August 28, 2006
Volume 14, Issue 8
Q&A: Nikki Hemming
Excerpted from Billboard Report by Christie Eliezer
Nikki Hemming emerged into the spotlight after 2002 when the Sydney-based CEO of Sharman Networks acquired the peer-to-peer (P2P) file-sharing software Kazaa. Within three years, the software was downloaded 300 million times for use in exchanging files of music, movie segments, software, and computer games.
Despite Kazaa’s position in the media spotlight, little is known about the 39-year-old, London-born Hemming. A former employee of Richard Branson’s Virgin Interactive and one-time GM of theme park Segaworld in Sydney, she rarely grants interviews, preferring to challenge herself with shark diving and mountain climbing. She next plans to trek through Peru to Machu Picchu, commonly known as the Lost City of the Incas.
How soon do you anticipate before Sharman starts announcing its first licensing deals and in which territory?
Very soon, actually. It’s our goal to secure licenses on a worldwide basis so we can take advantage of the fact there is a worldwide audience for us.
What is your game plan for the Kazaa software?
The first thing is to be at the forefront of technology. We have a lot of advantages from creating a flourishing digital content destination. We have an incredibly powerful brand and a lot of technical expertise. We have a unique understanding of the viral power that comes from P2P, and that’s going to be a facet in a very successful future selling content digitally. I’m confident we’re going to be leading the market in the future, cooperatively with the industry.
When Napster went legit, it lost users. What have you got in place to stop that happening to Kazaa?
That boils down to understanding the consumer market so that we deliver a product that hits the sweet spots of what they are expecting from a P2P application from which you can choose licensed content. We haven’t been sitting on our hands while we’ve been negotiating a settlement. We’ve been preparing for our future, and we’ve geared up for a strong entrance into the market.
You’re going to negotiate with people who have had you followed, raided your house and office, and called you a gangster. Have you got a problem with that?
Business is not about individuals, and it’d be pretty foolish of me to take personally things that have happened in the past. In terms of negotiations, we’ve concluded the first big negotiation already. Mutually agreeing to settle required a round-the-table agreement to go forward together. We’re not just willing to work together – we’re excited about the prospect.
At the same time, the people you’re negotiating with would have some suspicions about Sharman’s setup. Do you agree you’ll have to clear the air with your future partners?
The air is already cleared. We went out of our way to deal with any and all concerns on this subject. The Australian record industry’s most senior lawyer Richard Cobden didn’t have one question left on the subject. Anyone who says otherwise is simply making mischief.
What role will Kevin Bermeister and his two companies play in the new Kazaa?
We have a joint-venture agreement with Altnet, where Kevin is CEO, which has been in place for a period of time. We have technology that we are developing; he has technology that he is developing. Altnet is a great company to collaborate with: they’re very innovative and we’re happy to work with them.
When Sharman first bought Kazaa, you envisaged use of a subscription model. Is that still a viable proposition?
I think you’re referring to IPUF [Intellectual Property Use Fee]. That’s a model that certainly shouldn’t be dismissed. It requires that all parties in the integration chain participate, and therefore it’s a slightly longer term proposition. But Sharman intends to participate in the market with more than one model to ensure we’re capturing consumer demand across the board.
Why have consumers not embraced subscription models?
The IPUF model was before its time, and there were not enough players involved in the model in order to deliver it seamlessly. So when a consumer is purchasing they don’t see the back-end, they just get the experience they are looking for. Partially there are technical boundaries, and partly there’s not been enough innovation in subscription models at the moment.
When was the last time you paid for a CD or to see a movie?
I went to see "The Sentinel." It wasn’t as good as "In the Line of Fire." I don’t recall the last CD I bought – it was this year. I’m dated by my music collection, which is ‘80s-centric. The last CD I heard was Annie Lennox’s "Diva.
Report from CEO Marty Lafferty
 We wrote to US Congressional leaders this week to update them on key developments in the distributed computing industry with respect to commercial development of P2P file-sharing technologies and businesses that rely on them.
We are grateful to leading Senators and Members of Congress for their support of positive progress in the aftermath of the US Supreme Court MGM v. Grokster decision.
We request their continued vigilant stewardship over the public Internet in making fully informed decisions with respect to the so-called "Net Neutrality" issue.
Current anti-neutrality threats from special interests are not only very real, but also have the potential to cripple consumer use of the Internet, which it is important to recall was developed by ARPA with taxpayer funding.
Asymmetric network services, as proposed by these interests, would end the ability of citizens to host their own web servers, e-mail servers, and other productivity-improving applications. In effect, such a regime would oppress individual Internet users, sharply curtailing the freedoms they currently enjoy on an even playing field with all other Internet users, including large corporations.
The United States was a country formed by the people and for the people, and the Internet, which in many ways represents a modern-day technological manifestation of this nation’s democratizing principles, is now in jeopardy of being stolen from the people. We urge Congress not to cave-in to pressure from special interest groups on this important issue.
Meanwhile, a real milestone was achieved last month in the emerging distributed computing industry with the global settlement by DCIA Members Sharman Networks, Brilliant Digital Entertainment, and Altnet in regard to the most widely-known P2P software application, Kazaa. This included a settlement of all copyright and copyright-related actions as well as patent actions brought by our Members against other parties.
The Recording Industry Association of America (RIAA), Motion Picture Association of America (MPAA), and related international entertainment industry trade organizations are now working closely with Altnet and Sharman to give effect to an entertainment-industry sanctioned business model that augurs well for the entire digital distribution marketplace, beyond merely setting an example of appropriate leadership for the file-sharing channel.
Along these lines, other DCIA Members have voluntarily taken constructive steps. Grokster also settled its litigation; and MetaMachine, which distributes the currently most popular P2P software application, eDonkey, is in negotiations to settle with the entertainment industry in advance of such potential litigation.
Meanwhile DCIA Membership has grown to eighty Members, including content rights holders and service-and-support companies, such as P2P payment solutions providers and digital rights management (DRM) developers, as well as P2P software distributors.
We believe it is also timely for Congress to be made aware of certain technological advances that have taken place in parallel with the legal settlements. These are critical because they affect the nature of file-transfer via P2P on the Internet and relate directly to the current debate over network neutrality:
1) Files transferred via decentralized P2P protocolsare identified by a pre-assigned unique known file identifier. This unique identity of each file can in turn serve as a homing device for routers at Internet Service Providers (ISPs) to target, with pinpoint accuracy, those files which need to be acted upon to enforce copyright infringement, eradicate criminally obscene content, or protect national security interests.
2) Targeted files could include known occurrences of child pornography, identity theft, and terrorist communications, as well as unauthorized copies of music, movies, games, and software. The technologies required to accomplish this major improvement are available, inexpensive, and will have the added benefit of greatly reducing demand for bandwidth due to the resultant reduction in voluminous large-file piracy, such as for unlicensed redistribution of music collections, feature-length films, television program series, videogames, and computer programs.
3) Files that are not targeted remain free to pass through: they are not disturbed, opened, reviewed, or compromised in any way. Privacy of underlying data (and users associated with that data) is upheld with the same high regard enjoyed by the public today. The adoption of these anti-piracy solutions will enable P2P to realize its full potential as the most cost-effective and efficient distribution channel for copyrighted works.
The DCIA and our Members involved in bringing these recently deployed technologies to the marketplace hope to meet with Congressional leaders and their staffs to provide more details and perform live demonstrations, including the methods being deployed, in cooperation with the major music and movie industry companies, to accumulate all known infringing file identifiers on the Internet.
We strongly believe that the approach outlined above will lead to a better Internet for all, and seek support of our outreach efforts to Internet Service Providers (ISPs), whose participation – including specific roles, responsibilities, and remuneration – needs to be clarified at this juncture for the most substantial benefits to be achieved.
As DCIA Member Digital Containers’ CEO Chip Venters articulated last week at Building Blocks 2006, we are increasingly concerned that ISP plans for asymmetric networks will undermine the potential benefits of decentralized P2P technologies and their enormous efficiency advancements. Share wisely, and take care.
No Suit Required
Excerpted from Wired News Report by Jeff Howe
Terry McBride has an idea. Another idea. A good – no, a great idea. McBride, CEO of DCIA Member Nettwerk Music Group, is sitting in his Vancouver, BC, office with his local marketing staff discussing strategy for the release of a new album by Barenaked Ladies. The marketing departments in three other cities are conferenced in. The conversation ping-pongs from Nascar promotions to placement in a Sims videogame. McBride is on a roll.
"This one’s a real wingdinger," he says, leaning into the speakerphone so New York, Denver, and Los Angeles won’t miss a word. "Let’s give away the ProTools files on MySpace. Vocals, guitars, drums, and bass. We’ll let the fans make their own mixes." The room falls quiet. Musicians usually record their instruments and vocals on separate tracks; the producer and mixer combine those tracks into a finished product. McBride wants to make the individual files available so that amateur DJs can use them like Lego bricks to create something all their own. The record industry likes control. McBride is proposing unfettered chaos.
A voice from LA breaks the silence: "For the single, you mean, right?" McBride’s features screw up in concentration, then quickly expand into a grin. "What I’m proposing," he says, "is that we make all 29 songs available as ProTools files. In two weeks." The Internet marketers in Vancouver look worried. "But," he adds, "we’ll get the files from the single up on MySpace by Monday." Libby White, a member of the department, shoots McBride a skeptical look. "Can they make it?" McBride asks. White sighs. "We’ll make it," she says.
To all appearances, Nettwerk is just a midsize music management company with an indie record label on the side. Many of the artists on its client roster – which includes Avril Lavigne, Dido, Sarah McLachlan, and Stereophonics – are mainstream acts. But McBride, the company’s cofounder and creative force, is quietly carrying out a plan to reinvent the music industry, including legalizing file-sharing and giving artists control over their own intellectual property.
Which puts Barenaked Ladies, the goofy folk-pop jam band from Canada known to their fans as BNL, at the vanguard of this stealth revolution. Three years ago, on McBride’s advice, BNL left the Warner Music Group imprint Reprise Records to create its own label, Desperation Records. The upcoming album will be the first major test of that decision. It will also reveal whether Terry McBride is a crazy genius or just crazy.
The music industry is suffering. The major record labels – which rely on CDs for most of their revenue – are in decline. CD sales in the US have dropped more than 20 percent from a peak of $13.4 billion in 2000. But don’t be fooled: The market for music is thriving. With the rise of P2P networks, the iPod, and other digital technologies – plus a 100 percent jump in concert ticket sales since 1999 – the world is awash in music. The industry now has more sources of revenue – ring-tones, concert tickets, license agreements with TV shows and videogames – than ever before.
The freedom from major-label constraints that BNL now enjoys was at first "nerve-racking," band leader Steve Page says. The feeling passed. For the new album, "Barenaked Ladies Are Me," McBride and BNL have reinvented the release campaign, starting with the music itself. The band wrote 29 new songs, which will be packaged and sold in a variety of formats, including a CD, four different digital versions, a 14-track collection for Starbucks in Canada, and a second full-length disc, "Barenaked Ladies Are Men," due early next year.
And that’s just the beginning. Between ring-tones, acoustic versions, and concert recordings, those 29 songs have been multiplied into more than 200 "assets" – song versions – that can be used individually or in conjunction with others to create a product. "Because the copyrights are in one place – in BNL’s hands – we can be really creative," McBride says. Hardcore fans can buy 45 of those assets on a USB drive; others can download the special Sims versions. "For decades, people in music have used the number of albums sold as a measuring stick for success," McBride says. "We’re trying to get people to see beyond that. It’s about revenue from music, however you make it – selling concert tickets, licensing to TV, or selling packed USB drives."
Eventually McBride would like to pioneer another source of revenue with even greater potential: P2P networks. Earlier this year, he sparked a music industry uproar when he announced he would pay the legal defense for a Texas man being sued for piracy by the Recording Industry Association of America. "The lawsuits are hurting my bands," he says. "If you could monetize the P2P networks, everyone would make more money."
McBride has every reason to be confident that his experiment with Barenaked Ladies will pay handsomely. The band has a loyal following that has warmly embraced its new independence. If "Barenaked Ladies Are Me" can bring in even modest returns, both Nettwerk and the band will be in the black. The real test will come as Nettwerk tries to launch bands like the Format, an indie act with a small following and no real presence in the popular consciousness. "If we can break bands using this model," McBride says, "the industry will never be the same."
PeerApp at Vanguard of P2P Technology in Asia
PeerApp brings a much-needed advanced P2P bandwidth solution that more than doubles existing bandwidth efficiency in Asia where there is record growth in broadband subscribers and adoption of new uses for Internet-delivered content.
The company’s new China office is part of global strategy by PeerApp to penetrate international markets where existing and future high broadband demand far outstrips supply.
PeerApp’s UltraBand 2000, already in Thailand, cuts bandwidth needed for P2P Internet traffic by up to 90%, cutting costs for Internet Service Providers (ISPs) and Multiple System Operators (MSOs) throughout Asia where leasing physical capacity is expensive and the availability is sorely limited.
PeerApp’s new China office leader Sam Yang said, "The tremendous popularity of video downloading and P2P file sharing is contributing to the dramatic rise in Asia Pacific’s broadband use. In Thailand, the nation’s largest ISP, turned to PeerApp to meet growing subscriber demand. Japan and South Korea head the list of percent of broadband-connected subscribers and are innovators when it comes to using the internet to download content. All of which puts further pressure on ISPs to provide broadband capacity."
The potential is enormous. In China, broadband subscribers now only encompass 3% of the country’s massive population, but are projected to more than double next year, growing from 50 million to 113.2 million. The expansion will further continue, fueled, in part, by Asia’s penchant for US entertainment brands and emerging role as producer of branded entertainment content. Consequently, Asia Pacific’s ISPs and MSOs will need to accommodate a constantly growing subscriber base with technology that squeezes the greatest capacity out of limited Trans-Pacific cables. PeerApp offers just such technology.
Robert Mayer, CEO of PeerApp said, "Due to Asia Pacific’s accelerating broadband market growth, local ISPs must meet current bandwidth demand and also address the prospect of increasingly limited bandwidth availability in the future. With our new China office, guided by Mr. Yang’s sales and service expertise, we can directly facilitate UltraBand 2000 installs and service throughout the Asia Pacific region."
YouTube Offers Branded Channels
Excerpted from The Times Report by Rhys Blakely
The video website YouTube moved to cash in on its exploding popularity yesterday by launching its first branded channel, a platform that will allow advertisers to promote products through customized channels on the site.
The commercial push will make the privately owned website, which recently announced that it shows 100 million videos a day, a far more attractive candidate for a sale or flotation.
The branded channels will enable advertisers to create sets of web pages that will carry videos, adverts, and other content.
Warner Music Group is the first to start one of the dedicated channels, with a promotional campaign for Paris Hilton’s album "Paris." Fox Broadcasting, which is owned by News Corporation, parent company of The Times, has paid an undisclosed amount to appear on the Paris channel to publicize its television drama "Prison Break."
The move marks a change in strategy for YouTube, which to date has focused on providing a forum for members of the public to post home-made videos rather than reaping profits. It comes as the company takes part in talks with record labels, including EMI and Warner Music, over plans to make more music available on the site and amid speculation that YouTube’s backers will head to market when advertising revenues begin firing.
YouTube was launched in February last year by Chad Hurley, 29, and has raised at least $11.5 million from Sequoia Capital, the venture capital firm that backed Google. It is estimated that Sequoia invested $12.5 million in Google and that its stake in the online search engine was worth $1.5 billion when it floated in 2004.
Sequoia’s investment in YouTube is overseen by Roelof Botha, who is a director of the website. Before joining Sequoia in 2003, Mr. Botha was chief financial officer of PayPal, which was bought by eBay in 2002 for $1.5 billion.
After the recent Sun Valley conference in the US, the annual gathering of media executives organized by the investment bank Allen & Co, it was speculated that YouTube could command a price tag of $1 billion. Some analysts have disputed that figure, citing potential copyright issues with some of the content posted on the site.
Sony in Deal to Acquire Grouper
Excerpted from NY Times Report by Matt Richtel
Sony Pictures Entertainment announced Wednesday that it has acquired Grouper, a website featuring videos contributed by users, for $65 million.
The deal marries one of the biggest and most powerful movie studios, which regularly spends more than $100 million on a film, with a website that provides free access to short and often inexpensively made videos on topics like pets, sports, and music.
Michael Lynton, Chairman & CEO of Sony Pictures, said the investment was a bet that material posted by users would continue to be a big draw online.
"My sense is that user-based content is a form of content that’s going to last," Mr. Lynton said. "It’s a bet, no question, but it’s a bet worth making."
Despite its emphasis on letting users share homemade videos, many of the most popular clips on Grouper are slick short productions, including music videos and commercials.
The star of the web video sites is YouTube, which in July had 30.5 million unique visitors, according to Nielsen/NetRatings.
Grouper is getting eight million visitors a month, up from a million in March, according to Josh Felser, its Co-President & Co-Founder.
Sony said it would leave in place the management of Grouper, which is based in Sausalito, CA. The company was founded by Mr. Felser and David Samuel in February 2004 and has received $5.25 million in seed financing, Mr. Felser said.
Mr. Felser said Grouper had little revenue but had instead been focusing on amassing a user base that could eventually lead to significant advertising revenue. He said part of what made Grouper appealing to Sony was that it also operated a P2P network that allowed users to share high-quality videos with one another.
Mr. Felser said the deal with Sony grew out of discussions Grouper was having about partnerships with various Sony subsidiaries.
Grouper will promote Sony’s content and seek to build communities of users around Sony movies and television shows, Mr. Felser said.
Friendster Raises $10 Million
Excerpted from Digital Media Wire Report
Online social networking pioneer Friendster has raised $10 million in new venture capital financing.
DAG Ventures led the investment round; previous investors Kleiner Perkins Caulfield & Byers and Benchmark Capital also participated. Founded in 2002, San Francisco-based Friendster was initially the most popular social networking service. But the site counted only 1 million unique users in July, compared with 46 million for rival MySpace, according to Nielsen/NetRatings.
Friendster recently announced that it was awarded a patent on social networking technology, which it may eventually use to seek licenses from competitors like MySpace. The company intends to focus on twenty- and thirty-something users, rather than the younger demographic targeted by MySpace and Facebook.com.
Freenet Grabs $15,000 Donation
Excerpted from Digital Music News Report
Venture capitalists often award start-up funding in the millions, but less profit-oriented initiatives are usually more interested in keeping the lights on. Just recently, anonymous P2P project Freenet received a $15,000 donation from EFF founding member John Gilmore. The Freenet Project offers anonymity to users, part of a larger digital free speech agenda. The group "allows anybody to publish and read information with complete anonymity," part of a growing movement that has even assumed political importance in Sweden.
The Freenet concept relies on shared bandwidth, cryptography, and a decentralized architecture. In fact, Freenet claims no ownership over the network it created. "Nobody controls Freenet, not even its creators, meaning that the system is not vulnerable to manipulation or shutdown," a Freenet FAQ notes. The concept was originally created by Ian Clarke. Meanwhile, the funding follows the backing of anonymous IP service Relakks by PiratPartiet, a Swedish political party. Both services aim to ward off outside monitoring, and allow completely uncensored transmission of files.
Zapr Joins the P2P Party
Excerpted from GigaOm Report by Om Malik
Zapr, a Sydney, Australia-based P2P file transfer company is about to launch and open its service to beta customers. The company is one of the latest to join a new breed of online personal P2P applications.
DCIA Members Pando Networks and Perenety, plus Peer Factor, and Wired Reach, are examples of such services. We have also come across a few other companies since the previous post – YouSendIT and Civil Netizen. In addition, we are looking forward to learning more about AllPeers, the Firefox extension that will allow users to send and receive files.
Zapr, which only works with Windows XP, is as easy to use as an IM client, and mimics that user experience. Interestingly, it doesn’t make the recipient of the files download a client.
Michael Liubinskas, Zapr’s head of marketing and business development was in town last week and gave us a demo, which seemed simple enough and worked flawlessly over a Starbucks/T-Mobile Wi-Fi connection.
Pando seems to be the market leader in this space and has a million installs so far. That service works on Windows and Mac OS X, and has plug-ins that make big file transfers possible from within the Yahoo IM and Microsoft Outlook clients. We have been using it for a while now to send big PDFs and image files.
AllPeers Promises Private P2P
Excerpted from SDA Asia Magazine Report
AllPeers has released a beta Firefox extension, a P2P application that allows users to share pictures, music, and video’s within Firefox using BitTorrent. Unlike other P2P networks, with the use of BitTorrent in combination with a darknet, AllPeers allows the sharing of files securely and privately. This allows users to share file anonymously.
"AllPeers is designed for sharing specific files with specific people in your buddy list. When you share, metadata about all the files is sent to the recipient, so they can immediately see thumbnails, file sizes, etc. without having to search for anything. This approach is inherently ill-suited to sharing huge numbers of, say, MP3s with a bunch of people," said Matthew Gertner, CTO at AllPeers.
"AllPeers is for sharing privately with friends and family; not for massively distributing files amongst strangers," said CEO Cedric Maloux.
The application now available on Firefox’s extensions website is compatible with Windows, Mac OS and Linux. The final launch of the software will also include chat, comments, tagging, and support for external torrents.
Coming Events of Interest
-
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.
-
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.
-
Digital Music Forum West – October 4th-5th in West Hollywood, CA. Don’t miss the opportunity to participate in the premier event for music industry decision-makers focused on digital business models and legal issues impacting music. The DCIA will present a special panel on P2P.
-
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.
-
P2P MEDIA SUMMIT LA – October 23rd in Santa Monica, CA. The Fall DCIA Conference & Exposition will cover policy, marketing, and technology issues affecting commercial development of this emerging high-growth industry. Exhibits and demonstrations will feature industry-leading products and services. For sponsor packages and speaker information, please contact Karen Kaplowitz at 888-890-4240 or karen@dcia.info. Plan now to attend.
-
Digital Hollywood Fall – October 24th-26th at Loews Santa Monica Beach Hotel in Los Angeles, CA. The preeminent digital media and entertainment conference in the country. This year featuring more than 70 different sessions and over 450 speakers. The DCIA will moderate "Track I: Next Generation P2P Music and Film - DRM, Paid for Pass-Along and Other Legal Distributed Computing Models and the Entertainment Industries."
|
