, and execs say they hope it will serve as an olive branch to studios and labels with which it's hoping to forge closer ties.
"The bulk of our users download songs to sample them, and this lets them do so legally," Grokster prexy Dan Rung said. "It's a win for consumers, and for labels and artists who get new fees and access to consumers."
Grokster and Mercora are hoping to market the service to labels that can advertise albums, concerts or legal downloads within the radio application.
In addition, Grokster plans to create its own stations on the service to promote independent artists that it features in the P2P application. While labels and studios have vigorously opposed P2P, many indie artists have embraced the technology as their only way to reach a broad audience.
Report from CEO Marty Lafferty
 The DCIA was pleased to join many other parties last week in responding to the Federal Trade Commission's (FTC) request to file public comments for its planned public workshop entitled "Peer-to-Peer File-Sharing Technology: Consumer Protection and Competition Issues."
The purpose of this two-day workshop, scheduled for December 15th and 16th and open to the public at no charge, will be to explore consumer protection and competition issues associated with the distribution and use of peer-to-peer (P2P) file-sharing technology.
Our comments responded to seven key areas of interest: use of P2P file-sharing technology, the role of P2P file-sharing technology in the economy, identification of P2P file-sharing software program risks, disclosure of P2P file-sharing software program risks, technological solutions to protect consumers from risks associated with P2P file-sharing software programs, P2P file-sharing and music distribution, and P2P file-sharing and its impact on copyright holders.
P2P file-sharing technologies differ from others in that they support the decentralized discovery and delivery of content from published directories, or shared folders, posted on networked devices interconnected by means of compatible software programs. Technologies that use central servers require end-users to access their databases first to search for content and then to download it.
By eliminating the needs for centralized indices and storage capacity for content, P2P technology allows for faster file transfers and conserves bandwidth. It also supports a vastly greater participant universe than does a centralized architecture, and is capable of scaling to ever-increasing content inventories without adding costs to content providers, distributors, or consumers.
P2P file-sharing programs are the most popular Internet-based software program, having been downloaded nearly 700 million times, easily eclipsing instant messaging (IM), the previous most rapidly deployed and broadly accepted web-based software application. Typically, a cumulative universe of 80 million users access P2P file-sharing programs monthly.
According to Parks Associates: the ages of P2P heads-of-households are 18-24 29%, 25-34 37%, 35-44 23%, 45-54 8%, and 55+ 2%; annual incomes are under $50K 47%, $50-75K 27%, $75-100K 13%, and over $100K 6%; among Internet users, reported frequency of P2P usage is never 68%, less than once a month 12%, 1-3 times a month 8%, 1-3 times a week 7%, and daily / almost daily 5%.
Current commercial uses of P2P file-sharing technology include licensed distribution of games, movies, music, and software. All twelve major games publishers distribute their games by means of P2P, having achieved more than 200 million downloads. Independent studios, labels, and artists license their copyrighted movies and music for P2P distribution, not only for promotional purposes, but increasingly also for sale, availing themselves of digital rights management (DRM) and payment services solutions. At more than 50 million transactions per month, P2P has become the largest distributor of authorized content on the Internet.
Scientific uses include marrying P2P file-sharing technology with cycle-sharing, in order to conduct data processing functions for such purposes as applied mathematics and medical research. Industrial uses also include collaborative project management and voice-over-Internet-protocol (VoIP) telecommunications.
The likely future competitive impact of P2P file-sharing technology across the economy as efficiency improvements continue and additional differentiated P2P software programs proliferate will be to dramatically increase the selection of entertainment content options beyond what has been available in the past as a function of infrastructure cost limitations, and to offer consumers more attractive pricing reflective of their contributions of shelf-space and redistribution costs. Games, movies, music, and software industries will be positively affected by gaining a new, larger, and more efficient distribution channel than previously.
Risks to consumers caused by the downloading and use of P2P file-sharing software are generally no greater than those encountered by surfing the Internet and, thanks to self-regulatory actions, in certain cases are now less. For example, the Consumer Disclosures Working Group (CDWG), formed in June 2004 by leading P2P software developers and distributors to identify risks to consumers associated with P2P file-sharing software, has developed a standardized disclosure regime to clearly and conspicuously communicate those risks, and encourage competitive responses to mitigate or eliminate them. Each risk requires a unique method of addressing it in order to protect consumers, as our filing details.
A series of "P2P Music Models – Proposed Business Models for Digital Music Distribution" was developed with input from music and P2P software industry representatives and other qualified experts, and posted with an area for interested parties to add their comments and recommend other models. These include music distributed via P2P with advertising support, various types of subscription services, and a la carte track and album sales. Technology exists to support an unprecedented variety of economic models for music distribution via P2P. Content entered into P2P distribution by rights holders can be fully protected and securely monetized using P2P DRM technologies.
The remaining issue is content entered into P2P distribution by consumers. The P2P Revenue Engine (P2PRE) is a project involving ten independent technology companies in areas such as DRM, acoustical fingerprinting, and payment services that focuses on solving this problem so that consumer-entered content will perform as though rights holders had entered it.
The impact of P2P file-sharing on copyright holders varies depending on several factors, such as the nature of their content and their relationship with the P2P distribution channel. For those who have embraced P2P, licensed their content for authorized distribution, protected it with P2P DRM technology, and arranged for payment services, it represents a highly efficient channel, where many of the distribution infrastructure costs, including shelf-space, fulfillment, and even certain promotional expenses, are cooperatively borne by the customers. Each month, more independent music labels, movie producers, and individual artists distribute their copyrighted works via P2P, generating incremental revenue for the channel and income for themselves.
For those who have distributed numerous CDs or DVDs of pop-culture content without copy-protection and have not developed a P2P distribution strategy, which category includes the four major music labels and seven major movie studios, P2P software, like many other technologies, can provide a tool by which others can transfer and copy files without authorization.
Studies dispute whether such activity currently threatens to be a substitute for content purchases or a promotional/sampling phenomenon that leads to content purchases.
The bottom line, however, is that both the music and movie industries have shown substantial growth in sales year-to-date (YTD) at the same time as P2P file-sharing has also grown by double digits. For example, for the nine months from January-September 2004, Soundscan reports a 6% increase in music album sales and BigChampagne reports a 13% increase in file sharing.
BLACKSMITH on the Hill
Former William Morris agent and current management consultant and AME minister, Sam McKeith, and inspirational musician/writer/producer Al Smith met with Congressional staff last week to provide their perspective on the rapidly developing P2P file-sharing distribution channel.
Sam and Al, who distribute their works through DCIA Member INTENT MediaWorks, view P2P as a necessary distribution alternative to give voice to conservative, ethical performing artists, such as their new musical group BLACKSMITH, which was denied access by traditional media and distribution systems. BLACKSMITH reported that it experienced music industry bias against its over-30 target market and non-debasing lyrics.
In addition to a viable commercial channel, BLACKSMITH sees P2P as an effective means to get inspirational messages and uplifting campaigns out to the public. Their core message to Congress was not to curtail this technology (by passing restrictive legislation) because of what may have been inappropriate behavior by early abusers who lacked morals, ethics, and values.
BLACKSMITH believes that file-sharing technology now does much good for many. For instance, P2P supports digital rights management (DRM) and anti-pornography protocols that protect artists, users, and children from unlawful activity.
Sam and Al presented their genre of non-debasing and ethically suitable music, coined c/RIB (country, Rock, Inspiration & Blues). They related how the major labels shunned their proposals – "not being interested in their target market." They shared charts and data demonstrating how the past election revealed that they were correct in their assessment of the values and preferences of households being overlooked in red and blue states, especially when it comes to entertainment.
BLACKSMITH's first nine tracks have generated an average of 75,000 impressions per day with 5,000 cumulative licensed downloads, since INTENT MediaWorks began P2P distribution in late July, with tracks priced at $0.75. This month, advertising-supported versions of BLACKSMITH's music are being added to the a la carte purchase versions. BLACKSMITH is already well on its way to becoming the third most-distributed out of hundreds of artists contracted with INTENT for licensed P2P distribution, and this was not even their initial channel of distribution.
Next steps for BLACKSMITH include obtaining sponsorships for getting its c/RIB and P2P projects into the mainstream. They now have the distribution tools, performance venues, and data to prove their products resonate with the people.
BLACKSMITH's key message to the Hill was that participating file-sharing industry companies, such as INTENT MediaWorks, have cultivated P2P e-commerce and revenue models that are attractive to independents, and should also be to the mainstream music industry.
Coming Events of Interest
- P2P File-Sharing: Consumer Protection and Competition Issues - The Federal Trade Commission (FTC) will host a public workshop December 15th-16th to explore consumer protection and competition issues associated with the distribution and use of P2P file-sharing software.
The workshop is intended to provide an opportunity to learn how P2P file-sharing works and to discuss current and future applications of the technology. A detailed agenda and additional information on the workshop will be posted on the FTC's web site at FTC P2P Workshop Agenda.
The workshop will focus on uses of P2P file-sharing technology, the role of P2P file-sharing technology in the economy, identification and disclosure of P2P file-sharing software program risks, technological solutions to protect consumers from risks associated with P2P file-sharing software programs, P2P file-sharing and music distribution, and P2P file-sharing and its impact on copyright holders.
- Digital Hollywood at CES 2005 - Digital Hollywood will present a full program at the Consumer Electronics Show in the Las Vegas Convention Center North Hall, January 6th-8th.
The DCIA is proud to moderate "Next Generation P2P Music and Film - DRM, Paid for Pass-Along, and Other Distributed Computing Models and the Entertainment Industries" featuring Adrian Sexton, Executive Director, Business Development, Lions Gate Entertainment; Richard Conlon, VP Licensing, BMI; Derek Broes, Windows Client Strategic Relations & Policy, Microsoft; Marc Morgenstern, Vice President, Overpeer; Mark Ishikawa, Chief Executive and Technology Officer, BayTSP; Michael Weiss, President & CEO, StreamCast Networks, and Gerd Leonhard, CEO, ThinkAndLink.biz and Senior Advisor, Media Rights Technologies.
- P2P PATROL - Parents And Teens React On Line - The industry's anti-child-pornography initiative will hold its quarterly working session with private sector and law enforcement representatives in Dallas, TX on February 1st. For more information and to learn how you can contribute to P2P PATROL, please contact sari@dcia.info or call 888-864-DCIA.
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