September 11, 2006
Volume 14, Issue 10
EBU Demonstrates P2P at IBC
The European Broadcasting Union (EBU) is currently demonstrating several options for streaming and downloading audio/video content by means of peer-to-peer (P2P) technologies at the International Broadcasting Convention (IBC) in Amsterdam, Netherlands, which concludes on September 12th.
With rich media demand online resulting in significant bandwidth congestion, P2P can help broadcasters overcome the bandwidth crunch. P2P is a potential means for cost-efficient live distribution of radio and television programs.
"The Internet is becoming an important delivery media for broadcast content, and legacy methods for content delivery over the Internet have grown very costly. P2P solutions have the potential to become a complementary way of media delivery to the public, overcoming the traditional shortcomings of Internet unicast delivery," said EBU Technical Director Phil Laven.
The EBU P2P demonstrations show several P2P streaming technologies at work, including the solution developed by DCIA P2P MEDIA SUMMIT participant RawFlow, broadcasting the 2006 Eurovision Song Contest live to Internet users worldwide.
In addition, P2P MEDIA SUMMIT participant CacheLogic’s P2P technology is being used to show how efficient P2P is for downloading large files such as the IBC Daily News.
"We hope to work in close cooperation with Internet Service providers (ISPs), P2P technology providers, and manufacturers," Laven added.
To learn more, plan now to attend the day-long P2P MEDIA SUMMIT LA on October 23rd, being held in conjunction with Digital Hollywood’s fall conference.
The Orchard Licenses QTRAX
The Orchard, the world’s leading digital distributor and marketer of independent music, and QTRAX, the world’s first ad-supported P2P music network, this week announced a licensing agreement that will make The Orchard’s full catalog available through QTRAX.
QTRAX is a service offering of Brilliant Technologies’ subsidiary LTDnetwork, recipient of the 2006 DCIA Trendsetter’s Award.
The deal extends the presence of The Orchard into the P2P space and significantly expands the scope of QTRAX by adding the world’s largest catalog of independent music to its service.
"QTRAX has developed an innovative P2P music service combining the power of viral marketing with an ad-supported revenue model that fairly compensates rights owners," said Greg Scholl, chief executive of The Orchard. "By licensing our catalog to QTRAX, we help our labels and artists build audiences and sell music."
Allan Klepfisz, President & CEO of QTRAX, said, "The independent music sector continues to grow its market share exponentially and The Orchard, with its rich and constantly growing catalog, is better positioned than any other company to represent this segment of the industry. We regard our association with The Orchard as a critical component of the success of the QTRAX business model, and we look forward to working together to market independent music in new and creative ways."
Report from CEO Marty Lafferty
 We wrote this week to US Senator Olympia Snowe (R-ME), members of the Senate Small Business and Entrepreneurship Committee that she chairs, and Senator Byron Dorgan (D-ND).
We commend Senators Snowe and Dorgan for co-sponsoring a proposed network neutrality amendment to the Commerce Committee’s pending telecommunications bill, which, without such an anti-discrimination provision, we strongly oppose.
If planned discriminatory actions by major Internet Service Providers (ISPs) are permitted to proceed, participants in the rapidly emerging distributed computing industry will be severely harmed.
We support the view of Senators Snowe and Dorgan that large ISPs should be prohibited from charging small websites and other Internet-based firms for faster delivery of their data.
Current anti-neutrality threats from these wealthy special interests are not only very real, but also have the potential to cripple consumer use of the Internet, which was developed by ARPA with taxpayer funding.
Asymmetric network services, as proposed by the ISPs, 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.
As an example of alternatives our Members offer, the new Global File Registry (GFR), developed by DCIA Member Altnet, is now in the process of being introduced to federal and state officials.
GFR represents just one example of solutions, related to network-neutrality issues, being brought to the online marketplace by DCIA Members and other participants in our industry’s growth.
Such solutions directly address claims made by major ISPs that they need to impose discriminatory pricing regimes, which would be severely harmful, not only to small entrepreneurial Internet-based businesses, but also to consumers at large. GFR eliminates the argument that ISPs need to charge more for data delivery to recoup costs for increased bandwidth utilization by broadband customers.
P2P MEDIA SUMMIT (P2PMS) participant CacheLogic noted that peer-to-peer (P2P) file-sharing has increased to as much as two-thirds (65%) of download traffic and three-quarters (75%) of upload traffic on the Internet in recent years.
Research firms retained by major entertainment industry trade organizations have estimated that as much as nine-tenths (90%) of this traffic currently is comprised of copyright-infringing content.
GFR is a solution that will reduce such infringement to low single digits, thereby regaining the vast majority of bandwidth for future growth of legitimate services. With GFR deployed, there would be no need for major ISPs to impose discriminatory charges.
GFR has as its core a centralized database that contains the unique identifiers of millions of unauthorized content files collated on behalf of multiple rights holders.
Each content provider receives a secure authenticated login to the GFR database enabling it to track, take-down, and substitute authorized files of its copyrighted works on search engines, torrent sites, high-traffic portals, websites, and peer-to-peer (P2P) networks.
GFR neither invades user privacy nor impacts efficient delivery of authorized files and files of content that is not registered. It focuses totally on eliminating the transfer of illicit material, which also dramatically improves bandwidth utilization.
In short, GFR eliminates a key argument used by the ISPs in support of their proposed discriminatory practices.
Small entrepreneurial P2P companies themselves now comprise a rich spectrum of implementations: from supporting open networks to managing closed systems, from operating with proprietary protocols to working with multiple protocols, from offering primarily free user-generated content to providing ad-supported or subscription or paid download or hybrid access to catalogs and libraries of licensed content.
Major established P2P brands are at various stages of transitioning to entertainment industry sanctioned business models, and more recent entries now also compete for user acceptance and market share with their own named P2P offerings or as white-label service providers.
The key missing participants in what is already the most widely used medium for digital content redistribution continue to be ISPs. The time is now right for ISPs to engage with content rights holders, P2P software developers and distributors, and solutions providers to define their roles, responsibilities, and remuneration for helping to complete what promises to be the most productive and efficient distribution channel in history.
The DCIA encourages all DCINFO readers to contact Congressional leaders to voice your support for this approach, which will lead to a better Internet for all. 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 must do all that we can to stop that from happening. Share wisely and take care.
Psssst – Wanna Share Some Files
Excerpted from Macworld Report by Eric Suesz
File sharing used to feel downright revolutionary. Not so in the so-called Web 2.0 world. In this future version of the Internet, which is apparently being constructed around us as we sleep, file sharing is just another aspect of getting things done.
In case you’re not familiar with it, Web 2.0 is the land of blogging and RSS and commenting and letting everyone else know how awesome your favorite taqueria is. In Web 2.0 land, we’re all a hive of busy bees, and we desperately need to share our stuff – especially our opinions. Quickly and easily, please. We’re socially networking over here.
Fear not, social networker. Free and E-Z file sharing is coming to a browser or stand-alone application near you. As part of this Web 2.0 revolution, you’re going to be able to easily trade your favorite things: privately, securely, and in a direct, peer-to-peer manner. But, until the revolution has been realized, televised, and advertised, you’re going to have to do it in beta.
AllPeers is an interesting plug-in for Firefox now in beta. But what if you don’t want to go the browser route for file sharing or don’t use Firefox? There is another option: the stand-alone application.
Try Pando from DCIA Member Pando Networks. This program, also free and also in beta, allows you to share files, but it uses e-mail as a conduit to let you and your buddies know when you’ve got new files to download. I spoke with Robert Levitan, CEO of Pando, and he’s convinced that e-mail is a great peg to hang the idea of file sharing on. After all, at some point, nearly everyone has experienced the conundrum of how to transmit an extremely large file that can’t be shoved through the e-mail pipeline. Pando is one way to do it, and the application is very easy to use.
Through e-mail, Pando solves the synchronous problem you might have with AllPeers: You don’t need to be online at the same time as your buddies to share files. This is because the Pando model isn’t strictly P2P. The files you wish to share get uploaded to Pando’s server, and your buddy has to retrieve them within a fortnight (that’s 14 days to you folks in the 21st century) before they are let loose into the Internet trash bin.
Pando plans on taking the advertising route, at least in part. Its stand-alone application has some extra real estate in its interface, and this space will likely be taken up by banner ads at some point in the future. Web 2.0 cheerleaders say that new social networking tools and services like Pando get better the more people use them.
Skype Announces Cordless Phones
DCIA Member Skype has announced a range of cordless phones that enable Skype users to make and receive both Skype calls over the Internet and traditional landline calls, without a computer.
The company has partnered with Philips and NetGear to introduce the first two cordless phones with this ability. The cordless phones are the Philips VOIP841 and another from NetGear. Both connect directly to users’ broadband connections to enable web-connectivity.
Since both the Philips VOIP841 and the NetGear cordless phones can make and receive traditional telephone calls through a landline, Skype is promoting them as replacements for ordinary cordless phones. However, the company made it clear that the phones do not replace landlines and cannot be used for emergency calling.
Stefan Oberg, GM - Desktop and Hardware, Skype, said that Skype is broadening its reach to mass consumers by offering them the opportunity to communicate via Skype without having to be tied to the computer.
Oberg further explained that the cordless phones give Skype users the flexibility to make free Skype-to-Skype calls and inexpensive calls to ordinary and mobile phones anywhere at any time without a running computer.
The company also said that the cordless phones offer increased mobility throughout the home or office, giving consumers the freedom and flexibility of not being tethered to their computer. Consumers with multiple cordless phone handsets in their home will have the ability to hold separate conversations simultaneously, one on Skype, the second on the traditional line, each from a different handset.
Nettwerk Signs with Mercora
DCIA Member Nettwerk Music Group, Canada’s leading privately-owned record label and artist management company, and P2P operator Mercora this week announced an artist promotion agreement that provides worldwide rights to the sound recordings for Nettwerk artists.
Nettwerk manages established artists such as Sarah McLachlan, Avril Lavigne, Barenaked Ladies, and Dido as well as emerging artists such as The Format, Josh Rouse, Kinky, and Leigh Nash, formerly the lead vocalist for Sixpence None the Richer.
Mercora is the world’s largest social radio network with users in 140 countries. Nettwerk and Mercora are partnering to bring Nettwerk’s top-selling artists to a global audience.
"Nettwerk’s established and developing artists will benefit greatly from Mercora’s innovative RADIO 2.0 technologies and social music network," said Terry McBride, Co-Owner & CEO of Nettwerk Music Group. "We are looking forward to working with Mercora to introduce our artists to new music fans and customers worldwide."
"Music labels and recording artists should pay close attention to the Nettwerk-Mercora relationship," said Ed Golod, President of Revenue Accelerators, a New York-based consulting firm that specializes in sales strategies. "Partnerships like this allow music labels to increase their brand recognition, engage listeners and customers, and drive revenue growth in online and offline music stores." Mercora partners have demonstrated increases in online music store sales by as much as 30 percent or more.
Young Gun at Friend Media Technology Systems
Excerpted from Financial Times Report by Joshua Chaffin
Seeing Jonathan Friend in the conference room of a midtown Manhattan law firm, you might easily imagine that he is one of the partners’ school-age children who has strayed into the wrong office. Friend looks younger than his 23 years, and a starched white shirt and tie make him look even more fresh-faced.
Yet on a recent afternoon in one such conference room, Friend was the star attraction in a very adult show. With media executives and entertainment lawyers gathered around him, he was showing off the culmination of six years’ toil: a new computer program designed to help the media industry in its fight against copyright infringement.
In a soft and unfailingly polite voice, Friend began to discuss hashing, search algorithms, and other math and computer terms that underpin the software.
Then came the grand finale. With a laptop computer hooked up to a large screen at one end of the conference room, Friend logged onto a P2P file-sharing network. From the library of films and television shows on offer, he selected a music video and, with a few mouse clicks, began to download it.
Looking up at the screen, the assembled guests watched a Hollywood nightmare play out in miniature as the blue status bar began to extend from left to right across the monitor, indicating the computer’s progress at digesting the file. Then Friend moved to a separate computer armed with his software. With a few mouse clicks, he activated a blocking measure to interrupt the download. Almost instantly, the bar’s steady progress was interrupted. A task that would have taken a matter of minutes had suddenly been extended to a day or more.
"There is no way of actually stopping the person from ever getting the film," Friend explained to a room of raised eyebrows. "What we’re doing is making it incredibly frustrating."
The infringement epidemic is in some ways the flipside of the Internet revolution. The same digital technology that has liberated music from the physical bounds of compact discs and brought the miracle of the iPod has also made it easier than ever to trade unlicensed content.
The hope among many in the industry is that the threat of lawsuits and technological obstacles will frustrate the casual consumer into abandoning unauthorized file sharing for one of Hollywood’s emerging online film services.
But the fear is that the problem will grow worse, for two reasons. High-speed Internet access is spreading fast, giving millions of new consumers in Eastern Europe and Asia the ability to download films, television programs and other content. Also, the barrier between the personal computer and the television screen is disintegrating. This means that it will soon be convenient to download films online and watch them not on a laptop, but on a screen in the living room.
As a twenty-something male and technology maven, Friend fits the profile of the sort of person that the entertainment industry should fear most. But he claims to have never downloaded any unlicensed content, and shows little inclination ever to do so.
What did interest him, though, was computers. When Friend was seven or eight years old, his parents brought home an Amstrad. "It was a pretty basic computer," he recalls. "But one of the things that came with it was a manual on how to write software." So he began to create geometric shapes and figures and then - as his skills evolved - he started to author his own games.
He is recounting the story from the new offices of DCIA Member Friend Media Technology Systems (FMTS) in a glass skyscraper in Birmingham that looks over the mills and warehouses of the city’s industrial past. Friend and 10 engineers – all but one of whom are older than their boss – moved into the office in May.
The office’s beating heart is a windowless, air-conditioned server room. There, under the hum of fans, racks of computers were anonymously trawling the world’s various file-sharing networks. There were 30 of them in two cabinets, with boxes piled against the wall containing dozens more waiting to be installed.
Their task is something akin to missile defense. They must patrol a vast amount of territory, waiting for that brief moment when a threat is launched among a crush of legitimate traffic and then scramble to identify and intercept it. Meanwhile, the missiles and the people who fire them are implementing their own counter-measures.
If one were to extend that metaphor, then the greatest selling point of the Friend system, according to its inventor, would be its radar. At the moment many competing systems on the market supply data that are imprecise and often based on extrapolation. "A lot of the industry data are complete rubbish," Friend said. "They can’t see half of what’s going on."
But Friend claims he can – and then some. As a demonstration, he typed the name of a popular television program into his software, and soon a column of numbers and flags popped up on the screen, indicating how many unlicensed copies of the material were available for download in each country at that moment. The US led the field, in this case, with 126, followed by Canada, the Czech Republic, and Israel. With a bit more digging, Friend was able to sift the data by city, and then to list specific Internet protocol (IP) addresses, the unique number identifying a specific computer.
IP addresses are like unlisted phone numbers, and they change regularly throughout the day. Friend claims that he can dig up the history of downloads from particular addresses over time, creating a record of file-sharing behavior for specific users. He can determine whether an infringer was working from a company or university – two file-sharing hotbeds because of their fast Internet connections – and list their name and location. Using route-tracing technology that tracks data in its journey across the trunks and elbows of the Internet, he can even pinpoint the latitude and longitude of a downloader to within 10 miles.
To illustrate this, Friend gathered the coordinates of an IP address that was sharing the television program and entered them into Google Earth, a downloadable program that maps the world with satellite imagery and aerial photography. Soon a satellite picture appeared on the screen, and after a few enlargements, a patch of land along a road in Kentucky was visible. "My jaw dropped," said one executive from a music industry trade group who had seen a similar demonstration. "With Jonathan’s technology, you can drill right down into the building."
Aydin Caginalp, a partner at DCIA Member Alston & Bird, the law firm that represents Friend, claims that his client’s technology has value that extends well beyond combating copyright infringement. The data could be used as marketing intelligence for entertainment companies, who are just learning to sell products online. Or it could be applied to a whole host of customers in need of Internet security, such as banks or even the military. "Could you imagine being like that at 23?" Caginalp marvels.
Even in his own family, Friend is something of an anomaly. His parents, Denise and Malcolm, are accountants who met at the London School of Economics and have their own practice in Birmingham. His sister reads modern languages and classics at Oxford. His younger brother, who is to enter University College London, is a cross-country runner and recently trained with the Israeli army. In addition to their high achievement, one thing that binds the family is religion. They are observant Jews, and the bookshelf in their dining room is stacked with texts on Jewish history and Talmudic interpretation.
While Jonathan’s precocity with computers made him something of an in-house help desk for the Friends’ accounting practice, it was not uniformly appreciated. "We had a secretary walk out because she wouldn’t take directions from a nine-year-old," Denise Friend recalls. "How can you blame her?"
Last month, Friend appeared to earn a measure of validation. A major studio and a major record label each signed one-year contracts with FMTS. The company is also working with two record industry associations. For one, they are monitoring university and corporate networks for copyright violations. For the other, they are supplying forensic evidence for a legal case against an alleged infringer. They have also been contracted by a British bank to help protect customers from account fraud.
If all goes well, and the software proves as effective as Friend has claimed, he may soon become a villain among his peers. It’s not something that seems to bother him terribly. "Customs agencies aren’t very popular. Neither are governments, I suppose," Friend said, when asked about the prospect. Besides, he would have plenty of new friends in Hollywood.
New City Canyons Release
DCIA Member City Canyons Records announced the special limited release of The Alrights’ new album, "High School," to select online and retail stores, with national distribution to follow October 17th. The Alrights, based in Duluth, MN, will tour extensively in support of "High School" throughout the midwest and northeast with the support of a national radio promotion throughout North America in association with college, independent, and Triple A stations. The radio promotion is being handled by Planetary Group from Boston, MA. "High School" features catchy, memorable, original material with songs featuring a rich gumbo of musical influences – all melding into one tasty sonic treat. Whether music fans listen to "High School" in its recorded form or have the pleasure of seeing the band live on its current tour, they will inevitably hear true diversity. One song is rock, another is soul influenced. One sounds like a spiritual, another punk. One may be smooth and exact with complex vocal harmonies and thoughtful arrangements, the next might be raw, almost garage. Whatever form each song takes, the music comes together in a superb and seamless whole and marks the band as among the best young alternative rockers in North America.
Arcsoft Taps Softwrap DRM
DCIA Member Softwrap, an international supplier of industry leading digital rights management (DRM) technology for software distribution this week announced that it has partnered with ArcSoft, a leading developer of multimedia software and embedded solutions for digital cameras, PC-peripheral, mobile phone, and consumer electronics manufacturers.
Softwrap technology provides ArcSoft a solution to safeguard its entire suite of multimedia software products ensuring they can be securely sold on their website.
End-users are able to download full-working trials and purchase their licenses from within the software or make their purchases directly from the
ArcSoft website. Either way the software remains secure from casual infringement ensuring that ArcSoft maximizes its online revenues.
"We are confident that our partnership with Softwrap will deliver a secure and easy way for our users to access and enjoy our software," said Michael Downs, Vice President of Marketing and Business Development, ArcSoft. "By adopting Softwrap’s sophisticated copy protection system, we can distribute fully functional software programs on the web without worrying about potential infringement."
Richard Wienburg, a spokesperson for Softwrap commented, "We are pleased to partner with ArcSoft, a leader in their market, in protecting their applications and enforcing their copyrights. Softwrap is confident that our world-class digital rights management solution will eradicate ArcSoft’s security concerns and help them focus on their principal business activities."
Digital River Outperform Price Raised
Analysts at RBC Capital Markets reiterated their "outperform" rating on DCIA Member Digital River. The target price has been raised from $50 to $60.
Javien Supports MySpace Music Store
MySpace, the leading lifestyle portal for discovering culture, this week announced a partnership with Snocap, the leading end-to-end provider of licensing and copyright management services for the digital music marketplace.
The planned new MySpace offering will process music download payments through DCIA Member Javien Digital Payment Solutions. Artists and record labels will be enabled to sell their music from their profile pages and distribute a digital storefront across the community.
"MySpace has become one of the largest promotional tools for artists and labels to distribute their music to fans," said Chris DeWolfe, CEO of MySpace. "By introducing a powerful commercial tool-set into the industry, we expect to see artists translate their community reach into sales, ultimately allowing more bands to make a living and connect with fans."
"Up until now bands faced the challenges of content availability, technology, and distribution," added Tom Anderson, President of MySpace. "This music service enables artists and labels to oversee their own commercial and distribution platforms while lowering the barriers for all bands to sell music directly to their fans in a way that’s easy and totally legal."
Decentralized Downloading
Excerpted from Digital Music News Report by Paul Resnikoff
MySpace helped to revolutionize user-generated content, so a move into artist-focused downloads is unsurprising. From a financial angle, the move helps MySpace diversify away from advertising revenues, which dominate the balance sheet. From the perspective of both the artist and fan, the Snocap deal also makes sense. After all, the MySpace artist page is where a tremendous amount of the action is, and that makes it the perfect sweet spot for positioning a paid download. And the initial experiment with The Format over the summer is no accident. The band is managed by Nettwerk Music Group, headed by Terry McBride, a strong believer in grassroots digital music transactions. Instead of established online - or offline - stores, McBride envisions a music sales terrain largely characterized by band-to-fan, or fan-to-fan sales.
The vision is not as revolutionary as it seems. In fact, it is already happening among millions of fans daily, just not with a price tag attached. Among many mainstream observers, file-sharing is often ignored, but an average of ten million swappers are actively trading at any given time on the Internet. And that fan-to-fan interaction is not just happening on P2P networks, it is also happening on protocols like IM, email, and small-time websites. And even MySpace offers free downloads, depending on the artist. In fact, Snocap founder Shawn Fanning propelled the entire trend years ago, yet another ironic moment in the twisting-and-turning digital music terrain.
So how will the latest MySpace announcement fit into that freebie context? MySpace is utterly immense, so clearly something will happen. People pay for downloads, especially for artists they feel a real affinity for, and that could mean something for smaller acts. The choice of MP3 downloads also helps - especially since it is the language spoken by most downloaders. But will the concept explode, and change the game? Paid downloads have been growing aggressively, but they still play a minor role alongside free swaps. Part of that is driven by price, and an expectation among Internet users that almost everything - or at least most things - can be found for free. Certainly, fans are willing to pay something for convenience and hassle-free accessibility, though a minimum service charge of 45-cents - split between Snocap and MySpace - will make truly competitive pricing difficult.
Meanwhile, the industry is about to see an interesting test of MP3-based, ground-level sales models. Sure, eMusic is already in the MP3-based independent download space, but the MySpace distribution angle is entirely different. And what about iTunes? Paid downloads were never really an important part of the business model for Apple anyway, and MySpace is likely to cater to artists that might have had trouble getting onto iTunes to begin with. Meanwhile, the MySpace deal throws some different strands of spaghetti on the wall, and depending on what sticks, labels may finally reconsider their staunch objection to paid MP3 sales - at least for certain artists.
EMI Inks Download Deal
Excerpted from Variety Report by Gordon Masson
EMI Music Publishing has become the first major publisher to license its music and lyrics to SpiralFrog for its advertising-supported download service. The deal will allow SpiralFrog to offer repertoire from EMI’s vast catalog of musical compositions for downloading in the US.
SpiralFrog’s no-cost service, due to roll out before the end of the year, is targeted at listeners in the 13 to 34 age range.
The agreement with EMI Music Publishing follows a similar deal with Universal Music Group’s (UMG) music labels which gave SpiralFrog combined rights for artists such as Sting, Nelly Furtado, Jay Z and Kanye West.
SpiralFrog CEO Robin Kent believes the agreements with UMG and EMI Music Publishing represent clear signs that the music industry recognizes the revenue potential of an advertising-supported business model in helping to combat copyright infringement.
YouTube: Waiting for the Payoff
Excerpted from Business Week Report
The video-sharing website is a runaway success – everywhere but on the bottom line.
YouTube is the Internet company to beat these days. Wowed by its meteoric rise – the 19-month-old site dishes up 100 million daily videos – startups and giants alike are crowding into the video-sharing market. Microsoft is developing its own service. And this fall, the founders of DCIA Member Skype and Kazaa services will unleash the Venice Project, a wannabe YouTube killer built on file-sharing technology.
With all the excitement, it’s easy to forget that the video-sharing pioneer’s business so far amounts to a whole lot of expenses, not much revenue, and no profits. YouTube took on the job of creating the business model for a new medium where anyone can post any video. While it’s starting to develop new ad offerings, its popularity is driving up costs that established web giants, such as Google and Yahoo, are able to spread out. YouTube spends a tidy, and growing, sum to stream its short clips. Current estimates range from $900,000 to $1.5 million per month. Much of that goes for computer servers and transmission bandwidth. But because the company is charting a delicate course in how it handles pirated videos, its legal costs could balloon if lawsuits start piling up.
Even more important, though, is the tricky question of how YouTube can make money off its phenomenal growth while maintaining the promise behind that popularity. YouTube could easily alienate its users by overwhelming them with ads. And the startup has to figure out how to attract a broader group of marketers by filtering more for copyrighted or offensive videos and by creating more channels of similar content.
Aware of the risks, YouTube co-founders Chad Hurley and Steve Chen are moving slowly to ramp up advertising. They have been wary of asking viewers to sit through a 30-second ad before a two- to three-minute clip. Instead, YouTube is developing new formats, like ones rolled out in August that let marketers build their own video channels or pay to place a video on YouTube’s popular front page.
Creating channels is a logical way to carve out space for ads, but what kinds of channels work in such a wild and woolly environment? Warner Bros. launched YouTube’s first brand channel to promote Paris Hilton’s new CD. But for companies that don’t have content, such as a consumer-goods packager, another approach would be to create managed channels along themes – soccer, say, or anime. Or YouTube could use targeting technology to dish up ads based on a visitor’s viewing habits. Still, marketers say they want another level of filtering. "If I buy advertising to be near humor videos, it can be risqué and edgy, but I have to be comfortable with just how risqué that is," says Jeff Lanctot, GM of online ad agency Avenue A/Razorfish.
Another problem is that YouTube isn’t helping advertisers reach the best videos created by just folks, such as a five-minute spoof of Darth Vader as a grocery store manager. These videos are a big part of YouTube’s charm, but since they appear out of nowhere, it’s hard to sort them efficiently. YouTube could create separate channels of the more professional videos, says Allen Weiner, an analyst at Gartner. But that means picking over the videos individually or developing technology to pinpoint content that’s not pirated or from someone who is consistently good. "Until they can figure out the consumer-generated content, they miss nirvana," Weiner says.
For now, YouTube’s execs are resisting turning to ad pros for solutions. The company seems determined to rely on its visitors to filter out pirated and vulgar works. And it’s challenging marketers to find creative ways to tap into its community, such as running film festivals or sponsoring videos posted by studios.
YouTube has a huge head start. Still, it may not have much time to turn a gusher of videos into gold before being overrun by a new generation of mainstream sites and upstarts. Online, as in life, evolution rules.
Motionbox Closes $4.2M Financing
Video-sharing service Motionbox has closed a $4.2M Series A round of funding with Canaan Partners, SAS Investors, and ITOCHU Corporation of Japan.
The financing will be used to continue to build out Motionbox’s technology and to market the company. Motionbox enables consumers to quickly and easily sift through video to find and share the moments that make personal video worth shooting, watching, and sharing. Motionbox’s goal is to offer the simplest and quickest way to share online video.
"For 99% of people, online video is about sharing the moments, not creating professional video presentations," said Chris O’Brien, Motionbox’s Co-Founder & CEO. "You shouldn’t have to be a pro, or learn complicated editing software to make and share compelling online personal video. Time is precious, so Motionbox makes it easy to get to the good stuff – and share it – fast. We think it’s a game-changer."
Joining Motionbox’s board will be Warren Lee of Canaan Partners, Derek Idemoto of ITOCHU and Josh Grotstein of SAS Investors.
"We looked at many companies that offer online video-sharing services," said Warren Lee of Canaan Partners. "Motionbox was the only company that offered both differentiated technology and an experienced management team that we believe will deliver a world-class service to consumers."
"As the worldwide market for video-capable devices grows exponentially, a successful online video-sharing service must be both universal and scalable to satisfy it," said Derek Idemoto of ITOCHU. "We knew immediately that Motionbox had the right mix of talent and easy-to-use technology to be a global leader."
"Motionbox’s technology solves a major problem – how to make personal video more user-friendly and easier to share, particularly for the ‘rest of us’ folks who aren’t very tech savvy," said SAS Investors’ Josh Grotstein. "They are also uniquely positioned to work with partners across all media."
The Next Online Video Network
Excerpted from MediaPost Report by Joseph Serino
Anyone involved in the media business today is well aware that video has arrived on the Internet. It’s here in the forms of forced and selected pre-roll, as part of downloadable applications, and as elements of live in-stream participatory activities. Another growing element of the merging-converging digital present is P2P file sharing, which allows collaboration among Internet users. Music surely is today’s killer app, but as the success of YouTube indicates, video is certain to be the big player as multimedia meets user-control.
All this begs the question, what’s next?
Research firm In Media Communications has conducted an exploratory study into the technical developments and business processes that are required to create an immersive, interactive entertainment environment. The company estimates R&D costs of $15 million are required to develop the prototype interfaces and customized patron stations that would deliver an unencumbered conversation and game-play experience. The firm also has preliminary designs for a custom switching system that supports not only extended socializing activities, but also supports synthetic thespians (virtual characterizations), and a new type of interactive, environmental amusement.
Given advertisers’ search to develop the next generation of engagement media experiences, can it be long before a MySpace type of live, P2P immersive experience comes to a lyceum near you?
All this begs the question: Is there an advertising holding company out there with the vision and the guts to promote a forward-thinking engagement project of this magnitude among its client roster?
Coming Events of Interest
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Web 2.0 - Myth or Reality – September 20th in New York, NY. What is Web 2.0 and why is it generating buzz and staggering valuations? Take a look at this new wave as it defines the resurrected Silicon Alley from user generated media, open-source interactions of all kinds, and a flattening of the global marketplace.
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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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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.
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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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Webcasts, Downloads & Ring-Tones – October 11th in San Francisco, CA. The National Association of Record Industry Professionals (NARIP) presents an overview of the legal and practical aspects of the NEW recording industry Whether you are an artist, manager, lawyer, record executive, or producer this music business overview is essential to understanding new income streams such as digital downloading, webcasting royalties, mobile music deals, video games and certain types of branding.
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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.
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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."
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