February 14, 2005
Volume 7, Issue 12
Clickshare & Digital Containers Collaborate
DCIA Members Clickshare Service Corporation, the leading provider of advanced user management and payment services for digital content providers, and Digital Containers, Inc. (DCI), the leading source for secure content distribution and integrated e-commerce for distributed networks, last week announced their collaboration to provide a secure payment solution for digital content in distributed computing environments.
The advantages of the Clickshare – Digital Containers partnership include ensuring that content owners receive royalty payments for copyrighted or licensed materials, simplifying users' purchasing process, and easing registration concerns.
The Clickshare – Digital Containers payment processing solution automatically handles the settlement of accounts and movement of payments so that publishers, artists, or other owners of digital content are properly compensated no matter how users gain access to the content – whether acquired from a website store, e-mailed from a friend, or downloaded using P2P software.
Digital Containers' CEO Chip Venters explained, "Digital Containers tracks files to ensure that content owners are compensated each and every time a new user accesses their material, and provides a way to recommend and sell additional related digital content or physical goods. Our partnership with Clickshare allows us to provide rights holders with a proven Internet transaction infrastructure that simplifies the authentication and management of users and streamlines billing processes."
Clickshare CEO Rick Lerner added, "Clickshare is founded on the belief that if people are given an easy and safe way to purchase digital content, they will readily agree to pay for what they enjoy. We provide the ideal payment mechanism for secure payment of online music and video, audio books, games, and other forms of new media. We are delighted to be working with Digital Containers to make the online purchase of copyrighted digital content a painless and economical experience for all parties involved."
INTENT MediaWorks Launches iPeer
DCIA Member INTENT MediaWorks last week released the first P2P software that blocks and filters unauthorized copyrighted works and sexually explicit material from being redistributed. The software, called iPeer, is a P2P file-sharing software application that operates on public P2P platforms, such as Gnutella, and allows only authorized content to be traded among P2P users.
"Everyone in the industry has been waiting for a solution to the problem of copyright infringement. INTENT is offering such a solution," said Les Ottolenghi, Founding Partner & CEO of INTENT MediaWorks.
iPeer is available now for download. The software can scan thousands of computers per minute for licensed files, filtering out unauthorized material. iPeer has been successfully tested with very favorable results by such entities as Paalam Technologies and Gray & Associates.
"This is an amazing achievement. A filterable P2P client is something everyone in the media industry has wanted. Our company has tested the software and it truly works," said Paalam CEO Narsi Narasimhan, Ph.D. "INTENT has been providing secure distribution of files from artists and copyright holders for a year and has had great results, but a P2P application that allows only authorized files, and blocks illicit materials, is unique and seminal".
"Our firm has tested iPeer and it seems to have very advanced capabilities," said Martin Gray, President of Gray & Associates. "iPeer flags shared files, enables targeted messaging, and generates statistics in open P2P environments allowing media companies to understand how relevant their content is to users of various file-sharing software programs. The value to media companies is obvious: lowest possible cost of distribution and control of the distribution channel. What could be better?"
iPeer goes beyond P2P platforms with features that allow consumers to view downloaded files on televisions and mobile devices. INTENT has agreements with personal video recorder (PVR) manufacturers and cellular network providers to deliver branded and original production content through iPeer.
Report from CEO Marty Lafferty
 Media Summit New York (MSNY) producer Victor Harwood can be very proud of this year's highly successful conference for senior executives of the entertainment and technology sectors. MSNY, held last Wednesday and Thursday at the McGraw-Hill Building in NYC, was well-attended and its sessions were provocative and enlightening.
At a special evening session of MSNY, DCIA Members announced a new secure payment solution, piracy-proof peer-to-peer (P2P) file-sharing software, advanced micropayment aggregation engine, technology for integrating cell-phone and P2P payments, and more. Speakers provided an overview of the distributed computing industry, development trends, and critical forces acting upon it.
We are very grateful to our event sponsors Alston & Bird, City Canyons Records, Javien, and Sharman Networks (owner of Kazaa).
We will feature summaries and links to the full presentations made at this session by Alston & Bird, Clickshare, Digital Containers, Digital Static, INTENT MediaWorks, Javien, Jun Group, P2P Cash, Shared Media Licensing, Trymedia Systems, Upto11.net, and others in next week's DCINFO. The innovations demonstrated by these outstanding technology firms address principal concerns that major entertainment rights aggregators have had with the P2P distribution channel.
Special thanks also to participants in the MSNY Wednesday afternoon panel entitled "Next Generation P2P:" Mike Weiss, President & CEO of Streamcast Networks (owner of Morpheus); Michael Petricone, Vice President of Government Relations at the Consumer Electronics Association (CEA); Marc Morgenstern, Vice President and General Manager of Overpeer; Scott Kessler, Director of the Information Technology Group at Standard & Poor's; Andy Moss, Director of Technical Policy at Microsoft; and Les Ottolenghi, Founding Partner & CEO of INTENT MediaWorks.
BigChampagne provided industry metrics to kick-off our panel. P2P audiences have steadily grown from 5.3 million average simultaneous users in December 2002 to 7.5 million in December 2004. As of the fourth quarter, more than 70% of file formats redistributed on P2P were audio, with video growing most quickly, and pornography representing a very small percentage. Regarding the largest segment, music, iTunes has sold 250 million songs to date while, during the same period, 59 billion music tracks have been acquired on P2P, per RIAA estimates.
Mike Weiss began by noting that P2P file-sharing programs like Morpheus are DRM-agnostic, meaning that if digital rights management is applied appropriately, it will protect files as they are transferred from one user to another. He questioned whether the older-architecture centralized-server business models favored by the entertainment industries are working, and encouraged Hollywood interests to work more closely with P2P software providers. He said the P2P channel can support many more business models. With respect to the upcoming Supreme Court case, he said the key issue is whether society wants to allow the entertainment industries to be able to dictate innovation.
Michael Petricone said that as the representative on this panel of hardware manufacturers and distributors, he finds himself also now as a defender of the right to innovate. He referenced last week's Super Bowl ad differentiating the new Napster-to-go from iTunes as an example of marketplace competition, which is preferable to business-practice solutions determined by Congress or the courts. He noted that Shawn Fanning developed the original Napster because the music industry didn't, exemplifying the value of innovations coming from sectors outside of their immediately affected industries.
Marc Morgenstern said that P2P continues to grow, and will be around for a long time, but that it remains a hotbed for copyright infringement. We need to convert users from redistributing unauthorized copies of copyrighted works to redistributing licensed copies. P2P in general still needs to find the way to legitimize itself. He acknowledged that both the user base and the traffic in P2P are continuing to increase, but that so is copyright infringement at this juncture – and that is what must be addressed as a top priority. He envisions many different business models being supported by P2P, with the winners those who succeed in putting the most quality in front of consumers.
Scott Kessler said, as a market analyst, he is interested in the ways that P2P will affect the value of other Internet companies and how file sharing affects the way media companies approach the Web. The key question is how to translate the redistribution of billions of files into revenue. He noted that RealNetworks, for example, is only marginally profitable at this point. He asked where is the inflection point at which P2P software distributors will begin to pursue profit as their primary intention, versus just traffic. He asked about both the feasibility and the duty of P2P companies to take additional steps to monitor their traffic.
Andy Moss said that P2P is a highly misunderstood technology that has been around for a long time, but that what's new is the convergence at the consumer level. He said that what is needed most are new business models. The cost of distribution has dropped dramatically, so the question is who can capitalize on P2P the most – mature businesses that transition to selling their content via P2P, or totally new enterprises that rise up to take advantage of this distribution channel. He said that with respect to copyright infringement occurring among users, it is enormously challenging to resolve that issue for unsecured content, but that we are in the process of a journey and not yet at the destination. We should create build-outs comprised of legitimate uses; and marketing needs to play a much larger role than it has to date.
Andy said that infringement must be met with risk-management techniques, and that waiting for an absolute solution to appear before taking helpful actions will not prove to be practical. He concluded that the discovery capabilities with respect to content in the digital realm represent an enormous improvement over the analog or physical world, and that this aspect needs to be developed constructively along with the others being discussed.
Les Ottolenghi made a comparison to the changes affecting the travel industry, where the inability to transition in the face of marketplace realities was detrimental to entrenched airlines while these same conditions created opportunities for innovative new carriers. As the representative of a new company in the distribution of licensed works via decentralized networks, he noted that flexibility was very helpful in driving the growth and success of INTENT MediaWorks and its OffThePeer offerings. He noted that dramatically reduced production costs (hardware and software) are opening up opportunities for emerging artists to create professional quality content, and that his company adds the tools to distribute that material very efficiently through P2P.
During audience Q&A, most panelists seemed to concur that the entertainment industries need to adopt new business models to take advantage of P2P, similar to the way magazines have evolved to selling subscriptions as well as single copies and various bundles, samples, and packages to take full advantage of multiple distribution alternatives.
Javien's Micropayment Aggregation Engine
DCIA Member Javien Digital Payment Solutions last week launched its micropayment aggregation engine, responding to strong demand from the digital music and P2P industries.
Javien's aggregation engine is being released along with numerous other enhancements, such as a Web services module for improved customization. Micropayment processing requirements have increased significantly, in particular for digital entertainment offerings where it is essential to make single-download sales economically feasible.
"We initially launched this service under the MicroCreditCard brand back in 2000, but for several years there was little demand for micropayment processing," said Leslie Poole, Javien CEO, "But now that's changed dramatically, especially for online music."
Javien allows digital content merchants to choose how they want to bundle small charges before processing them onto a credit card, based upon their specific business needs. For example, one merchant might determine 5 dollars as a threshold, another 10 dollars, with time-based rules also an option.
Javien customers will enjoy the option of both stored value and aggregation for handling micropayments, with built-in support to submit transactions through many leading payment processors.
In 2000, Javien submitted non-provisional patent applications for this unique aggregation engine.
P2P Cash Integrates P2P and Cell-Phones
DCIA Member P2P Cash announced the world's first patent-pending method to conduct e-commerce between P2P software programs and cellular telephones. P2P Cash's Intelligent Cash Units, or ICUs, are designed to guarantee secure transactions and cash transfers between individuals using an Internet-connected PC, any cell-phone worldwide, or both.
Examples of use include guaranteeing the buying and selling of any form of online content, including music, video, and contracts. P2P Cash anticipates heavy use of its ICUs for international money transfers at a fraction of the cost of existing solutions.
According to P2P Cash CEO Tom Meredith, "P2P Cash will announce Letters of Intent with several key content companies within the next thirty days."
SVC Financial Closes on Growth Capital
DCIA Member SVC Financial Services, an emerging provider of secure electronic payment and digital rights management (DRM) solutions for online retailers and financial services companies, announced last week the completion of a round of growth-capital investment from current investors.
SVC President and Chief Executive Officer Christopher Haigh said that the infusion will be used for working capital and to introduce a unique new money transfer product to the market.
"SVC is bolstering its financial resources as it attacks some of the most extraordinary high-growth markets in financial services," Mr. Haigh said. "SVC is a serious technology player in electronic and wireless payment processing, money transfer, and debit cards. Now we are ensuring that we have the financial strength to introduce our unique technology into the market."
Half of Downloaders Have Paid for Music
Excerpted from Digital Media Wire
The popularity of fee-based digital music stores is on the rise, as nearly half (47%) of American music downloaders surveyed in December said they have paid to download a song, roughly double the 22% who said so a year earlier, according to a report from market research firm Ipsos-Insight.
"While fiercely competitive online music services and download stores undertake high-profile efforts to attract consumers to their respective sites and business models, it is clear from these data that consumers are increasingly experimenting with online methods of music acquisition," said Ipsos-Insight vice president Matt Kleinschmit.
The report also found that, for the first time, an equal proportion of the overall US population (11%) engaged in both fee-based downloading and file-sharing.
"This is significant both functionally and symbolically, as operators of fee-based digital music websites are finally seeing American downloaders embrace their services, and the broader industry can now see empirical evidence that fee-based online content can survive and even flourish while non-licensed content remains available," said Kleinschmit.
Coming Events of Interest
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Digital Music Forum - The 5th annual DMF is set for March 2nd at the French Institute Alliance Francaise in New York. DMF is the premier event for music industry decision-makers focused on business models and legal issues impacting music.
Shawn Fanning, Co-Founder of SnoCap will be the keynote this year, and featured panelists include Phil Corwin, Chief Lobbyist for DCIA Member Sharman Networks (owner of Kazaa); Jeff Bronikowski, VP of eLabs, Universal Music Group; Martin Elgison, Partner of DCIA Member Alston & Bird; and Ted Cohen, SVP of EMI Music.
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Canadian Music Week - Headquartered at the Fairmont Royal York in Toronto, March 2nd-5th, CMW will be the largest music and entertainment convention in Canada.
The DCIA Is proud to participate in "Redemption Song: Profit from P2P" moderated by LA Times correspondent Joseph Menn March 3rd at 2:45 PM. P2P has been the killer app driving the billion-dollar broadband business, and can generate new revenues for music rights-holders. There are a slew of new companies offering moneymaking P2P plans. This panel will consider whether it's time to talk carrot instead of stick.
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Future of Digital Music Forum – "What's after iTunes?" is the theme for The 2nd Annual DallasBlue Future of Digital Music Forum being held on Thursday March 24th, from 5:30 PM to 9:00 PM at Swan Court in Richardson, TX.
Five years ago the question was "What's after Napster?" Today iTunes is the poster child for Hollywood in a far more complicated environment. Overall music sales are flat. Broadband, the digital home, and wireless are increasingly pervasive. P2P continues to thrive despite an adverse environment. Online music services are popping up like weeds.
An expert panel spans the technology and entertainment sectors. Presentations and moderated discussions examine the convergence of music, consumer marketing, and technology. Sponsored by DCIA Member RazorPop.
- Supreme Court Oral Arguments – The US Supreme Court will hear arguments March 29th on whether companies that provide peer-to-peer (P2P) software violate copyright laws if their users commit copyright infringement. The Court's date for oral arguments in the case, MGM v. Grokster, coincides with an expected decision in a similar high-profile case in Australia, which involves Kazaa.
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