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June 21, 2004
Volume 5, Issue 2

Welcome New DCIA Member Sovereign Artists

Please warmly welcome Sovereign Artists to the Content 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.

Sovereign Artists' launch of Heart's "Jupiters Darling" on June 22 exemplifies this Internet-savvy music label's outstanding work: USA Today and People Magazine articles; NBC Today Show (3 songs + interview) and CNN segments; VH-1, CMT, and PBS specials; XM Satellite Radio features; and TV appearances on Conan, Leno, and Ellen.

United Airlines is featuring Heart on its in-flight entertainment. Comcast is providing announcements to its 20 million cable subscribers. And Sovereign Artists has orders from retailers of all sizes (Wal-Mart, Target, etc., including Costco which only carries 30 titles at a time).

On the Web, Real.com has committed resources including a live concert stream, online sales, and coverage at rollingstone.com. Ticketmaster, AOL, iTunes, and Live365 have committed to huge online marketing programs. Rock The Vote is promoting Heart heavily; and Amazon is committed to a significant program.

And finally, in the peer-to-peer (P2P) distribution channel, Sovereign Artists has concluded agreements with DCIA Member Altnet and Streamcast Networks (Morpheus), and is currently in discussions with INTENT MediaWorks. It believes P2P can be the music label's most profitable online resource.

"Jupiters Darling" is already the 3rd most-added song on radio (Celine Dion & LeAnn Rhimes are 1st and 2nd) and Sovereign Artists, which is just beginning its promotional push, proclaims, "Not bad for two women in their 50s who haven't released a new album in over a decade."

Report from CEO Marty Lafferty

Congratulations to Adam Thierer and Ned, Paul, and Tinzar Than Sherman for producing highly successful Washington DC events last week.

Adam's eighth annual Cato Institute technology and society conference, "The Law and Economics of File Sharing and P2P Networks" and the Shermans' inaugural Digital Media Wire & Potomac Tech Wire " Washington Digital Media Conference (WDMC)" attracted exceptionally high-caliber speakers and attendees. Check out Paul Resnikoff's in-depth coverage.

Underscoring the timeliness and importance of both events were metrics presented by Comscore Networks CEO Magid Abraham, who kicked-off WDMC. Magid cited data tracking the growth of paid online content as measured since 2002 in research sponsored by the Online Publishers Association.

The study, which excludes online pornography and gambling, reports that content purchases on the Internet by US consumers exceeded $1.6 billion in 2003, representing a 23% increase from 2002. Perhaps most significant is the fact that such premium content has now also surpassed 1/4th of total online spending.

The DCIA believes that this figure could have been more than $3 billion for 2003 had entertainment industries fully embraced the P2P distribution channel in early 2002, when entertainment content business models were first introduced. 

It is clear that the current trend is driven by increased acceptance of "for-pay" service offerings, even though these are now purchased by only 11% of Internet users. The average amount spent is $24 per month - just half of cable TV today - making the upside potential for P2P content offerings, both from greater penetration and higher per-user revenue, enormous indeed.

Current content growth categories also point to a huge untapped market for licensed music, games, and movie file sharing. Entertainment at this point in fact lags in 3rd place behind personals and business.

Personals/dating now top the paid-for services group at $450 million - having enjoyed a phenomenal 10 times growth-rate in just 2 years. Business/investment is now at $334 million. And entertainment, which would be much higher if mainstream content were licensed for P2P, follows behind these two at $214 million.

4th and 5th places are held by research at $109 million and personal growth (led by dieting) at $91 million. 

The top 5 providers of revenue-generating content do not yet include file sharing software applications like Kazaa, Grokster, eDonkey, Morpheus, or LimeWire. Instead they are Yahoo.com, Real.com, Match.com, Classmates.com, and WSJ.com.

Finally, the relative extremity and marketplace distortion of "money left on the table" as a result of the continuing P2P boycott by major labels and movie studios was underscored in Magid's final slide.

He closed with a bar chart showing percentages of bandwidth consumed by various protocols, the top 5 of which are: P2P 63%, HTTP 29%, JAVA 2%, IRC/IM 1%, and AOL 1%.

We believe the opportunity for major content providers and P2P software suppliers to engage with service-and-support companies in bringing business solutions to the marketplace could not be more clear.

The DCIA invites all parties to join with us based on the kind of openness - with respect to access, standards, and online property rules - required for success in digital media distribution.

Trymedia Systems and Relatable at WDMC

Kudos to DCIA Members Trymedia Systems' VP Gabe Zichermann and Relatable's CEO Pat Breslin for speaking at WDMC.

Gabe spoke on the games panel following Entertainment Software Association (ESA) President Doug Lowenstein's keynote. Key takeaways include revelations about older-than-perceived gamer demographics: 18-35, with a 29 average - 1/3 of whom are women - and projections that games will dominate the entertainment sector in the coming decade.

70% of male gamers want more original and less derivative games. More than half of current players say they expect to play games as much or more in 10 years as they do now. And according to Gabe, mass market acceptance means "truly appealing to women, rather than offering what an adolescent male thinks will appeal to women." 

By 2020 there will be 174 million Americans between the ages of 5 and 44 who will have a lifetime familiarity with games.

Within 10 years, photo-realism will be the norm. Improved story lines and production values coupled with artificial intelligence and connectivity will create dramatically more immersive experiences. The currently bifurcated market, characterized by $100K OR $5M budgeted successful games, will have breakthrough intermediate entrees - plus new blockbusters with budgets exceeding $25M.

Game publishers are already embracing P2P with increasing success, while continuing to be wary of infringement. Buy-and-download, subscribe-online, rent-via-Internet, Web-purchase-extension-packs, and other marketing innovations will supplant brick-and-mortar, and clearly online games will arrive mainstream and no longer only be for the elite - in fact, solo gaming may become the exception.

Two decades ago, no online game grossed more than $35K per year. Now Sony's " Everquest " does $60M. Trymedia reports that download game sales have grown from 0 to 7% of revenue in less than 4 years, and its 300 game titles are distributed via all 10 top P2P software applications.

Next week's DCINFO will feature coverage of the DCIA-sponsored "Technology for Digital Content Delivery" track on which Pat Breslin was a featured speaker, as well as "Spyware: Protecting Consumer Privacy" moderated by DCIA CEO Marty Lafferty, featuring the CDT's Mike Steffen, Verizon's Sarah Deutsch, the DCIA/Fleishman-Hillard's Doug Campbell, and Congressman Jay Inslee's Brian Peters.

INTENT MediaWorks at Senate Hearing

DCIA Member INTENT MediaWorks' President Les Ottolenghi will be a panelist at the hearing entitled "The Future of P2P Technology" scheduled for this Wednesday afternoon at 2:30 PM US ET, to be chaired by Senator Gordon Smith (R-OR).

Senate Commerce Committee Members will hear testimony regarding potential benefits and detriments to both consumers and content providers from anticipated uses of P2P file distribution technology in the future. 

Other panelists include Mike Weiss, CEO, Streamcast Networks; John Rose, EVP The EMI Group; Howard Beales, Director, Bureau of Consumer Protection, the FTC; and Curt Pederson, VP for University Advancement & Vice Provost for Information Services, Oregon State University.

Click here for the live webcast.

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