October 24, 2005
Volume 10, Issue 12
Zennström Back to Work after $4 Billion Sale
Excerpted from Herald News Daily Report by Georgina Prodhan
Three days after closing the sale for up to $4 billion of the business he started two years ago, DCIA Member Skype's chief executive and co-founder Niklas Zennström was back to business as usual.
"We still have products to develop, customers to satisfy," Zennström told Reuters. "We closed the deal on Friday. Now it's back to business."
Internet calling phenomenon Skype, started by Zennström, 39, and 29-year-old fellow Scandinavian Janus Friis in 2003, was bought by Internet auction house eBay for $2.6 billion plus up to $1.4 billion in performance payments.
Some 59 million users are registered to use its Internet-based voice network – the vast majority of whom pay nothing to "Skype" one another. Only calls to or from non-Skype customers – and extra services – are charged for.
"The fact that most of our users are for free isn't a problem for us because they don't cost us anything," Zennström said. Next year, he expects revenues of more than $200 million.
Zennström said he was confident of reaching the targets for revenue, profit, and subscriber growth that will trigger the extra payout from eBay.
"We set objectives for 2008. It's a big challenge, but I believe they're achievable," he said. Asked whether he would still be there by then, he answered: "That's my intention."
Zennström said he was not surprised at Skype's success. "When we started Skype, our ambition was to create a very successful big company that would be generating billions in revenue," he said.
"If you don't have big expectations, you won't reach them."
Bertelsmann to Launch File-Sharing Service
Excerpted from AP Report by Matt Moore
Bertelsmann AG, a client of DCIA Member Alston & Bird, said Friday it will launch a new service that uses the technology made popular by file-swapping businesses for legal downloads of music and movies.
The service, dubbed GNAB, or "BANG" in reverse, is set to be used in Germany by the end of this year, with an eventual rollout to other countries through 2006 and beyond.
GNAB uses a decentralized peer-to-peer network to offer downloads whose original content is hosted on centralized servers.
Unlike other file-sharing programs, Arvato said, GNAB will be licensed to partners who can use it to sell their own downloads, meaning consumers will only get to use it if they go through a particular partner or company.
The decentralized nature of GNAB's technology makes it feasible for providers to distribute large files like feature films or games without overburdening the centralized servers.
"In addition, we can offer our customers and all users of the platform a maximum of quality and security thanks to our secure file-sharing technology," said Hartmut Ostrowski, chairman and chief executive of Arvato.
Arvato has agreements lined up with several labels, particularly Sony BMG, of which Bertelsmann has a 50 percent stake, giving it access to about 1 million songs.
According to Arvato's website, GNAB adds features which ensure copyrighted material that is downloaded is flagged so that payment for the file, such as a song, can be made.
The Weed Files Announces Free Artist Area
With the launch of its Artist Area featuring unlimited uploads and free lifetime hosting, DCIA Member Shared Media Licensing's affiliate, The Weed Files, provides virtually costless do-it-yourself online music distribution.
Artists and labels are invited to sign up for a free account where they'll be able to create artist pages, upload Weed files and promotional material such as photos and banners, and select featured and podsafe files.
Downloadable at no cost, Weed files can be played 3 times for free and shared legally. Once bought, the files can be played at will, burned to CD, and transferred to a portable player.
Artists get 50% on every sale of their files, and don't need to be signed to a label or even have a full album produced to get started. Listeners who redistribute their files are rewarded with up to 20% of the sales price.
"For podcasters, music bloggers, and P2P users, Weed files have the potential to turn hobbies into economically profitable activities. It really is a win-win solution for everybody involved," said Christopher Stewart, owner of The Weed Files. To date, close to 90,000 titles have been "Weedified."
Report from CEO Marty Lafferty
 The Adelphi Charter on Creativity, Innovation and Intellectual Property was issued last week by an international group of academics, artists, business experts, economists, lawyers, politicians, and scientists.
The Charter was developed to strike a balance between rewarding creativity and encouraging investment on one hand, and ensuring that people have access to ideas and knowledge on the other.
The purpose of intellectual property (IP) laws, such as copyrights and patents, should be to foster both the sharing of knowledge and the incentivizing of advancement.
Humanity's capacity to generate new ideas and knowledge is its greatest asset. It is the source of art, science, innovation, and economic development. Without it, individuals and societies stagnate. This creative imagination requires access to the ideas, learning and culture of others, past and present.
Charter signatories believe that the expansion in the breadth, scope, and term of IP laws in recent times has resulted in an intellectual property regime which is radically out of line with modern technological, economic, and social trends. This threatens the chain of creativity and innovation on which we and future generations depend.
Their document sets out new tenets for copyrights and patents, and calls upon governments to apply a public interest test. It promotes a new, fair and efficient way for addressing intellectual property rights in the 21st century.
The Charter calls upon governments and the international community to adopt these nine principles:
1. Laws regulating intellectual property must serve as means of achieving creative, social, and economic ends and not as ends in themselves.
2. These laws and regulations must serve, and never overturn, the basic human rights to health, education, employment, and cultural life.
3. The public interest requires a balance between the public domain and private rights. It also requires a balance between the free competition that is essential for economic vitality and the monopoly rights granted by intellectual property laws.
4. Intellectual property protection must not be extended to abstract ideas, facts, or data.
5. Patents must not be extended over mathematical models, scientific theories, computer code, methods for teaching, business processes, methods of medical diagnosis, therapy, or surgery.
6. Copyright and patents must be limited in time and their terms must not extend beyond what is proportionate and necessary.
7. Government must facilitate a wide range of policies to stimulate access and innovation, including non-proprietary models such as open source software licensing and open access to scientific literature.
8. Intellectual property laws must take account of developing countries' social and economic circumstances.
9. In making decisions about intellectual property law, governments should adhere to these rules: A) There must be an automatic presumption against creating new areas of intellectual property protection, extending existing privileges or extending the duration of rights. B) The burden of proof in such cases must lie on the advocates of change. C) Change must be allowed only if a rigorous analysis clearly demonstrates that it will promote people's basic rights and economic well-being. D) Throughout, there should be wide public consultation and a comprehensive, objective and transparent assessment of public benefits and detriments.
Signatories include Duke University law professor James Boyle, British Library chief executive Lynne Brindley, University of Cambridge economics professor William Cornish, University of Buenos Aires economist Carlos Correa, Open Society Institute director Darius Cuplinskas, University College intellectual property watch chair Carolyn Deere, Electronic Frontier Foundation (EFF) staff member Cory Doctorow, Australian National University law professor Peter Drahos, Arts Council England director Bronac Ferran, and Research Libraries Network director Michael Jubb.
The group also includes Brazil culture minister Gilberto Gil, Creative Commons chair Lawrence Lessig, Consumer Project on Technology executive director James Love, University of Edinburgh law professor Hector MacQueen, Open University technology professor John Naughton, Research Foundation for Science Technology and Ecology director Vandana Shiva, Wellcome Trust Sanger Institute director Sir John Sulston, and Australian Competition and Consumer Commission (ACCC) deputy director Louise Sylvan.
The Economist reports: "As technologies like computers and the Internet make the exchange of information easier than ever – and inventions become more conceptual – huge stress is being placed on today's IP laws, which trace their foundations to the birth of the printing industry and mechanical industrialization.
Industries that rely on copyright and patent protection are increasingly turning to the law to protect their businesses. For example, music firms are suing thousands of people for swapping songs online. Google has recently been sued by authors to prevent it from placing book excerpts online. And Microsoft has recently reiterated its intention to patent a basic format for storing files – a move that could let the firm collect money from the IT industry for things that have been done cost-free for years.
The Adelphi Charter is clearly far from a complete answer to the dilemmas posed by intellectual property rights in an era shaped by digital technology and the desire for as much innovation as possible. But it does aim at the right target by promoting the idea that good policy does not just consist of 'more rights', it consists of maintaining a balance between the realm of property and the realm of the public domain."
Nettwerk Opens in Nashville
Excerpted from Nashville City Paper Report by Chris Lewis
People curious about the workings of a record label are invited to pop in at DCIA Member Nettwerk Nashville's new offices just off Music Row.
They can sit down at a kiosk and listen to Nettwerk's music or even mix a CD of songs by its artists. They can also pepper the four-member staff with questions.
Breaking with Nashville tradition, Nettwerk is not pursuing a country music clientele. Rather, its roster embraces a wide variety of styles, from Sarah McLachlan and Barenaked Ladies to Dido and Avril Lavigne.
In another unusual twist, Nettwerk combines both artist management and record label functions into one office. The roughly 50 artists on Nettwerk's international roster avail themselves of one or both services.
Formed in Nettwerk CEO Terry McBride's apartment in 1984, the company gained momentum from its association with McLachlan and the 1990s women's music tour, Lilith Fair. It expanded to offices in Vancouver, New York, London and Los Angeles.
The new office brings Nettwerk closer to some of its established local clientele: Jars of Clay, Abigail Washburn, Guster and Griffin House. The artists will perform at a free grand-opening concert at Nettwerk's offices on October 27th, starting at 5:30 PM.
BitTorrent: The Great Disrupter
Excerpted from Fortune Magazine Report by Daniel Roth
Since the birth of the Net, programmers had been stumped by how to transfer massive files – movies, TV shows, games, software, whatever – without incurring astronomical bills or risking frequent failure.
Bram Cohen knew he could find a solution; all it would take was time, good code, and brute intellect. He had all three. The money would take care of itself. "I didn't have any clear plans when I first started," he says.
What he came up with was BitTorrent, a deceptively simple program that has grown into the hottest way to download anything bigger than a music file. All it takes is a free download of the BitTorrent software – something 45 million people have done.
Today there are roughly 1.7 million copies of Hollywood movies – typically the most popular ones – being downloaded at any one time using BitTorrent, a 12% jump from last year, according to DCIA industry data resource BigChampagne. In the same period the number of TV shows downloaded grew by 150% – about 70% of them snagged using BitTorrent.
Cohen's brainstorm was to break the file into pieces – typically about 1,000 – and share the pain of the transfer among many downloaders. The BitTorrent software runs on a user's machine and "talks" to other users who are trying to download the same file, automatically bartering for the pieces they each need.
The more users, the faster the download. The program also always tries to snag the rarest piece of the file first. The idea? The more machines that have that rare piece, the less rare it becomes.
Almost no one in media or entertainment doubts that the world will move toward digital distribution. In one of his last speeches as a Hollywood don, Michael Eisner in late September told his peers, "Don't panic over the latest techno jargon, such as peer-to-peer, Wi-Max, 802.11, BitTorrent. Rather, embrace them." So will BitTorrent walk into the promised land with the moviemakers?
Certainly the company's investors are crossing their fingers for something Skype-like to happen: The infant Net-based phone company was recently purchased by eBay for up to $4 billion. "I'm a big believer that when the majority of Internet traffic is governed by BitTorrent and they have 45 million users, you're going to be able to monetize that," says David Chao co-founder of the DCM venture firm.
Leveling the Playing Field
Excerpted from Stereophile Magazine Report by Wes Phillips
In MGM v. Grokster, Justice Souter wrote: "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."
It certainly seems that this decision could have far-reaching effects on new inventions – not to mention opening a whole can of worms for existing ones.
"The President believes that the manufacturer of a legal product should not be held liable for the criminal misuse of that product by others," said White House spokesman Scott McClellan. So that makes it a bad decision, right?
President Bush wasn't talking about digital copying, but about a different industry altogether. MGM vs Grokster is, apparently, a good decision when it keeps evil hackers from copying CDs or DVDs. It's apparently a bad decision when it can be used against manufacturers of firearms, legal products that are frequently used by third parties in "acts of infringement."
Just before the Senate August recess, it voted 65–31 for S397, The Protection of Lawful Commerce in Arms Act, which shields firearms manufacturers and dealers from lawsuits resulting from gun-related crimes.
The gun lobby gave close to $2 million in political donations in 2004, while the combined record and movie industries ponied up a whopping $32 million.
All that money bought access to decision makers. Buying access is something the recording industry knows more than a little bit about, as Sony BMG's settlement in NY Attorney General Elliot Spitzer's payola investigation illustrates.
Sony BMG confessed to paying DJs and radio-station programmers in exchange for their "charting" Sony records on their broadcasts. How does this hurt anyone? Basically, it gives an advantage to the players who have the most money.
When artists have to buy their way onto radio station playlists, it's obvious that it's really all about "the Benjamins." The same hurdles confront the garage inventor, who must now worry about how his invention might be used somewhere down the line. If the playing field isn't level, it isn't the biggest players who suffer; it's the smallest.
Despite Threats, File Trading Grows
Excerpted from TechNewsWorld Report by Jay Lyman
Online music industry experts indicate that despite its court victories, the RIAA is having no negative effect on file sharing, which has grown more than two-and-a-half times since the recording industry group began filing lawsuits against individual file traders two years ago.
Yankee Group Senior Analyst Mike Goodman, said the RIAA's efforts actually tend to publicize and promote unlicensed file trading of music online, which jumps by thousands of users every time the issue is in the news. "Every time there's news about it, the number of P2P users grows."
The RIAA has loudly fought the growth and proliferation of P2P networks, from the first suits that brought down the original, unlicensed Napster to individual lawsuits against alleged illegal file traders.
After a court loss late last year on blanket subpoenas to Internet service providers (ISPs) to give up supposed copyright infringers, the RIAA finally scored a win from the Supreme Court, which ruled in June that while P2P technology itself is not illegal, some behaviors by operators encouraging free file trading are.
Goodman said the RIAA court win has had "zero-effect" on the growth of P2P users, which grew from 3.8 million average users per month when the RIAA suits began in 2003, to 9.5 million in August 2005.
"It just keeps going up," he said, adding that the RIAA's court cases have not been the reason for the increase in legitimate online music services, either.
The analyst, who called the growth in P2P "explosive," observed that for each P2P network targeted, there are ample more to step up and bring on more users. "It doesn't go away, it just shifts, and every time it shifts, it gets bigger."
Gartner Research Director Mike McGuire told TechNewsWorld a similar story, noting that the focus on Grokster or any other P2P application changes regularly. "They appear to be moving a lot of traffic off to other protocols," he said, adding that eDonkey is the latest, most popular P2P.
McGuire, who said companies promoting better copyright control have good reason to want content protection, indicated that some parts of the music label industry are realizing the need to leverage the technology and architecture of P2Ps, rather than resist them.
However, the majority of the industry continues its legal campaign to pursue P2P operators and users, a tactic for which McGuire had an analogy. "It seems to be like trying to manage Jello," he said.
Coming Events of Interest
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TELECOM '05 – Venetian Conference Center, Las Vegas, NV, October 23rd–27th, TELECOM '05 brings buyers and sellers together, in one place and at one time, to explore the full potential that the future offers our integrated communications industry. The DCIA presents "Next Generation Peer-to-Peer – Where do Telcos Fit In?" looking at the ecosystems that have evolved to make P2P the content distribution system of the 21st century.
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Internet Telephony Conference & EXPO – DCIA Member Skype CEO and founder Niklas Zennström will deliver the keynote address at this major conference at the Los Angeles Convention Center, CA October 24th–27th. His address, which will be delivered live from London via Internet Telephony Videoconference, will take place Tuesday, October 25th at 12:15 PM PT. Click here to register for the show.
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The Blogging Enterprise – November 2nd in Austin, TX. A one-day conference that will explore blogging, podcasting, and video podcasting and their potential benefits and value in building brands, educating prospects, making sales and cultivating customer loyalty. Attendees will depart with new ideas and a better sense for how to implement this new technology successfully.
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P2P Litigation Summit - November 3rd at Northwestern University Law School, in Chicago, IL sponsored by Electronic Frontier Foundation (EFF) and Privacy Resolutions. This conference brings together public and private defense attorneys, clients, investigators, advocates, and academics to discuss the latest developments in P2P litigation. Please click here for more information and to register for the conference.
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Search Engine Strategies Conference & Expo – Chicago December 5th-8th. Real-time actionable information to grow your business through search engine marketing. Ins-and-outs from top search experts and the search engines themselves. Access to the world's most comprehensive gathering of search engine marketing & optimization-related solutions providers and potential partners. Please click here to learn more about this event.
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Digital Hollywood at CES – January 5th-7th, Las Vegas Convention Center North Hall. The Consumer Electronics Show will have over 140,000 attendees; 2,500 exhibitors; 4,000 press representatives; and keynotes by Bill Gates, Chairman, Microsoft; Howard Stringer, Chairman & CEO, Sony; Paul Otellini, CEO, Intel; and Terry Semel, Chairman & CEO, Yahoo. The DCIA will moderate the "Next Generation P2P" panel on January 7th.
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