April 11, 2005
Volume 8, Issue 8
P2P PATROL Quarterly Working Session
P2P PATROL (Peer-to-Peer Parents And Teens React On Line) will hold its quarterly working session for participating law enforcement and private sector representatives as planned on Tuesday May 3rd at 9:30 AM in San Francisco.
DCIA Member SVC Financial Services has graciously agreed to host this meeting at its headquarters in the San Francisco, CA financial district. For more information on attending, or to find out how you can contribute to P2P PATROL in other ways, please contact sari@dcia.info.
The P2P PATROL initiative, which represents a voluntary collaboration of technology and related service companies along with government agencies and trade groups, offers programs focusing on education, deterrence, and enforcement for combating online child pornography, and operates the P2Ppatrol.com website.
SMARTguard Software Launches WallFly
Excerpted from Report in Digital Media Wire
DCIA Member SMARTguard Software, which currently offers Blockster, last week also introduced WallFly, a software tool that lets parents control which PC games can be accessed by children on home computers.
The application provides ratings from the Entertainment Software Rating Board database, and allows parents to create individual profiles for each child and set limits on what content is allowed, in addition to limits on how often and for how long children can play PC games.
SVC Financial & Merit Solutions
DCIA Member SVC Financial Services (OTC: SVCX) last week announced an agreement with Merit Financial Solutions for distribution of SVC stored-value debit cards to potentially millions of consumers via tens of thousands of merchants throughout the nation.
"I am very excited and pleased with our partnership with Merit; they are a proven powerhouse that is one of the major forces driving the prepaid card distribution industry," said Christopher Haigh, SVC President & CEO.
"We have been looking for a partner that cost-effectively enables consumers, workers and families to transfer money easily, reliably, and securely," said Rick Greene, VP of Merit Financial. "SVC fills the bill perfectly."
The distribution partnership follows on the heels of SVC's introduction of 'Scoot' – enabling cell-phone users to transfer funds directly. For one low fee, the '"Scoot family Plan" enables family, friends and co-workers to 'Scoot' money to each other from half-a-block or half-a-world away.
Report from CEO Marty Lafferty
 Chief Justice Oliver Wendell Holmes once said of the US Supreme Court, "We are quiet, but it is the quiet of a storm center." The nine Justices indeed meet privately in quiet chambers to conduct their deliberations. And when their decisions are revealed, so also is the fact that the secret of the high court is that it has no secrets. The inside story is that there is no inside story. It is all out there in the opinion.
Of some 7,000 cases reviewed by the Supreme Court annually, the 100 or so that are taken up represent the most important and divisive issues facing contemporary society. These are cases that transcend the rulings of lower courts and signify the most challenging of high-stakes conflicts not only for the United States, but also often for all of civilization. For the high court to intervene, the controversy must be one of historic proportions.
And as Justice Brandeis once remarked about the process of this federal institution that most assuredly takes the long view, "We do our own work."
We have previously noted that the emerging distributed computing industry makes the greatest progress in terms of commercial development during those times when affected parties are not preparing for their next showdown in the courts.
In the wake of oral arguments heard by the Supreme Court in the MGM v. Grokster case, notable for the intimacy as well as austerity of its underlying drama, we are doing all that we can to focus on positive action steps.
All parties seem to agree that peer-to-peer (P2P) file-sharing technologies are here to stay. It remains so far an elusive question, however, as to how to best harness them for the optimal benefit of content rights holders, software technology firms, and the public at large.
As the Justices are responsible to interpret the constitution, uphold the rule of law, and answer their own consciences in their adjudications, so too should we take responsibility to pursue paths of integrity in fostering the adoption and encouraging the expanded usage of P2P for legitimate purposes.
While we continue to believe that the P2P Revenue Engine (P2PRE) represents a very good example of the kind of solution that major entertainment rights aggregators and leading P2P software distributors ultimately will adopt, we also recognize that this effort is a very ambitious undertaking.
So we are also supporting smaller steps – bilateral arrangements between pairings of companies that are ready to move ahead with more modest experiments – basically exploring business models for P2P distribution of licensed entertainment content that show promise.
In fact, there is no more constructive activity than this that we can recommend to interested participants while awaiting the decision of the high court.
There is no more efficient means for reaching an audience today than by "P2P super-distribution." The file-sharing medium is sufficiently robust to support simultaneous revenue generation from ad-supported, subscription, and a la carte offerings of copyrighted works. The technologies are there. The support infrastructures are proven. And the service providers are ready.
No one can yet predict which of these or what combination of them will prove to be the "sweet-spot" for optimization of this new channel, but the best and the brightest among industry players know that those who test the waters earlier rather than later will stand to be the most successful when P2P finally realizes its full potential.
Reflections on Grokster Day
Excerpted from In the Know by Public Knowledge President Gigi Sohn
The Supreme Court. Tuesday, March 29, 2005 will go down as one of the most memorable days in the history of copyright law.
Don Verrilli, the very talented advocate from Jenner & Block, opened on behalf of the entertainment industry. Almost immediately, Justices Stevens and Ginsburg jumped in - doesn't Grokster have legitimate uses? Isn't it used to share authorized and public domain files? Verrilli responded that it didn't matter, because Grokster "intentionally built and actively encouraged" infringement.
At that point, the Court's most influential member, Justice O'Connor, came down squarely in the middle, as is her wont. She asked Verrilli if the "Court could reach the question of active inducement," that is, whether Grokster engaged in specific acts that encouraged infringement.
Verrilli changed the subject - trying to get the Court to consider a new standard for secondary liability. He said that the "touchstone" for such liability is whether the "business is substantially built on infringement," and what were the "relative portions" of infringing to non-infringing use.
Justice Souter fretted that Verrilli's standard would equate to a "Sword of Damocles" hanging over the head of inventors. The Justices understood the importance of Sony's bright line test to continued technological innovation.
When Richard Taranto, the seasoned Supreme Court solicitor representing Grokster and Streamcast began, he got no better treatment. Justice O'Connor once again raised the question of whether an active inducement test might be appropriate. Taranto answered that such a test was not found in copyright law.
Justice Kennedy asked what was wrong with the entertainment industry's "substantial use" test. Taranto responded that the Sony case was clear - the manufacturer of a technology cannot be held liable for the infringement of others if the technology is "capable of substantial non-infringing uses," and that the record here demonstrated that Grokster had many lawful uses.
But Justice Ginsburg was not buying that, stating that the "standard is not so clear." She noted that the Sony Court went on to write another 13 pages after articulating the standard, and that one can't "isolate one sentence" from that decision. Taranto pointed out that those 13 pages focused not on the liability standard, but on whether time shifting of TV programs was a fair use.
During the remainder of Taranto's time, it was clear that a number of the Justices were troubled by Grokster's business model, and were looking for a way to send the case back to the district court.
The entertainment industry's intention, despite their many statements to the contrary, is clear - it is not so interested in "getting Grokster," as it is interested in diluting the Sony standard in such a way that forces all technology companies to ask their permission before they develop new products.
It has now been over a week since the oral argument, and of course, everybody has an opinion about how the case is going to come out. One credible guess came from my PK colleague Mike Godwin, who thinks that the Court will ask the parties for further briefing on what the proper standard for active inducement should be, in anticipation sending the case back to the district court. But who knows? At this point, all we can do is wait.
The Interoperability Sinkhole
Excerpted from Digital Music News Report by Paul Resnikoff
While Capitol Hill is unlikely to intervene in the current interoperability mess, the mere possibility reflects a tough state of affairs for the business. Format incompatibility is a big consumer buzzkill – that much we know – with Apple the only company able to gain any market traction with a restrictive, proprietary solution. But even with 300 million downloads under its belt, it is hard not to wonder how many more customers are standing on the sidelines.
We may never find out. Today's consumers are bombarded with endless entertainment options, and few customers will shed a tear if the paid download experiment doesn't work out. So far, purchasing a restricted track for 99-cents has not been a compelling proposition, with hundreds of millions of downloads comparing unfavorably to the billions upon billions of free P2P-based acquisitions.
Somehow, crossing the fence to a paid model has never been an attractive move for most music fans. There are too many trap doors, too many rules, and few can blame customers for being so skeptical. Will a purchased track work in five years? The question is a scary one for most.
For Apple, format incompatibility is not a chief concern. Steve Jobs is playing the game just like everyone else, creating a closed system to ultimately own the digital music consumer experience. In fact, the Apple result is an example of why format incompatibility exists in the first place. Everyone is playing with a winner takes all mentality, with Apple hoping to call the shots in what could become an immensely lucrative paid download market.
But rosy projections aside, paid downloads still represent a very small revenue pool. Sure, Apple may ultimately win the sandbox battle over paid downloads, just as it is right now. But at what cost? The real danger is that there aren't enough paid downloads to sustain an industry - a future extension of exactly what is going on at this very moment. That result would make the current format turf battle more than just another industry mistake. It could end up being a fatal blow to the entire online download experiment.
Sony PSP is Hacked
Excerpted from MediaPost Report by Tobi Elkin
Talk about consumer-generated media. Apparently hackers have turned Sony's latest portable game player, the PSP handheld, into a device for online chat, Web browsing, and a venue for movies and music.
Leave it to hackers who managed to add an online chat function by hijacking a Web browser built into a racing game called "Wipeout Pure." Once the hackers are able to change the PSP's network settings, they can point the browser to a Web portal. There's also a way for hackers to transfer TV programs recorded on the TiVo service to the PSP player, a program for reading e-books, and a viewer for comic books downloaded from the Web.
Apart from the PSP, the individual as a media generator takes on a whole new meaning with Google's plan to expand its "My Media" feature. The search giant will enable consumers to submit self-produced videos, essentially video blogs or video diaries. Take your pick. We can all thank Apple for this, since Apple seeded the trend of the individual movie producer. Literally, anyone can make a movie using Apple software and related gear.
The most delicious thing about the "My Media" plan is no one, not even the great and powerful Google, can know how the people's video blogs will turn out. So, if they're about robots, or dogs, family dysfunction, or turn out to be soft porn videos shot in Aunt Bertha's basement, one would assume that they'll be indexed by Google and good to go. Or will Google censor the content? The Minute doesn't see how it can possibly do that.
Everyone's a content creator. Everyone's a publisher. It's consumer-generated media aided and abetted by the Web. It's also the subject of a cover story in the April issue of Media Magazine.
Coming Events of Interest
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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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Cyberlaw in the Supreme Court – On April 30th, the Stanford Law Center for Internet and Society will host a discussion entitled "Cyberlaw in the Supreme Court."
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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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