July 31, 2006
Volume 14, Issue 4
Kazaa, Skype, and Now The Venice Project
Excerpted from Business Week Report by Steve Rosenbush
Niklas Zennström and Janus Friis, the entrepreneurs who created the pioneering web applications Kazaa and Skype, are working on a new communications venture. The pair plans to develop software for distributing TV shows and other forms of video over the web.
Working under the code name "The Venice Project," Zennström and Friis have assembled teams of top software developers in about a half-dozen cities around the world. The teams are currently in negotiations with TV networks. A formal announcement of the new venture could come as early as this fall.
The mortality rate for tech startups is high, but Zennström and Friis have defied the odds with a series of highly disruptive new businesses that have roiled the communications and media establishments.
They created the Kazaa file-sharing network, which consumers used for the distribution of music and video. The peer-to-peer (P2P) network’s system consisted entirely of its users’ PCs. The controversial company, which bypassed the entertainment industry by allowing free distribution of content, was sold to DCIA Member Sharman Networks.
In 2003, Zennström and Friis launched a P2P phone service called Skype. The software allows users to make free, high-quality calls over the Internet, bypassing the traditional phone system. DCIA Member Skype was acquired last year by eBay for $2.6 billion in cash and stock and an additional $1.5 billion in bonuses that could be paid by 2009.
Zennström and Friis will not be leaving Skype or spending less time there than they are now. The Venice venture will get an investment from Zennström. Friis is expected to spend up to 20% of his time on the venture to help develop the business model. Others are being recruited to run the project on a daily basis.
This time around, Zennström and Friis are inviting the cooperation of TV producers and networks. While the exact nature of their business model isn’t clear, they are talking to every TV network in town, according to one person familiar with the matter. The idea is to become a dominant TV distribution company for the Internet era, just as companies such as Comcast have dominated TV distribution in the cable era.
Sharman Networks Settles Global Litigation
DCIA Member Sharman Networks announced that a historic turning point has been reached for both technology and content industries with the global settlement of the Metro-Goldwyn-Mayer Studios Inc. et al v. Grokster Ltd. and the Universal Music Australia Pty Ltd. & Ors v. Sharman License Holdings Ltd. & Ors copyright cases.
The global settlement of all legal disputes between Sharman, which owns and distributes the Kazaa P2P software application, and the major entertainment content providers and trade groups, clears the way to enable distribution of the broadest range of licensed content over Kazaa.
"This settlement marks the dawn of a new age of cooperation between P2P technology and content industries which will promise an exciting future for online distribution in general and Kazaa users in particular," said Nikki Hemming, CEO of Sharman Networks.
"It has been our longstanding goal for Kazaa to play a significant role in the growing market for licensed online distribution and authorized exchange of copyrighted content using P2P technology, and this settlement ensures that we will be working together with the content providers to the benefit of consumers, businesses, and artists," said Hemming.
All the parties involved now recognize the time is right to work together, and we are looking forward to collaborating with the music and motion picture companies to make P2P an integral part of the future of online digital entertainment," said Hemming.
Altnet Reaffirms Anti-Piracy Commitment
DCIA Member Altnet announced that it is also pleased resolution has taken place.
"The settlement clears the way for us to get back to the business of providing cutting-edge technology for the management and protection of online content.
We are more committed than ever to assisting in global anti-piracy efforts which we see as an important objective. We made a few decisions that led to a conflict, but we are glad that dispute is now behind us and that we can focus on the task ahead.
We look forward to building our relationships with labels, studios, and other content owners to enable them to improve their digital content sales. Additional information about our new technologies will be available soon at www.globalfileregistry.com."
Report from CEO Marty Lafferty
 We are excited about prospects for The Venice Project. Among content industries, television has been the most innovative, progressive, and receptive to the advantages of using P2P file-sharing technologies for distribution of video.
This may be attributable to the relative comfort of major broadcasters with advertising as a revenue stream or to their greater need for distributed computing technologies to handle large files efficiently.
In any case, viewers can now find hundreds of TV program series online and an even larger number of promotional experiments underway involving P2P companies from BitTorrent to Veoh Networks.
We also hail the resolution of longstanding disputes this week surrounding Kazaa and the entertainment industries. Sharman Networks and Altnet, Members since the DCIA’s inception in July 2003, have consistently said they wanted to play continuing roles in the online distribution of content and when a real opportunity finally arose to achieve that aim they eagerly embraced it.
This is an accord that both Member companies have long sought, and the significance of its announcement is that Kazaa will have a place in the online entertainment industry’s future. There have been settlements to all litigation involving these parties throughout the world.
That there has been resolution when people on both sides initially held such strong views is the clearest evidence of how far the technology and entertainment industries have come.
The companies have never been more confident than now that their technologies, including their newest ongoing advancements, will play a critical role going forward. And by settling, they have taken the first opportunity to confirm that role.
Sharman Networks and Altnet remain committed to the continuing development of solutions that will benefit consumers, businesses, and artists. Their costs expended to date are an important investment in the future of online entertainment.
The firms have prided themselves for being on the cutting edge with their technology design and are currently working with content companies to define the next generation of entertainment delivery functionality to take advantage of advances they have made while also working towards dispute resolution.
The companies’ financial contributions to the settlement will further lead to enhanced revenue opportunities for all parties, which will be realized by their working collaboratively with the entertainment industries.
Sharman Networks and Altnet expect to attract many new partners in their businesses, not the least of which will be the major music labels and movie studios. They are committed to making the P2P distribution channel available to as many customers, artists, and content providers as possible.
We can now all join in and forge an exciting future for online content and its distribution for the benefit of all constituents. The DCIA was established in part to serve as a forum for the exploration and encouragement of this kind of advancement.
Our trade association welcomed the US Supreme Court’s decision in the MGM v. Grokster case just over a year ago, anticipating that it would help guide greater clarification of rules of engagement between content providers and technology suppliers, which in turn would ultimately lead to continued expansion of the distributed computing industry.
This week’s settlements provide further impetus for the P2P distribution channel to grow and flourish. P2P digital rights management (DRM) technologies, interactive advertising, and micro-payment solutions have been proven to work with Kazaa and other P2P programs for computer games, software, and independent music and films. Now major music labels and movie studios can also avail themselves of these tools and related new advances to develop viable marketplace solutions.
P2P file-sharing technologies are part of the larger movement to an increasingly distributed computing environment. As the Supreme Court affirmed in June 2005, this kind of technological progress is inevitable – embracing it to harness its capabilities will benefit all affected parties. The DCIA urges an increased focus on deploying new business models for content distribution that are non-infringing and expand the marketplace for digital content.
We don’t think anyone with a genuine passion for online content or its distribution will be disappointed that Sharman Networks and Altnet can now join with content rights holders to create new and exciting opportunities for consumers, businesses, and artists. One of life’s secrets is to turn stumbling blocks into stepping stones. Share wisely, and take care.
Kazaa File-Sharing Service Advances
Excerpted from Technology Daily Report by Andrew Noyes
Major movie studios and music labels have reached a global settlement in their lawsuits over the Kazaa file-sharing network, trade groups representing the industries said Thursday.
The action comes roughly a year after the Supreme Court decided the landmark MGM v. Grokster case. The justices unanimously ruled that file-sharing services can be held liable for users’ copyright infringement.
Sharman Networks, which owns Kazaa, was a co-defendant in the case and operated one of the most popular file-swapping networks at the time of the court battle. At its peak, Kazaa had an estimated 4.2 million simultaneous users worldwide.
The Australia-based business, which called the settlement a "historic turning point" for the high-tech and content industries, will work on new methods to curb unauthorized sharing on its system. Grokster announced a similar deal with movie and music companies last November.
Sharman will pay about $115 million to members of the International Federation of the Phonographic Industry, the Recording Industry Association of America, and the Motion Picture Association of America, company spokeswoman Gabriela Duran-Gorman said. Those industry groups took legal action in the United States and Australia.
The settlement "marks the dawn of a new age of cooperation" between P2P networks and copyright holders, Sharman CEO Nikki Hemming said in predicting "an exciting future for online distribution." "The time is right to work together," she said.
MPAA chief Dan Glickman said the "important victory" represents a milestone in "the progress that content and online communities have made in coming together to meet consumer demands while still respecting the rights of content creators." A flurry of P2P services launched shortly after the Grokster ruling last June.
"The clarity of the court’s decision provided the content and technology sectors a window of opportunity which both sides are embracing," Glickman said.
IFPI Chairman John Kennedy and RIAA Chairman & CEO Mitch Bainwol welcomed news of the settlement. Kennedy said Sharman’s shift is a "win-win scenario." Bainwol said "fans, artists, and labels and everyone else involved in making music and our partners in the technology community" will benefit.
The agreement should propel commercial development in the P2P marketplace, said Marty Lafferty, CEO of the Distributed Computing Industry Association.
Technologies to manage digital rights, interactive advertising, and micro-payment solutions have shown promise in the file-sharing arena, and now major music labels and movie studios can use these tools, he said.
Sharman Working with Labels & Studios
Excerpted from Washington Internet Daily Report by Greg Piper
A wave of P2P settlements with music and movie labels continued Thursday, as Kazaa parent Sharman Networks came to terms with music labels and movie studios in two long-running cases in the US and Australia.
Kazaa will start offering licensed content and use filtering technologies under the $100 million-plus global settlement, Sharman said.
"This settlement marks the dawn of a new age of cooperation between P2P technology and content industries," CEO Nikki Hemming said. The company always wanted Kazaa to "play a significant role" in licensed P2P, despite near-constant litigation in recent years, she said.
The settlement "removes an impediment to progress towards realizing the full potential of file-sharing technologies," said Marty Lafferty, CEO of the Distributed Computing Industry Association (DCIA), to which Sharman belongs.
Altnet, another defendant in the Grokster case that also settled Thursday, made "a few decisions that led to a conflict" and called itself "more committed than ever to assisting in global anti-piracy efforts," it said.
"This is the best possible outcome for the music industry and consumers," International Federation of the Phonographic Industry (IFPI) Chairman John Kennedy said. RIAA Chairman & CEO Mitch Bainwol called the outcome "another important marker on the remarkable journey that is the continuing transformation and development of the digital marketplace."
MPAA Chairman & CEO Dan Glickman called Sharman’s decision to filter "a breakthrough for online distribution opportunities."
Kazaa to Install Filtering Software
Excerpted from Video Business Report by Paul Sweeting
On Thursday, the studios’ and record companies’ long legal pursuit of P2P service Kazaa finally came to an end in an out-of-court settlement.
Kazaa-owner Sharman Networks agreed to pay the plaintiffs $115 million and install filtering software to prevent unauthorized copyrighted works from being traded over its FastTrack network.
"This is another important victory in this historic case," Motion Picture Association of America Chairman & CEO Dan Glickman said. "Since the Supreme Court’s unanimous decision a little more than one year ago, we have seen a surge in new opportunities for consumers. Today’s settlement represents yet another milestone in the progress the content and online communities have made in coming together to meet consumer demands while still respecting copyrights."
The settlement announced Thursday covers all claims against the company worldwide.
"Steadily but surely, we are passing another important marker on the remarkable journey that is the continuing transformation and development of the digital marketplace," RIAA Chairman & CEO Mitch Bainwol said. "The winners are fans, artists, and labels and everyone else involved in making music and our partners in the technology community."
Born in The Netherlands, Kazaa grew to become one of the world’s most popular P2P applications, with 4.2 million simultaneous users at its peak.
After an adverse court ruling in 2001, however, its Dutch founders sold the Kazaa Media Desktop (KMD) application and the software behind the FastTrack file-swapping network to Sharman. The new owners maintained most of their operations in Australia.
"This settlement marks the dawn of a new age of cooperation between P2P technology and the content industries, which will promise an exciting future for online distribution in general and Kazaa users in particular," Sharman Networks CEO Nikki Hemming said.
"It has been our longstanding goal for Kazaa to play a significant role in the growing market for licensed online distribution and authorized exchange of copyright content using P2P technology."
The Distributed Computing Industry Association, which represents Sharman and other P2P services in Washington, called the settlement "a positive step" for the P2P industry.
"The Kazaa settlements should help advance commercial development of the P2P distribution channel," DCIA CEO Marty Lafferty said. "Such conflict resolution represents a positive step for industry growth, removing an impediment to progress toward realizing the full potential of file-sharing technologies."
Digital River Upgraded to Buy
Analysts at Oppenheimer & Co upgraded the stock of DCIA Member Digital River (DRIV.NAS) from "neutral" to "buy." The target price is set to $46.
Digital River, a global leader in e-commerce outsourcing, builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers. Its multi-channel e-commerce solution, which supports both direct and indirect sales, is designed to help companies of all sizes maximize online revenues as well as reduce the costs and risks of running an e-commerce operation.
The company’s comprehensive platform offers site development and hosting, order management, fraud prevention, export controls, tax management, physical and digital product fulfillment, multi-lingual customer service, advanced reporting, and strategic marketing services.
SafeNet Offers DRM Best Practices
DCIA Member SafeNet, setting the standard for information security, announced the immediate availability of guidelines to assist content owners and distributors in creating compelling digital content service offerings for consumers using digital rights management (DRM) technology. These recommendations offer best practices for DRM usage to ensure the growth of digital distribution services without compromising the flexibility that consumers demand.
"While online delivery of copyrighted content is poised for tremendous growth in the years to come, this growth is heavily dependant on the adoption of secure and easy to use DRM solutions," said Zippy Aima, Analyst, Digital Media Practice, Frost & Sullivan. "Our recent report on mobile DRM highlights consumer concerns around usability issues like consistency, interoperability, and transparency. Initiatives like SafeNet’s are desperately needed to help address these issues."
Content providers have never been so closely involved with mobile DRM as they currently are with next-generation mobile multimedia services. Participants in the mobile content industry value-chain are looking to enhance their DRM capabilities –both for on-net and off-net delivery of content.
"As a security specialist, SafeNet understands the usability issues that arise in the application of rights management. As an industry leader in anti-piracy and DRM solutions, we are uniquely positioned to understand the concerns of both content owners and content distributors," said Simon Blake-Wilson, Managing Director of DRM Products, SafeNet. "We have developed DRM usage guidelines for the industry because usability is an issue that requires attention from technology providers, content distributors and content owners alike."
SafeNet DRM technology is a complete solution, offering a suite of security products and services to provide ongoing protection for digital content throughout its lifecycle. SafeNet has drawn upon its expertise in both anti-piracy and DRM to develop these DRM usability guidelines.
"With heightened consumer awareness levels, time to market is a critical consideration," said Vikrant Gandhi, Analyst, Mobile Communications, Frost & Sullivan. "Our firm’s most recent research on U.S. Mobile DRM markets indicates that partnerships with leading mobile DRM solution providers such as SafeNet add tremendous value from both a technology and ROI perspective for next-generation mobile content market participants."
The DRM usage recommendations are available for download, free of charge, at the company’s website www.safenet-inc.com/drm_usage.
Storage Virtualization Eases Pain
Ray Lucchesi of DCIA Member Silverton Consulting has released a new report regarding customer experience with storage virtualization products.
Block storage virtualization products have been introduced in the past couple of years by a number of small to large storage vendors including HDS, IBM, NetApp, Sun, EMC, DataCore, FalconStor, StoreAge, and others. These new products provide simplified access to the aggregated storage behind them and make it easier to move, copy, and replicate data to other managed storage subsystems.
Customers purchase storage virtualization to better manage where data lives within their environment and better protect data across sites. Many customers start small but quickly find that the advantages of storage virtualization grow as they add more data. Most customers end up with all their online, networked storage behind the virtualization engine.
Storage virtualization products take much of the drudgery and pain out of storage administration. Data movement can be done with continued access to the data while it is being moved from place to place. Prior to storage virtualization this would have required taking the storage offline during the data move disrupting application users and bringing it back online after the data had finished being moved.
Welcome HackBack Media
Please warmly welcome HackBack Media to the Operations Group. We look forward to providing valuable services to this newest DCIA Member and supporting its contributions to commercial development of the distributed computing industry.
HackBack Media was founded to thrive in an ultra-broadband future where all media is available to consumers, instantaneously, anonymously, and for free.
According to HackBack Founders Bob Way and Clay Price, "If you can’t outshine free on-demand content – you are not the future. Period.
We relish this opportunity to work with DCIA’s esteemed Membership in creating distributed computing’s future and advancing our nascent service, code named, ‘Privateer.’
Privateer is a pure digital property broker. We capitalize intangible properties by separating traditionally implicit social conventions into explicitly valued transactions. More simply; we sell consumer attention to advertisers, then we purchase pure digital media for consumers.
We broker consumer-centric transactions for web, radio, and television services, as well as pure digital goods such as eBooks, eMusic, and eMovies.
We maintain absolute consumer privacy from both advertisers and media providers, while delivering DRM-free properties in open formats, containing no spyware or adware.
Of course we do this completely legally, while respecting copyright, first-sale, fair use and unregulated use rights – all while preventing consumer piracy."
P2P Innovative Launches iP2P Network
P2P Innovative, a leader in the design and implementation of advanced P2P technology, announced the launch and availability of the iP2P network. The iP2P network was engineered to address the needs of the expanding world of distributing large media files and the fast growing P2P community.
The iP2P network infuses P2P Innovative’s proprietary network technology with DHT and BitTorrent compatibility to create a fully decentralized, secure community that is highly scalable and efficient. iP2P was built to evolve seamlessly as new application layers and advanced protocols are added. The iP2P network hopes to become a broadly adopted platform for the future of media distribution as well as community building and sharing.
P2P Innovative is now licensing the proprietary iP2P network to top Internet and media companies as a cost-effective solution for media distribution and live content streaming. P2P Innovative will also be engaging innovative joint venture projects using the power of the iP2P network.
P2P Innovative will continue to create exciting solutions for new P2P applications. The company is looking for partners in the software and hardware industry who want to implement its P2P network or technology to create applications in areas such as: efficient file distribution, worldwide media streaming, voice over IP (VoIP), live events, massive multiplayer gaming, mobile device P2P networking, shared CPU processing, community building, virtual BitTorrent tracking, video/audio submissions and sharing.
Current top non-exclusive licensees of P2P Innovative’s technology are Warez.com and Warez P2P, the third largest decentralized, proprietary P2P file-sharing network in the world with 1.5 million simultaneous online users and over 25 million downloads to date. Warez P2P has chosen the iP2P network for its next generation P2P system in the upcoming version 3.0.
iPhox, a VoIP service provider, has licensed the iP2P network for its upcoming upgrade. P2P Innovative is helping with the integration of P2P media sharing, entertainment streaming, and advanced conferencing within the iPhox communication system.
P2P Innovative welcomes partners with exciting ideas and creative applications using P2P technology. The company can tailor its P2P technology to create a private network for its customers’ unique applications.
Coming Events of Interest
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Building Blocks 2006 – August 15th–17th in San Jose, CA. The DCIA is pleased to participate in this premier event for transforming entertainment, communication technologies and the global communications network: TV, cable, telco, consumer electronics, mobile, broadband, search, e-mail, VoIP, RSS, blogs and websites: "Disruptive Thinking – Change Agents That Transform the World –Where Content is King and Technology Rules."
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2006 Word of Mouth Marketing Forum – September 21st–22nd in Arlington, VA. Learn the ins and outs of one of the most innovative and efficient marketing techniques. New tools and technology have made Word of Mouth Marketing one of the best strategic tools marketers can use to build brand awareness and customer loyalty.
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OMMA Awards– September 26th at the Marriot Marquis in New York, NY. The OMMA Awards honor the brand marketers, agencies and content providers who continue to push the potential of online advertising creative. The OMMA Awards celebrate the year's most innovative and brilliant creative work in 27 categories. Submission deadline is July 28th.
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6th Annual Future of Music Policy Summit – October 5th–7th at McGill University in Montreal, Canada. FMC sees hosting this Summit in Canada as an opportunity to expand its perspective on a range of issues – from copyright, to sampling, to digital royalties, to radio, to how various musical communities are managing change. The music marketplace has become truly global, and some of the biggest challenges are navigating the assortment of legal and licensing schemes that encourage and/or impede the promotion and sale of music.
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