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August 30, 2004
Volume 5, Issue 12

Artists Take Advantage of P2P Music Sharing

By Chris Marlowe in The Hollywood Reporter

While politicians and lawyers argue the legalities of peer-to-peer (P2P) technology, several highly respected musicians are getting on with the business of using it to reach their audience.

Most recently Sananda Maitreya, the artist formerly known as Terence Trent D'Arby, has made three songs from his "Angels and Vampires" project available via P2P. The soulful singer's career never again reached the 1987 heights of "Wishing Well" or "Sign Your Name," but he still has hard-core fans who are avidly following his artistic evolution.

Maitreya chose DCIA Member Shared Media Licensing's (SML) Weed technology to distribute his project. Each song is digitally packaged to protect its integrity and maintain its copyright control, using a version of Microsoft's WMA audio format and related digital rights management (DRM). But Weed adds the twist that each person who downloads a track is allowed to play it three times free of charge. A fourth attempt at playing is greeted by a request for payment.

With that distribution choice, Maitreya joins rock veterans HEART. The DCIA Member Sovereign Artists act is also working with Weed to distribute tracks from its new album, "Jupiter's Darling," as well as an exclusive version of "Love Hurts." Rhythm Cartel's Sir Mix-A-Lot, best known for his 1992 hit "Baby Got Back," is another artist who chose to "Weedify" his music, to use the company's terminology.

Files that use Weed can be shared by any means, including direct downloads and P2P software programs, and once purchased, the songs can be burned to CD or transferred to portable devices. The rights holder sets the price and always earns 50% of every sale. The rest gets distributed as commission on a sliding scale to everyone along the song's distribution path, with Weed receiving 15% as its share. Weed also will work with artists and other content owners to create their own on-site stores.

According to Sovereign Artists President George Nunes, Heart sold more songs via Weed than they did through Apple's iTunes Music Store during its first weeks of release. "The entire P2P community came together to allow Heart to reach out to millions of fans worldwide," he says, adding that he chose Weed because it encourages sampling while ensuring that artists are properly compensated for their work.

SML President John Beezer says Weed's ability to generate secondary revenue is something older distribution methods – including used CD sales – cannot do. It's also a way to have fans promote artists by letting their friends hear entire songs legally and easily before getting out their wallets. Currently it is primarily used for music, but Beezer says there's no reason Weed would not work equally well for video or any other type of media file.

"P2P software programs are an extremely efficient way to distribute music," Beezer says. "Rather than trying to eradicate file sharing, the challenge confronting the music business is to develop business models that take advantage of the efficiencies file sharing offers."

Report from CEO Marty Lafferty

How can we replace the increasingly frenetic activity surrounding S. 2560 (the INDUCE Act) with more rational conduct? Last week highlighted some of the more distressing aspects of what has quickly degenerated into dysfunctional behavior conspicuously lacking in good sense.

The procedure established by the Senate Judiciary Committee to provide for input from interested parties on all sides has proven to be both inadequate and unworkable.

Last week we learned that, like this committee's July 22nd hearing, such input is meant to exclude representation from the P2P sector, despite the fact that the acknowledged primary purpose of this bill is to enable the entertainment industries to sue P2P software providers.

With implications that would in one fell swoop undo the delicate balance maintained for more than two decades between the tiny handful of powerful aggregators of pop-culture copyrights and the highly diversified technology and telecommunications industries that innovate content distribution, all such permitted input is to be completed and thoroughly processed before Labor Day.

Despite the impracticality and inequity of this, both the Consumer Electronics Association (CEA) and the Business Software Alliance (BSA) independently and in good faith submitted thoughtful alternative proposals last week. Their submissions focused on what ought to be more even-handed objectives than kow-towing to a powerful special interest group. Their contributions acknowledged that any proposed legislation in this space will have far-reaching impact on many parts of the economy and society at large.

Rather than responding to these well-intentioned efforts with respectful consideration, the opponents of our industry reacted with cynicism. They exclaimed that these proposals were no good because they would not facilitate suing file-sharing companies, which is their sole interest here, adding that the fact that anything at all was submitted proved their point that new laws to encourage litigation against P2Ps are needed and needed now.

More than ever, the DCIA believes that new business models, such as the ones described in this week's lead article and referenced in Kazaa Rocks On, are what need to be encouraged in the marketplace, not more lawsuits.

The ink is barely dry on the Ninth Circuit Court's unanimous decision on this issue, and already our industry's opponents are arrogantly demanding that because current law does not serve their purposes or interests, that new law must be given to them and given at once.

Meanwhile, music sales are up for the year. Movie revenues are at an all time high and increasing. The games and software industries are growing healthily. P2P file-sharing usage is also steadily expanding, and most important of all – so is licensed P2P distribution of entertainment content both on an absolute scale and in terms of its share of file-sharing traffic.

In addition, industry self-regulation continues to make rapid and notable strides in enhancing the value and safety of P2P user experience; and the myths propagated by our industry's opponents, regarding alleged risks associated with data security and malware, are being debunked daily. 

Given these circumstances, wouldn't it make sense to adopt a more deliberate process than recklessly railroading through Congress a misguided and ill-conceived measure to placate a few Hollywood mega-players? Shouldn't the potential to cause devastating unintended consequences at least motivate a pause for reflection?

Why should there not be a reasonable public fact-finding, whether by fair-and-balanced hearings or other method, with respect to the real status of P2P file sharing from both the consumer and commercial perspectives, and especially with respect to interaction with content providers?

What is going on in the marketplace among various segments of consumers? What is going on in the marketplace among various segments of rights holders? What is going on in the marketplace among various segments of distribution technology developers?

The only certain truth is that well-established lobbyists representing the largest and richest party to this debate have done a thorough job of painting their picture of the situation, but this is not necessarily an accurate one. In a country with as advanced and enlightened a system of democracy as the leader of the free world, shouldn't the whole truth be examined before its laws are changed?

Real Networks Competitive Pricing

Competition is heating up for digital music and the winner at long last may be the consumer.

The DCIA congratulates Real Networks for its precedent-setting move in pricing digital downloads of popular mainstream music competitively, and in a way that acknowledges the cost efficiencies of digital distribution by passing savings along to consumers.

Taking a page from Linspire's (formerly Lindows) marketing playbook, which improved margin contribution by offering its new operating system via BitTorrent P2P for fifty percent (50%) of what it sold for in retail stores, Real Networks cut the established price for online major-label-music tracks in half.

Real Networks has made history by becoming the first online distributor to break ranks with virtually all other music-industry-supported resellers who continue to artificially maintain the $0.99 per track intended to make the effective price-per-track in retail CD distribution look relatively attractive.

One week after the announcement of its significant price reductions, Real Networks is already showing impressive results. Since it began selling music for $0.49 per song (or $4.99 for most albums) it has already sold more than a million (1 M) music tracks.

The DCIA has previously published a cost allocation analysis demonstrating that at the $0.49 price and given CD manufacturing and retail infrastructure cost eliminations – labels, performing artists, publishers and composers could all receive as much or more per track as in the CD channel – with P2P software providers, service-and-support companies, and even uploaders reasonably compensated for their contributions.

Real Networks has been weaving an aggressive strategy in other ways as well, clearly aimed towards centralized online download-store market leader Apple iTunes.

Real and Apple came to loggerheads shortly after RealPlayer 10.5 was introduced in beta last month, because the new software included a technology, called Harmony, that allows songs downloaded from Real's music store to play on Apple's iPod devices.

Apple has not licensed to third-parties the technology that enables songs to play on the iPod. While the dispute between the two companies continues to simmer, Real is claiming booming sales at its online store.

The Real deals will run through Labor Day weekend. The big questions now are whether the RealPlayer software will continue to work on the iPod, and how the music industry will respond.

Wraptor and Wantickets in Deal

Wraptor, developer of a multimedia file format that can include music, lyrics, photos, and other content, announced last week a partnership with online ticketing provider Wantickets. The deal will allow independent artists, using the .wrap format to distribute music via P2P file-sharing software programs, to include the ability to promote and sell concert tickets alongside their song files.

Operation Digital Gridlock

The DCIA praises the Department of Justice, not only for the perspective expressed by Assistant Attorney General Hewitt Pate in Aspen last week, but also for its action of seizing computers, software, and related equipment in Texas, New York, and Wisconsin as part of Operation Digital Gridlock, its massive copyright infringement investigation. The targeted private "darknets" trade extremely high volumes of content through hubs exceeding 100 GB each.

Strategic copyright enforcement actions, coupled with investigations of the anticompetitive activities of a small number of entertainment conglomerates regarding their refusal to license content, should combine to lead to more rapid commercial development of the P2P distribution channel.

We agree with Attorney General Ashcroft's statement that, "When online thieves illegally distribute copyrighted programs and products, they put the livelihoods of millions of hard-working Americans at risk and damage our economy." We certainly also concur with his news-conference comment that "P2P or peer-to-peer does not stand for 'permission-to-pilfer'." 

As DCIA Member Rap Station's founder Chuck D said at last Fall's Permanent Subcommittee on Investigations Hearing, "P2P stands for ‘power-to-the-people'."

And as DCIA Members increasingly demonstrate, P2P has the potential to become the most "Personal-and-Powerful" of all distribution channels for the authorized distribution of copyrighted works.

Copyright 2007 Distributed Computing Industry Association
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