January 23, 2006
Volume 12, Issue 1
EMI & BMG Deal for Download Platform
Excerpted from Reuters Report
EMI signed the first pan-European deal with arvato mobile, a unit of Bertelsmann Media Group (BMG), to offer customers access to 300,000 music tracks from artists including Coldplay and Norah Jones.
The software platform, called GNAB, allows makers and distributors of music, games, movies, and ring-tones to offer legal downloads of large files to clients under their own brands.
"GNAB is an innovative milestone on the way to a new digital download era," Bernhard Ribbrock, chief executive of arvato mobile, said in a joint statement with EMI.
"Fully authorized peer-to-peer (P2P) will enable consumers to access more music, allow retailers to offer interesting music products, provide new revenue streams for EMI Music, and strengthen arvato mobile's position," he added.
Sharing legally copied and bootlegged music and movie files is hugely popular among Internet users and has turned services such as eDonkey and Kazaa into big hubs for music downloads while the music industry has stood on the sidelines.
But easy-to-use services such as computer maker Apple's iTunes have let the music industry discover its sympathy for music downloads and led to a surge in legal online music sales.
A spokesman for arvato mobile said that the firm already had content agreements for individual countries with other music firms, including the world's second-largest music label SonyBMG, which Bertelsmann co-owns with Sony.
Indie911 Programs the Small Screen
DCIA Member Indie911, one of the Internet's leading music networks for independent labels and film companies, announced plans at MidemNet to launch "indie911 mobile" focused on cutting-edge programming specifically created for the small screen. The primary format of Indie911's programming will take place on "PLUG" – a mobile music and video channel comprising short interstitials that combine music videos, episodic television vignettes, and movie shorts.
Since its initial launch as a streaming music network in March 2004, Indie911 has quickly grown into one of the most trusted sources for independent music, animation, and video, drawing an unusually loyal user base. Driven almost entirely by word-of-mouth, indie911.com now attracts over 4 million monthly visitors.
"Most of the media content that reaches the eyes-and-ears of mass audiences is delivered by large corporations whose very structures often dictate content," Indie911's Founder & CEO Justin Goldberg said. "Indie911 caters to the creativity that thrives outside of the mainstream – the best artists and audiences usually do. It's an exciting time to be at MIDEM where we hope to expand our distribution."
Geared toward younger, tech-savvy consumers, PLUG will be distributed directly to mobile devices with the ability to display original video and audio programming via cell phones, video iPods, and Sony's handheld PlayStation.
Top PlayFirst Title Goes Mobile
Glu Mobile, a leading creator and global publisher of mobile entertainment, last week announced the launch of Diner Dash for mobile phones. The original downloadable version of Diner Dash for PC and Mac, which has been the top title on major game sites including Yahoo Games, MSN Games, and Shockwave, was published by DCIA Member PlayFirst, the leading full-service publisher of downloadable popular games.
Diner Dash for mobile has already made a big splash with reviewers. IGN's Levi Buchanan gave the game a score of 8.9 out of 10, an Editor's Choice Award, and called it "the first great mobile game of 2006."
"Casual games have emerged as the most popular genre on mobile, and Glu has consistently delivered top quality titles that keep, and even enhance, the game-play experience as the game transfers from PC to mobile," said Kenny Dinkin, Vice President & Executive Producer, PlayFirst.
"For the millions of Diner Dash fans who can't wait to take their favorite game on the go, this version will not disappoint. It has all the high energy fun they've come to expect."
Report from CEO Marty Lafferty
 We've been asked by entertainment industry leaders to elucidate the "three Fs" of secure file sharing – file-protection, filters, and forensics – introduced last month.
The three Fs are meant to serve as a template to guide development of the P2P channel to its fullest potential for distribution of licensed content.
As noted then, the challenges to effectively harnessing P2P for secure distribution of copyrighted works are not insignificant.
And they will continue to be with us for some time even after major content providers authorize their works for P2P.
Such licensing and the revenue stream that it will generate, however, are key drivers for collaboration among companies in the entertainment and technology sectors.
By way of analogy, in the physical world of retail stores, consumer products are protected by multiple means. It is not enough to use bar-codes and scanners. Cashiers are stationed at check-out points. It is not enough to staff cash registers. Surveillance cameras are also deployed. And it is not enough to rely on such in-store protections. Police officers also walk their beats on the sidewalks in shopping zones and up-and-down the aisles of malls.
So too, in the digital realm, it will not be enough to rely on copy-protection introduced at the level of individual files. It will not be enough to rely on software content-identifiers and related filters at the client level. Nor will it be enough to rely on forensics, such as watermarks or acoustical fingerprints, to track and prosecute infringers at the network level after the fact.
It will be the unique combination of the three Fs of file-sharing security that will enable content rights holders, P2P developers and distributors, and service-and-support companies to achieve an equilibrium marked by ninety-plus percent non-infringing traffic instead of the opposite condition that currently persists.
First, file-protection: for any copyrighted work of value, protecting the file needs to come first. Optimally, such considerations should begin during the creation of each work that its owners desire to track and monetize in P2P distribution.
DCIA Members, such as Digital Containers, Softwrap, and Macrovision's Trymedia Systems, provide flexible and reliable digital rights management (DRM) solutions to enable this process for establishing and changing prices for paid downloads, imbedding and exchanging interactive advertising, setting and modifying usage rights, etc. while, very importantly, protecting consumer rights.
Our new P2P Digital Watermark Working Group (PDWG) focuses on implementation of a process for the insertion of identifying data into content during post-production, while maintaining source quality, which will survive attempts at circumvention by re-recording such content during display mode (the so-called "analog hole").
The DCIA is grateful for the support of Digimarc in this undertaking, and believes that industry-wide adoption of this technology, available from multiple vendors worldwide, will mark a meaningful step in progress for content providers and P2P software distributors.
Second, filters: filtering technologies can help ensure that licensed registered works are made available on terms-and-conditions established by rights holders at prescribed quality levels, no matter how or where such works are introduced or re-introduced into the distribution channel.
This can be optimally accomplished by incorporating security checkpoints at critical junctions where third-parties engage in various aspects of copyrighted content redistribution. Important "don'ts" here include not interfering with the most efficient operation of affected software applications, not blocking authorized versions of filtered content, not disrupting other functionality of users' machines, and not clogging public networks.
At the P2P client level, Audible Magic, for example, now provides an acoustical fingerprinting filter for P2P software distributors, who in turn can supplement this with their own metadata filters.
In Phase 3 of DCIA P2P Music Distribution Model A, the proposal was put forth to involve Internet Service Providers (ISPs) in P2P traffic monitoring. This approach to filtering, which would have the advantage of being securely managed off-premises at ISP points-of-presence (POPs), would involve router manufacturers providing a packet header and file-hash turnstile billing solution.
Although this would require a change in the legacy position of ISPs regarding their knowledge of and liability for the contents of data traffic, the need for ISP involvement and the relative advantages they could offer may soon outweigh these outdated views.
Third, forensics: no matter how well coordinated and exhaustive the implementation of file-protection and filtering, the realities of fast-changing developments of numerous digital distribution technologies, such as the ongoing evolution of swarming techniques, dictate a full "belts-and-suspenders" approach to defending against copyright infringement, and this will inevitably involve forensics.
A very promising example is the content protection solution offered by our newest DCIA Member, Friend Media Technology Systems (FMTS), recently demonstrated in a series of private meetings in New York and Los Angeles.
The FMTS system is capable of blocking unauthorized retransmission of content on P2P networks. Relying on content comparison and in-depth data-capture, FMTS is able to protect material against unauthorized distribution very quickly after its creation. Particular advantages of FMTS are that it does not impede distribution of licensed versions of content that it is protecting, and that it does not affect other legitimate activities being conducted by networked devices.
Finally, third-party monitoring, auditing, and reporting by trusted parties will be essential. We are very encouraged by the announcement to be made this week concurrently at MIDEM and NATPE by DCIA Member INTENT MediaWorks and P2P Revenue Engine participant Mediaguide, which underscores the enhanced control and reporting of digital distribution offered by the INTENT platform to advertisers and content owners.
We again urge leading content and technology companies to join our Members and other participants in the new P2P Digital Watermark Working Group (PDWG). Qualified representatives are encouraged to call 888-864-3242 or e-mail PDWG@dcia.info to sign-up as soon as possible.
The DCIA and our Members look forward to achieving the optimal combination of the three Fs. Share wisely, and take care.
ByteRocket Releases MyOtherDrive
ByteRocket, a Dayton, OH start-up firm, has released a new file-sharing Internet service called MyOtherDrive, which is currently in beta.
Anyone with Internet access can create an account on the site and get 2GB of free storage space. The site handles photographs, making it a competitor in this regard with Snapfish, OFoto, AOL, and others.
It also indirectly competes with file-sharing programs such as Kazaa and eDonkey, but with an important difference from such public software applications: MyOtherDrive users can share their files only with others they identify.
This site facilitates sharing home-movies from digital cameras with family and friends and is also useful for sharing work files with business associates. Because it is available on the Internet and protected by username/password, users can park large files on MyOtherDrive so that they can move them from one computer to another when there is no direct connection between the computers.
The site runs as a Java applet that looks similar to Microsoft Windows Explorer or ACDSee, permitting users to create a folder hierarchy on the left side of the screen, and files on the right. File types that are recognized, such as images, display as thumbnails. Any file type can be stored on MyOtherDrive.
The site includes a user-manager utility that allows users to permit others to access subsets of their directories. Useful for limiting family-to-family related photos, and friend-to-friend related content.
The site is essentially a free 2GB hard drive with an Explorer-style interface, making its storage available anywhere Internet access is available.
This is ByteRocket's first public site. The company has plans to release other useful personal sites similar to MyOtherDrive over the coming year.
New TVMyPod Service Comes in Gray (Area)
Excerpted from Hollywood Reporter by Chris Marlowe
A tiny Massachusetts company named TVMyPod is selling iPods that come with movies and TV programs already loaded on them, a practice that raises questions of legality as it addresses consumer demand for convenience and portability.
Customers choose any content currently available on a DVD and which iPod they want. TVMyPod then puts the content on the player and ships the original DVDs along with the iPod restored to its original packaging.
TVMyPod co-founder Vijay Raghavan said most people don't have the time or the technology to convert DVDs into the iPod's required format, which is what gave him and his business partner the idea to start the service.
DVDs have copy protection on them, however, and under the terms of the Digital Millennium Copyright Act it is illegal to bypass that technology. Raghavan said his company's process does not involve decryption.
He added that moving the content onto the device is a one-way transfer, which since the purchaser gets both the original and the copy is legal under the fair use provisions of the US Copyright Act.
"It's kind of an obsolete law since Congress was not taking into consideration portability," Raghavan said. "These players are exploding on the market, but the legality of it can sometimes be in a gray area."
TVMyPod is not charging for its services yet, so customers pay only the actual cost of the iPod and whatever the price is on Amazon for their chosen DVDs.
Raghavan said TVMyPod will set prices when it rolls out its next offerings, which will include consumers sending in their own iPod and possibly a subscription service to keep the content refreshed.
Digital Music Sales Top $1 Billion
Excerpted from Red Herring Report
Worldwide digital music sales jumped 190 percent to $1.1 billion during 2005, making up 6 percent of all music sales, an industry group said Thursday.
As the number of tracks available from record companies doubled to 2 million songs, customers downloaded 420 million tracks last year, according to a report by the International Federation of the Phonographic Industry (IFPI).
The United States accounts for the vast majority of these sales, with 352 million tracks sold in 2005, according to Nielsen SoundScan. That firm said earlier this month that the last week of 2005 set a record for US online music downloaders, with 20 million tracks sold.
Subscription services, which offer customers access to a large library of songs for a monthly fee, are widely seen as a better business model than single-track download shops, but they lag behind Apple's iTunes. At the Macworld conference in San Francisco last week, Apple CEO Steve Jobs claimed iTunes has 83 percent market share.
Nielsen/NetRating said Thursday traffic to the iTunes web site and application had risen to 20.7 million unique visitors in December 2005, up 241 percent from the year before. That amounts to 14 percent of the active US Internet population, said the firm.
Subscription services such as Rhapsody and Napster grew dramatically last year, said the IFPI, but not at the same level as overall downloads. Subscribers rose to 2.8 million globally, up 87 percent from 1.5 million last year.
Napster this week disputed a report by Digital Music News that it was considering layoffs or a fire sale, saying it had a half-million subscribers and a promising future.
Online music vendors said the IFPI report confirmed that the growth they're seeing is an industry-wide trend.
"This is great news," said iMesh Co-founder & President Talmon Marco. "It's proving that consumers are adopting online digital music and are willing to pay for it." iMesh was previously an unlicensed P2P file-sharing network, but it changed tack after legal pressure from music labels.
Mr. Marco would not disclose iMesh's number of customers, but he said it is growing quickly. "There were a lot of people who said P2P users are just out there for the free stuff, but the numbers that we see internally prove the complete opposite," he said.
Estimates vary widely for the number of people on unlicensed file-sharing networks. P2P research firm BigChampagne continues to report that almost every month brings a rise in P2P users. BigChampagne recently said nearly 7 million Americans were logged onto P2P networks at any given time in December 2005.
iTunes' new video offerings may offer proof that digital downloads can be a valuable marketing tool. Earlier this week, an NBC executive told TV Week that the availability of its show "The Office" as a video download on iTunes had led to a significant increase in its regular viewership. The audiences for ABC's "Lost" and "Desperate Housewives" also rose – 28 and 7 percent, respectively – after those shows became available on iTunes.
ISPs and Music Groups on Verge of War
Excerpted from Playfuls Report
ISPs and music companies might be heading towards a very serious conflict. "It's been a year since I asked for the ISPs cooperation, and I've effectively had zero response," said John Kennedy, Chairman and Chief Executive of the IFPI, which represents record companies worldwide.
Mr. Kennedy said he would continue to try and negotiate with the ISPs, but said that as a last resort, he could turn to litigation if the Internet groups continued to turn a blind eye to illegal music downloading by their users.
He said he wanted ISPs to send out warnings to customers who downloaded music illegally and then cut them off from using their services if they refused to stop. "If it's easy enough to cut them off if they don't pay their bills; it's easy enough to cut them off if they infringe copyright laws," said Mr. Kennedy, adding that the government should also increase its efforts to protect intellectual property.
The comments came as the IFPI released its 2006 Digital Music Report. The report details that over 400 million music tracks were sold in 2005 - 20 times more than 2003. In addition, the music industry is hopeful the integration of mobile phones and the MP3 player will yield continued success in 2006. According to the IFPI, mobile music downloads account for 40% of all digital revenue.
While the IFPI's report succeeds in its account of the 2005 digital music market, it completely fails in its account of P2P and file sharing. The problem with the IFPI's report is that it relies heavily on findings by the largely discredited NPD Group's reports on file sharing.
In addition, the IFPI's report demeans its potential consumer base by referring to them as "obstacles." Yet the report ignores the reasons why these "obstacles" are spending less money on CDs. P2P and file-sharing users represent the frontier of the digital age, where relying on physical CDs is less important than having a digital file.
It's impossible to expect an advanced culture of individuals to lug around circa 1978 technology when MP3 players offer cutting-edge portability. These reports also fail to examine the possibility that iTunes users spend less on music by purchasing single tracks rather than full albums.
The greatest failure of the IFPI is its intolerance of the P2P community. Rather than open a dialog with its consumer base, it refers to them as "obstacles" and "thieves," which represent the great core of their problems. The IFPI is in a struggle to win the hearts and minds of the P2P population, as the IFPI readily admits it is failing to achieve.
The answer to this problem boils down to respect. If the IFPI can't respect the needs and wishes of the P2P community, it can't possibly expect the P2P community to respect theirs.
Old Media: King Content
Excerpted from The Economist Report
Media companies are suffering intense pain – and it is starting to seem worryingly permanent. In America, shares of old media firms such as News Corporation, Comcast, and other giants of television, film, radio, and print, have fallen 25% behind the S&P 500 in the past two years, despite some heroic financial results.
Meanwhile, the market value of Google, which made its debut on the stock market in 2004, is now equal to the combined worth of Walt Disney, News Corporation, and Viacom, three beasts of the old media jungle. One investor, who recently moved two-thirds of his $1 billion fund out of American media and into emerging-market companies, moans that "the market thinks something's going to get them, whether it's piracy, personal video recorders, or Google."
Desperate to rescue its share price, Viacom broke itself in two on January 3rd. Time Warner, the biggest media group of all, is under attack from Carl Icahn, a corporate predator perfectly adapted to sniff out the weak and vulnerable. The big groups have seen their newspapers and magazines lose readers and advertising to the Internet; their music businesses suffer piracy and falling sales; and someone else's videogames captivate new generations of consumers. Now come fears about film and TV, the bedrock of their business.
Hollywood took 7% less at the box office in 2005 than in 2004 and growth in sales of DVDs has slowed. Internet video threatens the satellite and cable systems of companies such as News Corporation and Time Warner. Dozens of advertisers are shifting budgets from television to such places as the Internet. And if media firms move on to the Internet themselves, they risk losing their films and television programs to pirates.
No wonder that on media island they are downcast. Yet, if Hollywood teaches one thing, it is that stories can be re-made and dreams can come true. Rather as big retailers, including Wal-Mart and Tesco, have discovered advantages online, so too will big media companies.
The Internet is still in the digital equivalent of the silent-film era. It has been formidable for text, still images, and music, but is only now, with broadband access, entering an age of high-quality video. As it does so, Time Warner, News Corporation, Disney, and other media companies will be able to cash in on their film and television archives. Selling video direct to consumers, without distribution getting in the way, lets media firms, and viewers, mine their vaults for old episodes of "The Outer Limits," Johnny Carson, or whatever: minority tastes, to be sure, but taken together, a vast new market.
Moreover, old media will command audiences for many years yet. New media understand this: Google has just bought dMarc, which sells old-fashioned radio advertising. Websites, such as BabyCenter and AlwaysOn, have recently launched print-magazine versions of themselves, to capture advertising that was out of their reach online. As the best remaining source of a mass audience, TV and film are the best places to create and promote the next "Simpsons" or "Narnia."
Some people worry that new media companies may over time shunt old ones aside as producers of content. Certainly, digital media will create new stars and new businesses, but making high-quality video content will always be a daunting and expensive task. Music or a blog can be composed from a bedroom, but not an episode of "Friends."
Just last month, DreamWorks, Hollywood's youngest studio, sold itself to Viacom, despite its strong financial backing and the talent of Hollywood luminaries. It made some money, but could not afford a billion-dollar investment in films year-in, year-out. Yahoo has a media unit, but so far it hasn't had any hits. Responding to the news this week that Yahoo intends to spend up to $10 million on a reality-TV concept called "The Runner," analysts complained that the investment would damage its margins.
By contrast with Yahoo's dabbling, old media is now investing in digital media in earnest. It all went terribly wrong before 2000 when bewitched executives squandered money on the Internet and Time Warner sold itself to AOL in one of history's worst-ever deals. But now they are back. Rupert Murdoch, chief executive of News Corporation, made a series of acquisitions in 2005. Disney is supplying two hits, "Desperate Housewives" and "Lost," using Apple's iTunes download service. Last summer Viacom bought Neopets, a virtual-pets site. Old media is well placed to steer its huge offline audiences to its websites.
Helpfully on cue, piracy now seems less of a threat. The music industry now has a healthy business in legal downloads. Operators of P2P networks, such as eDonkey, are going straight. And Hollywood is realizing that it has no equivalent to a big musical weakness – that many albums consist of a few decent tracks padded by dross.
Any media business has two products to sell: its content (to readers and viewers); and its audience (to advertisers). The task for old media is first to protect its advertising revenues by amassing audiences online and, second, to offset their viewers' intolerance of mass-advertising by making them pay more for content – which they are increasingly willing to do. It will not be easy, but then saving the heroine never was.
Coming Events of Interest
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MidemNet Forum & MIDEM – The World's Annual Forum for Digital & Mobile Music January 21st-26th, Cannes, France. Confirmed keynotes are EMI Group Chairman Eric Nicoli; Ken Lombard, President of Starbucks Entertainment; Patricia Langrand, Senior EVP of Content for France Telecom and Nokia's EVP and GM of Multimedia Anssi Vanjoki. MidemNet forum will welcome the world's leading digital music experts and global authorities on mobile music. Please contact DCIA Member indie911 CEO Justin Goldberg at justin@indie911.com or 310-943-7164 if you plan to attend.
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NATPE 2006 – The National Association of Television Program Executives conference January 24th-26th in Las Vegas is the only American market serving the worldwide television industry, whether you're looking to meet with colleagues, find new partners, learn about the burgeoning business opportunities of mobile and digital, or share ideas. Preview NATPE 2006 here
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New Technologies and New Media in Advertising Law Conference – January 30th-31st in New York. An inside look at hot topics in marketing, trademark and copyright law. In-depth assessments of areas in which technology has been driving rapid change, including privacy and data security. Not just an ordinary overview – topics at the forefront of how technology is changing the legal realm of advertising.
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Digital Commerce Summit 2006 - January 31st in New York. Digital Media Wire invites you to attend this one-day executive forum for content owners, merchants, payments & technology companies, banks & financial services institutions, ISPs, MSOs, P2P vendors, and wireless & mobile companies focused on payment solutions and commerce strategies for digital content, including games, music, film, television and video products.
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Media Summit New York – February 8th-9th in NYC. The 2006 Media Summit New York is the Premier International Conference on Motion Pictures, Television, Cable & Satellite, Broadband, Wireless, Publishing, Radio, Magazines, News & Print Media, Advertising and Marketing. The DCIA will participate with the CEA and MPAA in discussing "The Piracy Freight Train: As Entertainment, The Law & Technology Collide."
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Defining the Problem, Developing Solutions – The Anti-Spyware Coalition's first public workshop to be held on February 9th at the Capitol Hyatt in Washington, DC will address the impact of spyware on businesses and individuals and will include interactive panels on public education, policy and enforcement, corporate security, and industry guidelines. Confirmed speakers include FTC Chairman Deborah Majoras, Wall Street Journal Columnist Walt Mossberg, and Pew Internet and American Life Associate Director Susannah Fox.
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New Communications Forum 2006 – March 1st, Palo Alto, CA. NCF brings together the industry's leaders from around the globe to discuss the impact of participatory communications on media, marketing, PR, and advertising. This year the conference will examine how blogs, wikis, podcasts, and other emerging tools, technologies, and modes of communication are affecting organizations.
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Omma West Conference and Expo-Hollywood – March 27th-28th in Los Angeles. The rash of technology innovations and content syndication deals over the past year, coupled with consumer adoption of broadband, DVRs, VOD, and an unwavering insistence on media control, are taking the shape of an infrastructure the media industry's most forward thinking prophets have long heralded. The Internet is now becoming what it was meant to be – the distribution channel for all media.
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First Annual DCIA Conference & Expo – June 22nd, Tysons Corner, McLean, VA. Panel tracks at this first-ever global "P2P Media Summit" will cover policy, marketing, and technology issues affecting commercial development of the emerging file-sharing industry. Exhibits and demonstrations will feature industry-leading products and services. Plan now to attend. For sponsor packages and speaker information, please contact Karen Kaplowitz at 888-890-4240 or karen@dcia.info.
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