January 12, 2004
Volume 3, Issue 3
DCIA Winter Meeting and Media Summit NY
Media Summit
DCIA participants will be particularly interested in the Monday February 9 th Media Summit New York day-long workshop on "digital rights management (DRM), content piracy and security" presented by Digital Hollywood.
Session A, moderated by RightsLine's Russ Reader, will address feature film distribution. Session B, moderated by EMI Music's Ted Cohen, will focus on the music industry. And Session C, moderated by CH Potomac's Dave Liebowitz, will examine DRM technology innovation: content integrity in music, film and mobile.
The DCIA's Winter 2004 Quarterly General Meeting, which will take place in conjunction with the Media Summit, will be held in the NY Hilton and Towers at Rockefeller Center from 6:30 PM to 9:30 PM US ET on Monday evening (2/9).
Our agenda includes discussion of proposed business models regarding next steps in the commercialization of peer-to-peer (P2P) music distribution. The models, developed with input from our key constituencies over the past several months, propose alternatives such as: 1) a program for licensing and DRM-encrypting major label content and enhancing P2P search functionality; or 2) the introduction of an interim compulsory licensing system whereby all broadband ISP subscribers using P2P software would pay a modest monthly fee to compensate music rights holders; or 3) a third option currently under development as part of an additional model to be distributed prior to the winter conference; and the DCIA is of course open to alternative suggestions.
The full schedule for the DCIA meeting will include detailed discussion of which elements of the three P2P music distribution models should be further explored and refined for possible implementation. We will also discuss potential legislative activity taking place in early 2004.
Please suggest additional agenda items and register for the DCIA Winter Quarterly General Meeting by e-mailing info@dcia.info. Information regarding hotel discounts and joint registration with the Media Summit will be provided upon request. Space is limited so please sign-up to attend at your earliest convenience.
Report from CEO Marty Lafferty
 Several press reports last week indicating that US file-sharing traffic declined during the past several months are now being refuted by the facts.
For example, the 2.4 million users downloading Kazaa from CNet during the second week of December matched within four percent (4%) the weekly average number for May.
Moreover, as Jefferson Graham reported last Monday 1/5 in USA Today:
"3 million people downloaded the program last week, bringing the worldwide total to more than 312 million registered users."
The confusion is understandable given both the origins of the misleading media articles and the fact that this kind of misinformation would almost certainly be fueled by large opponents of peer-to-peer (P2P) technologies.
At the source of this group of erring stories were results of recently conducted consumer research from the Pew Internet & American Life Project, which were released, inaccurately interpreted, and then widely publicized without appropriate critical analysis or questioning.
The methodologies for this research included surveying a sample of 1,358 respondents by telephone about their music downloading activity in the March-May 2003 timeframe and then in the November-December timeframe, followed by tabulating and extrapolating their answers to represent the universe of US Internet users.
The data gathering techniques were neither based on actual measurements of P2P traffic nor were they mathematically precise. Nor did these surveys distinguish between using P2P software such as Kazaa, eDonkey, or Grokster, and accessing centralized music downloading sites such as iTunes, the new Napster, or Rhapsody.
Exacerbating potential skewing of results were the circumstances of the data gathering. Specifically, the latter questioning occurred after widespread publicity had been generated, starting in September 2003, by subpoenas and lawsuits being filed against consumers for alleged copyright infringement of music.
An analogous situation would be to compare a set of answers about consumption of alcoholic beverages from a panel of consumers before the onset of Prohibition to a set of answers gathered at the height of Prohibition.
Would anyone be surprised to see the number of admitted imbibers fall in half (say from 1-in-3 to 1-in-6) in terms of "taking a drink in the past month," or from 1-in-25 to 1-in-100 in terms of admitting to "having had a drink today," as it did with Pew's P2P results?
Probably not. Naturally, the second sets of answers would be very downwardly biased, regardless of whether alcohol consumption actually declined, simply as a function of respondents not wanting to admit to a punishable behavior.
In the final analysis, Pew's recent P2P consumer surveys may only indicate that an estimated 18 million American Internet users are now readily willing to acknowledge that they participate in an activity that could subject them to copyright infringement accusations by the Recording Industry Association of America (RIAA).
As John Schwartz reported Monday 1/5 in the NY Times, in part contradicting the spate of other articles with implications to the contrary:
"Respondents to surveys could be more reluctant, in light of the lawsuits, to admit to engaging in an activity that could get them into legal trouble.
'I think it's not unreasonable to believe that most folks have at least heard of the RIAA lawsuits and probably figure that telling a stranger on the phone about their downloading isn't a very good idea,' said Cindy Cohn, the legal director for the Electronic Frontier Foundation (EFF)...
Rob Glaser, the chief executive of RealNetworks, which makes software that plays music and video, said that he suspected that an unwillingness to admit to downloading could be skewing the Pew results, and that the survey went farther than other data he had seen. Moreover, core Internet users, like college students, have not changed much, he said...
If anything, use of file sharing is still on the rise, said Eric Garland, the chief executive of BigChampagne, an online media measurement company.
'We have empirical evidence that the use of popular file-sharing services like Kazaa, both in terms of the number of users and in terms of the volume of material, is up, and up dramatically' over the time measured in the study, he said."
Meantime, there was better than expected year-end news for the recording industry. As outlined New Year's Day by Jeff Leeds in the LA Times:
"US album sales dipped about 3.6% to an estimated 656 million, compared with an 11% decline the year before, research firm Nielsen SoundScan reported. Sales of CDs, which account for 96% of the market, slid 2% to about 636 million albums, compared with a 9% drop the previous year."
The fourth quarter actually saw a gain of 5.6% in CD sales from the same period a year earlier.
Finally, according to Scott Morrison, writing on Tuesday 1/6 in the Financial Times:
"The threat of legal action has made respondents a lot more wary about admitting they download music.
'Calling people today and asking them whether they have downloaded music is like calling people and asking them whether they have broken the law this week,' said (EFF's Senior Intellectual Property Attorney Fred) von Lohmann.
Internet users may have adopted more furtive behavior when swapping online music... Others have started using software to protect themselves from the cyber-sleuths hired to track them down...
But recent data from Nielsen SoundScan showed that the music industry's sales held steady last year after several years of plunging sales...
'The ultimate success or failure of the RIAA campaign is not determined by whether or not fewer people are downloading, but whether or not it has prompted consumers to go flocking back to the music stores,' said Mr. von Lohmann."
The DCIA's view is that the recording industry could enjoy a very significant turnaround and experience substantial increases in revenue by embracing the P2P marketplace, which continues to grow, by adapting innovative new business models, and by licensing content for P2P distribution.
Can Congress Tame Internet Piracy
The DCIA is very pleased to participate this Friday January 16th in the National Journal's Tech Policy Roundtable: "Can Congress Tame Internet Piracy" at the Watergate's 8th Floor University Room, 600 New Hampshire Avenue NW in Washington, DC.
The event will take place from 8:15 AM to 11:00 AM US ET. A networking breakfast will be held from 8:15 AM to 9:00 AM.
Over the past several years, peer-to-peer (P2P) file-sharing technology has steadily gained in popularity -- expanding from music to movies, software, and video games. Please join us for this important panel discussion -- featuring key stakeholders in this debate from Capitol Hill and the music, movie, game, and technology industries.
Invited Keynote:
Senate Judiciary Committee Chairman Orrin Hatch, R-Utah
Confirmed Panelists:
Marty Lafferty, CEO, Distributed Computing Industry Association (DCIA)
Douglas Lowenstein, President, Entertainment Software Association (ESA)
Jack Valenti, CEO, or Fritz Attaway, Exec VP, Motion Picture Association of America (MPAA)
Gigi Sohn, President, Public Knowledge
Sarah Deutsch, Associate General Counsel, Verizon Communications
Invited Panelists:
Ted Cohen, Senior Vice President, EMI Music
Bud Tribble, Vice President, Apple Computer
Moderator:
Drew Clark, Senior Writer, National Journal's Technology Daily
Please respond to rsvp@nationaljournal.com, including your name and organization in the body of your e-mail, or call Katherine Birrow at 202-266-7356 for more information.
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