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October 6, 2003
Volume 2, Issue 1

October 8th DCIA General Meeting

Our Quarterly General Meeting will take place in the Training Center at DCIA's Headquarters, 4200 Wilson Boulevard, Suite 800, Arlington, VA 22203, on Wednesday, October 8th.

The meeting will begin at 9:30 AM with a continental breakfast and welcome session and conclude at 1:00 PM following a luncheon presentation.

A private meeting of Charter Members and prospective Charter Members will take place from 1:00 PM to 3:00 PM in the Board Room.

Registered attendees include representatives of Platform, Operations, and Content sector companies, both as delegates and observers.

The overall focus for this General Meeting, as previously announced, will be on the elimination of copyright infringement in peer-to-peer environments. We have added a module on the elimination of criminally obscene content, in response to Senator Hatch's public comments at the National Press Club on Friday.

The meeting will kickoff with opening remarks from key Congressional and industry leaders, including Nikki Hemming, CEO of Sharman Networks, Ltd. (SNL), distributor of KaZaA Media Desktop and a founding Charter Member of DCIA, and senior media industry advisor George Vradenburg, former high-ranking executive at CBS, FOX, and Time Warner.

The format for the morning general session will be two hour-long workshops, led by Charles Nesson, Executive Director of Harvard's Berkman Center for Internet & Society, and Gary Arlen, Founder and President of new media research firm Arlen Communications, Inc.

Both workshops will operate from the premise that their leaders develop recommendations for principals representing P2P software companies, broadband ISPs, music labels and publishers. These entities are about to enter into a series of private negotiations for the purpose of initiating business solutions to the current P2P crisis. What principles should be upheld? What pitfalls should be avoided? Where can there be compromise?

Charles will lead attendees through an interactive discussion of the key issues from a broad societal view in "Law, Technology, and Ethics." Gary will then lead a more focused examination of "Business Considerations," starting with a highly successful case study in distributing copyrighted content via P2P presented by Gabe Zichermann of Trymedia Systems.

Our luncheon session will feature the presentation of a proposed business model for P2P music distribution, developed for DCIA based on data from Altnet's marketplace experience and RIAA's published statistics and projections, as well as music industry reports, research, and analysis, contributed by qualified third parties.

Space is now very limited. DCIA's conference hotel, the Arlington Hilton, has sold out, and the next nearest hotel is the Holiday Inn Arlington at Ballston, 4610 North Fairfax Drive, Arlington, VA 22203 (703-243-9800). Please register to ensure your attendance at RSVP@dcia.info.

Report from CEO Marty Lafferty

Our links to press highlights in the left-hand column do justice to some of the events from what was a very busy week, which included a Congressional hearing with participation from DCIA Charter Members SNL and Altnet, as well as private meetings with members of Congress and continuing demonstrations for their staff members.

One of the more interesting activities, not covered there, was a luncheon debate on Friday sponsored by the Federalist Society between the RIAA's President Cary Sherman and the Electronic Frontier Foundation's General Counsel Fred von Lohmann. Here are some highlights.

Cary Sherman described the current crisis in the recording industry as one of music piracy on an unprecedented scale with revenues in a state of freefall. Blank CDs are outselling pre-recorded CDs 2:1. New releases sell only one-half of the units they did a year ago. The MusicLand retail chain, acquired by Best Buy for $650 million not too long ago, just divested for $1.

He attributed the recording industry's demise to the double impact of ubiquitous CD burning capabilities at the consumer level and peer-to-peer digital media distribution, pointing to the decimating combination of these two technologies fueling commercial piracy overseas.

Cary described his industry's strategy to respond as threefold: 1) Get online. 2) Get online. 3) Get online. He noted that Apple iTunes' initial results, in a universe of only 1% of PC users, augured well for many new entries coming on the Wintel platform.

He also outlined RIAA's educational and enforcement efforts, explaining its focus on suing heavy uploaders because it believes 90% of unauthorized content may come from as few as 10% of P2P users. He said lawsuits against consumers were meant as a deterrent to stop the recording industry's hemorrhaging, but that its main goal was to wean users to legitimate services when they become available.

Cary cited recent press reports of a new level of parent-child and educational institution discussion on the issue of copyright infringement as an indication of his success.

Fred Von Lohmann acknowledged that the recording industry is in decline, but questioned whether that was due to P2P, an unregulated technology that he asserted is here to stay. He introduced a broader view of the music industry's need to transform itself with new business models.

He cited historical examples, such as the player piano and audio-cassette, where content rights holders sought to control or limit new technologies in ways that were not healthy for the overall growth of society, or ultimately for the rights holders themselves. They inevitably experienced new levels of growth and profitability after transitioning to embrace new distribution technologies.

Fred framed the central issue as being at the disruptive stage of a new technological innovation, which will prove itself to be part of a cyclical phenomenon paving the way to new expansion. The question then is what price will we consumers have to pay as a result of efforts to limit or control this technology's growth during this phase?

He explored three areas of concern: 1) Privacy - He stated that RIAA's subpoena power is greater than federal law enforcement agencies currently, and gave examples of related abuses. 2) Innovation - While broadband development is critical to US economic growth, legal uncertainties (going back to BMG being sued by other music companies for investing in Napster) have drastically stifled investment, especially in P2P. 3) Culture - 80% of recorded music is not currently available anywhere legally, but P2P has already made it possible for countless culturally diverse musical works, with microcosmic audiences, to be digitized and distributed globally.

He disagreed with the RIAA's enforcement efforts as not so much weaning people as attempting to intimidate them.

Finally, Fred made the proposal for a voluntary collective license approach for music, whereby licenses would be granted to consumers for $5 per month with aggregate receipts to be divided equitably among music copyright owners.

He said the implementation of such a regime would increase broadband penetration, promote innovation, and, importantly, create customers not criminals. He concluded that if business can't or won't do this or something like it, then Congress should step in.

He urged the recording industry to let go of its old business models and learn to dovetail with new technologies, especially when they have already been adopted by hundreds of millions of consumers.

During the rebuttals and audience questions period, there were a number of additional interesting exchanges. Please let me know if you'd like more details.

I look forward very much to seeing you at our meeting this Wednesday.

A Warm Welcome to The Gator Corporation

Finally, a very warm welcome to DCIA's newest member of our Operations Group: The Gator Corporation. Gator is the leader in online marketing. It also produces some of the Web's most popular applications.

Based in Redwood City, CA, since the launch of its first software application, GatorSM eWallet, to the public in June 1999, Gator has become one of the world's largest behavioral marketing networks and software distributors. The company now runs consistently one of the 25 most trafficked Web properties in the world. Gator's software portfolio also includes WeatherscopeSM, Precision TimeSM and Date Manager.

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