March 28, 2005
Volume 8, Issue 6
Bertelsmann Launches P2P Platform
Excerpted from Reuters Report
German media giant Bertelsmann, a former partner of file-sharing network Napster, is launching a new Internet platform for downloading and sharing movies and games over the Internet, it said Tuesday.
Bertelsmann's services and technology arm Arvato said it would sell the service, dubbed GNAB, outsourcing the storage of files and their download to users of the network.
Sharing of music and movie files is hugely popular among Internet users, which has made peer-to-peer (P2P) software programs such as eDonkey and DCIA Member Sharman Networks' Kazaa big hubs for downloads while the music industry has stood on the sidelines.
Bertelsmann, which co-owns the world's second-largest music label Sony/BMG teamed up with Napster in late 2000, when the service was already being sued by the music industry for helping copyright infringements.
FOX Advertises Films on Grokster
Excerpted from Online Media Daily Report by Wendy Davis
Twentieth Century Fox Film Corp., currently suing DCIA Member Grokster for alleged copyright violations enabled by peer-to-peer (P2P) technology, advertises through software bundled with Grokster, according to adware researcher Eric Howes.
Howes reported Thursday afternoon that he was served a full-screen trailer for the DVD of the FOX movie "Fat Albert" after downloading Grokster.
In many ways, the news that a film company in the middle of litigation against Grokster also advertises through software downloaded with it highlights just how entangled business relationships on the Web have become.
Last year, the Ninth Circuit Court of Appeals ruled against the studios. "We live in a quicksilver technological environment with courts ill-suited to fix the flow of Internet innovation," wrote the court.
Report from CEO Marty Lafferty
 As reported from CNET to Wired, closing statements were given in the record industry's Australian copyright infringement case against DCIA Member Sharman Networks last Wednesday, with the company arguing that the industry gave no evidence to prove any guilt. A ruling is expected within six weeks.
Meanwhile, oral arguments will be heard this Tuesday March 29th in the MGM v. Grokster case at the US Supreme Court. As expressed in some twenty-five amicus briefs supporting the respondents' position, the case has far-reaching implications affecting the future of innovation. Please also see the new report just released by the Consumer Federation of America.
The highest-profile legal case of the digital age, MGM v. Grokster transcends the question of whether peer-to-peer (P2P) file-sharing program providers should be held secondarily liable for acts of copyright infringement committed by abusers of their software applications. Its outcome will impact the future of the entire technology sector.
American capitalism has thrived by legally balancing the rights of creators of popular entertainment content with those of inventors of new distribution technologies. Each party has enjoyed sufficient protections to incentivize continued production and innovation, and society has benefited from their output and progress.
If Hollywood were allowed to win this case, it would gain absolute control over distribution technologies. Victory for the entertainment industries would create enormous uncertainties, curb investments in innovation, and cause serious harm to the public and the economy. Many recent inventions we routinely enjoy – such as PCs, DVRs, and MP3 players on the hardware side or e-mail, Web browsers, and CD-burners on the software side – not to mention those not yet even imagined, would all be stifled if the Betamax doctrine were overturned.
Should those who earn income from developing and distributing new distribution platforms be obligated to request permission from content rights holders whose works may be copied or distributed before moving ahead with such inventions – as a condition of being allowed to innovate – instead of being allowed to proceed provided that their technologies are capable, prospectively at least, of substantial non-infringing uses?
Should those who earn income from exploiting aggregated pop-culture copyrights be obligated to license new distribution technologies that bring advancements in convenience, efficiency, and choice – as a condition of retaining their legally established monopolies – instead of being allowed to boycott such distribution channels in order that the business models of their established infrastructures, temporarily at least, avert new forms of competition?
Or should the marketplace be allowed to work. In 1984, when the high court was asked to outlaw Sony's Betamax VCR, it did not address the latter question, and it said this in response to the former: If a technology has the potential to be used for legitimate purposes, then the courts should not stand in its way. As a direct result of that judgment against the motion picture industry's arguments, Hollywood developed the video sales-and-rental business with a revenue stream that grew to triple theatrical box-office receipts within a decade.
MGM v. Grokster brings these same issues into the digital realm and raises the even more challenging one of how to regulate the Internet, which already defies conventional geographic jurisdiction, continues to technically evolve at lightning speeds, and disrupts nearly every business it touches – so far ultimately to the benefit of consumers as well as the businesses themselves after initial periods of adjustment.
We continue to believe that the Ninth Circuit got it right when it ruled for Grokster: "The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player."
Since that ruling, thousands of independent music rights holders have distributed millions of authorized copies of their works through file sharing, both for promotional purposes and for sale. The P2P channel has grown to be the largest online medium for licensed content distribution – an order of magnitude larger than the older centralized-architecture download stores backed by the major music labels. This has been accomplished despite all four major labels continuing their refusal-to-deal with established P2P software companies.
It is scandalous that more than three years after the advent of today's file-sharing industry, not a single big-four music track is yet available in an authorized version in the P2P distribution channel. Why isn't this outrage the focus of serious governmental inquiry?
In contrast, all twelve of the major games publishers and all ten of the top casual games publishers now license their works for promotion and sale via current major P2P software applications, and fully authorized games have now been downloaded more than 200 million times. P2P digital rights management (DRM) technologies work well and both pay and ad-supported business models have been more than adequately demonstrated.
Industry-leading P2P software providers have continued to make good-faith efforts to license music from the major labels despite being rebuffed at every turn. And once the high court oral arguments have been heard and the pundits have given their interpretations, we should resume that potentially far more productive work, which has been once again interrupted by major litigation.
Instead of confronting with lawsuits and legislative upheaval the very entities that have the potential to provide them with the largest and most lucrative distribution channel ever imagined, major entertainment content providers should negotiate with P2P companies to explore new business models and develop requisite distribution agreements. The majors will find willing and resourceful partners where they have so far sought only to create adversaries.
Indie Labels Mine P2P Distribution
Excerpted from AP Report by Alex Veiga
Recording industry executive Andy Gershon sees opportunity in online file sharing that most of his rivals decry. As President of V2 Records, home to such acts as The White Stripes and Moby, Gershon mines Internet distribution channels for new fans and revenues.
A number of mostly independent recording artists and labels have experimented with and embraced the freewheeling digital distribution that the Internet affords. And many worry that a victory by major recording companies in a landmark file-sharing case now before the US Supreme Court could short-circuit the very technologies that they believe are making a more level playing field of the music business.
Some artists, including Wilco frontman Jeff Tweedy, see an upside to file sharing.
"I look at it as a library. I look at it as our version of the radio," Tweedy said. "It's a place where basically we can encourage fans to be fans and not feel like they're being exploited."
V2 Records taps file sharing by selling songs and offering free promotional materials like music videos.
About 20 independent recording artists, including musician and producer Brian Eno, rockers Heart and rapper-activist Chuck D, filed a legal brief with the high court in support of Grokster. They insist file sharing and related technologies help expose new audiences to their music – outside established channels of the recording labels.
The artists argue that file sharing "has the immediate potential to develop into a significantly more prevalent alternative distribution and promotion system." But a ruling that outlaws or limits it "will block that potential from ever being fully realized," the brief contends.
Some are concerned about the possibility of requiring file-sharing companies to filter out unauthorized works, a move the major labels consider crucial to legitimizing file sharing as a distribution system.
"It definitely would greatly reduce the amount of traffic," said Chip Schutzman, head of online marketing at DCIA Member Sovereign Artists.
Sovereign has promoted and sold tracks by Heart using the online Weed file-sharing format, in which listeners can hear a song for free several times before having to buy it. Weed files are distributed to Web sites and across file-sharing networks.
John Beezer, president of Weed-creator and DCIA Member Shared Media Licensing said more than 7,000 artists have offered their songs through Weed, and the vast majority aren't signed with recording labels.
Beyond P2P & Download Stores
Excerpted from Report in Digital Music News
Where are users grabbing their music files these days? According to a recently published report by Pew Internet & American Life, P2P software and paid download stores are only part of the picture. A large percentage of music fans share music using methods like instant messenger, e-mail, or by taking tracks from other MP3 player collections.
Specifically, the survey pointed to a total of 18 million Americans, or 14% of Internet users, engaging in alternate delivery methods. That is a significant percentage of all users who download music and videos, with Pew estimating the total pool to be about 36 million Americans.
The results confirm usage patterns that have been widely known within the industry for years. While paid download services have always been "competing with free," peer-to-peer networks themselves face threats from other discovery and file-sharing methods.
That includes services like the beta Google GMail, which offers users 1 gigabyte of inbox storage and creates a convenient environment for storing and sharing MP3 files.
P2P File Sharing Launches Music Career
The G-Man, Scott G, started by file-sharing individual tracks of his songs (bass, guitar, drums, synthesizer, etc.) with anyone who wanted to mix a new version of his works. While the Hollywood studios and the major record companies fret and litigate in an attempt to shut down P2P, Scott G feels it actually created his career.
"Everything started to happen for me once I began to use P2P file sharing. The results have changed my life, both personally and professionally," states the G-Man.
Scott G, whose fourth album "Sonic Tonic" is being released April 4th on Delvian Records, is now president of G-Man Music & Radical Radio, a creative director of the National Association of Record Industry Professionals (NARIP), and a member of The Recording Academy (NARAS).
"A great number of legal file-sharing business models are now thriving," points out Brian Forest, VP of G-Man Music & Radical Radio.
Scott G is affiliated with DCIA Members INTENT MediaWorks and RazorPop.
Coming Events of Interest
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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. The George Washington University Law School (Fifth Floor, 716 20th St. NW, WDC) and Georgetown University Law Center (600 NJ Ave. NW, WDC) will each host discussions of the MGM v. Grokster case on Tuesday at 4:00 PM.
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Digital Hollywood Spring – An extraordinary group of over 300 speakers will be featured during the 16th Annual Digital Hollywood Spring at Loews Santa Monica Beach Hotel in Los Angeles, CA March 30th-April 1st. Digital Hollywood is the leading gathering of entertainment, media and technology executives.
Tracks and panels with special relevance to the DCIA include subjects ranging from DRM & Piracy: Digital Rights Management in Film, Music and Technology; to P2P Super Distribution: Evolution of the Content Distribution Revolution.
The DCIA is proud to sponsor entertainment for DHS' new On-Demandies Awards Dinner, featuring DCIA Member Good Witch Records' extraordinarily talented Glenda Benevides. Please contact DCIA Member Services leader Karen Kaplowitz for more information at 888-890-4240 or karen@dcia.info.
Speakers (with DCIA Member links) include BayTSP's Mark Ishikawa; CEA's Michael Petricone; CH Potomac's David Leibowitz; Digimarc's Reed Stager; Digital Containers' Chip Venters; EMI's Ted Cohen; Envisioneering Group's Rick Doherty; FOX's Ron Wheeler; INTENT MediaWorks' Les Ottolenghi; Jun Group's Mitchell Reichgut; MasurLaw's Steve Masur; Microsoft's Derek Broes and Andy Moss; P2P Cash's Tom Meredith; Overpeer's Marc Morgenstern; SPE's Mitch Singer; ThinkAndLink's Gerd Leonhard; and UMG's David Ring.
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Justice Talking – On April 5th NPR's debate format show taped in front of a live audience at the National Constitution Center in Philadelphia, PA will be discussing digital copyright, the MGM V. Grokster case, P2P, music sampling and more.
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Copyright and Internet Intermediaries – The management of intellectual property in the online environment poses significant opportunities as well as challenges, and raises high stakes as the value of online transactions, both authorized and unauthorized, increases.
Internet intermediaries, which may include Internet service providers (ISPs), file-sharing software distributors, auction sites, and portals that enable these transactions, are at the center of global debate involving complex policy, legal and business issues.
The World Intellectual Property Organization (WIPO) is sponsoring a seminar to help obtain a better understanding of these issues on April 18th at its headquarters in Geneva, Switzerland.
The seminar is designed to provide a forum for discussion among international experts and business leaders, academics, government delegates and policy makers.
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CONNECTIONS Digital Home Conference – This executive marketing conference, to be held May 11th-13th at the Hyatt Regency near the San Francisco Airport in Burlingame, CA combines Parks Associates' market and consumer expertise with insights from key industry strategists to provide a comprehensive analysis of current and future "Digital Living" technologies.
DCIA Members Digital Containers' CEO Chip Venters and Trymedia Systems' SVP Gabe Zichermann will be featured speakers.
Parks Associates' research shows that roughly one-third of all US households now have broadband access and nearly 20 million have a home network. The combination of these solutions is changing the paradigm for access to mainstream music, movies, television programs, and games. Currently one-third of all Internet households listen to online radio stations each month, and a comparable number download music files. Likewise, 10% of all Internet households access on-demand video content each month.
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