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April 3, 2006
Volume 12, Issue 11

MyPeer Signs Major Music Brands

DCIA Member INTENT MediaWorks announced that MyPeer, its new private-label file-sharing network that was demonstrated to major entertainment companies at the Digital Hollywood Spring conference last week, has been adopted by a diverse group of leading musical brands – from Barenaked Ladies to Public Enemy.

"We are thrilled at the response from the creative community to MyPeer," said INTENT President Andy Cooper. "Artist acceptance is obviously as important a factor in our success as audience adoption, and these announcements signal that MyPeer is well on its way to achieving both of these goals."

Terry McBride, CEO of fellow DCIA Member Nettwerk Music Group, which manages Barenaked Ladies and other top musical artists who have agreed to distribute their works using MyPeer, added, "MyPeer provides the security and protection that are essential to monetizing online distribution, combined with the community aspects of fan participation that augur well to make MyPeer a big winner in the marketplace."

"With the MyPeer platform, we are creating a complete online social community and file-sharing network for my brands, artists, and fans," said Chuck D, Public Enemy frontman and CEO of Slam Jamz Records. "All of us will have the power to publish, discover, search, and share content for the first time in the same online space. This is 'MySpace' for the Public Enemy and Slam Jamz lifestyle."

MyPeer joins Palladia, INTENT's flagship e-commerce solution, a delivery platform that offers a continuum of revenue-generating services – including digital media packaging, distribution, promotion, commerce, and payment options – to suppliers and retailers.

INTENT also announced that it has closed on $3 million in venture capital financing. The company provides packaging, distribution, and promotional services to the media industry for the secure and profitable distribution of digital content via peer-to-peer (P2P), social networks, web-based download stores, blogs, e-mail, IPTV, RSS, and instant messaging.

Coke Partners with Jun Group

The Coca-Cola Company has partnered with DCIA Member Jun Group to make a ground-breaking new music video program that is free to download and share.

Entitled "Stageside," this first-of-its-kind program is available on P2P networks, BitTorrent, and the web. It will also be formatted for PSP players, iPods, and other devices.

The premiere episode of Stageside, featuring R&B phenom Ne-Yo, was launched into file sharing on March 28th, and can be viewed at http://stageside.tv.

Unlike other Internet programs, which are protected by digital rights management (DRM) technology, Stageside is free and 100% legal for consumers to download and share with their friends however they like - with no strings attached.

The show is subtly branded by Coca-Cola during beginning-and-end-credits, but it is otherwise uninterrupted and commercial-free. Future episodes are planned, starring other well-known performers.

Seamless P2P Presents ED.1

DCIA Member Seamless P2P presented its Entertainment Device One (ED.1) to music, entertainment, and informational content providers, as well as hardware and software manufacturers, at Digital Hollywood.

ED.1 is a portable entertainment device measuring 5"x4"x2" and weighing less than 12 ounces that offers an MP3 player, gaming console, and full-fledged computer. The keyboard unfolds to offer almost full-size functionality and ergonomics. Seamless is working to add secure wireless Internet and voice communications capability to the device and integrate its breakthrough Secure Private Network (SPN) layer technology into the ED.1. The product offers private networking, FIPS compliant encryption, and P2P communication thru proxies and firewalls.

Seamless holds the patent rights to ED.1, which won the "Best of Innovations" award at the 2002 Consumer Electronics Show, and expects to launch the next iteration of the device with enhanced functionality and design this summer. The company is conducting a contest to name the next generation portable computing and communications device that will begin on April 4th.

Report from CEO Marty Lafferty

Photo of CEO Marty LaffertyCongratulations to Digital Hollywood President Victor Harwood for a highly informative, energized, and well-attended spring conference.

We are very grateful to Next Generation P2P panelists Andy Cooper, President of INTENT MediaWorks; Billy McNair, Co-founder & CEO of Peerflix; John Beezer, President of Shared Media Licensing; Srivats Sampath, President & CEO of MERCORA; Bob Summer, Executive Chairman of iMesh; Leslie Poole, CEO of Javien Digital Payment Solutions; and Chip Venters, CEO of Digital Containers, for their terrific contributions.

Andy summarized INTENT's mission as optimizing content redistribution through consumer discovery mechanisms while also enabling rights holders to monetize P2P traffic. He distinguished between open and closed P2P software, noting that open P2P continues to grow, making it increasingly important for major content providers to license this market segment. Andy sees a convergence of social networking with P2P that will present unprecedented opportunities for media brands to connect with their customers. He encouraged entertainment industry leaders to explore the development of new business models for exploiting rights in the digital realm, and urged the technology sector to innovate in ways that will help content rights holders protect their intellectual property (IP), such as supporting the use of digital watermarks.

Billy described Peerflix as a trading platform that invites users to come onto its network to trade DVDs for $0.99 each under the first-sale doctrine of US copyright law. He believes licensed video is still 3-to-5 years away from being distributed via true P2P, but meanwhile US consumers have 5.5 billion DVDs that can be recycled. Billy sees the most immediate opportunity in a combination of social networking with P2P communities establishing a new means for content discovery. He urged content providers to embrace P2P as a channel because by so doing they will displace piracy.

John explained how Weedshare works by allowing listeners to play a downloaded song three times before purchasing it and compensating them with sales commissions for redistributing the song to others. He noted that technology advances sometimes represent backward progress in terms of secure content distribution – such as VoIP facilitating music darknets – and that P2P must transition from its current status as a marketing center to a real profit center. John believes commercial files will be able to compete with free by means of sharing incentives, and looks forward to closing imminent licensing agreements with several majors and taking Weedshare to IM and VoIP platforms.

Srivats defined MERCORA as a consumer-managed radio network with an audience of more-than-a-million people in forty countries who have now assembled a catalog of seven-million music tracks. He compared the role of P2P to traditional radio: a place for very large numbers of listeners to discover new music for free before determining what to buy. Srivats envisions P2P evolving into a more grid-like structure that will underpin such new developments as having one's own TV station on one's PC. He said that perhaps it is time to look again at a statutory licensing regime to break the logjam among non-licensors.

Bob called iMesh an operating P2P music site – and a bold experiment – having evolved from and now competing with free P2P programs, attracting a substantial user base of paying subscribers. iMesh offers 2.5 million music tracks and now supports 15 million daily searches. It is preparing to expand the community aspects of its offering with an IM service. Bob believes there must be a better harmonizing of free and pay offerings, so that physical CD sales revenue declines will be more than offset by growth in digital compensation. Today's music industry executives should be especially concerned about sapping strength from the ongoing conversion from physical to digital given current softness on both sides.

Leslie noted that among Javien's e-commerce clients, P2P software distributors have a "cool factor" thanks to their ability to integrate community features such as chat with music sharing that is core to consumer pop culture. He pointed to an innovative company that is exploring music file sharing among cars as they drive along the highways, and that this in turn will require alternative billing systems as well as pose interoperability challenges. Leslie believes entertainment industry leaders need to leverage the power and efficiency of P2P, not to avoid it.

Chip outlined Digital Containers' role as a super-distribution company, developing IP needed throughout a process that begins with seeding digital content files securely and then continues through retransmitting them packaged with fungible marketing and revenue-generating elements targeted to individual users who pass content from-one-to-another in decentralized online environments. He noted an up-tick in positive industry momentum after the MGM v. Grokster decision in which the US Supreme Court declared that P2P technology comprises a legal infrastructure. Chip cited FireFox's imminent addition of a P2P plug-in as an example of the accelerating acceptance of P2P technology. He said that the entertainment media file itself, or the content that is in the file, ultimately will become the primary brand as ongoing evolution continues. Chip exhorted Hollywood to experiment with content not otherwise being monetized by using P2P to increase the value of libraries and catalogs, proving the validity of long-tail marketing theory.

During audience questions and closing comments, Billy shared that Peerflix has indexed some thirty-five thousand titles that its users are sharing, and that consumers seem to prefer owning over renting entertainment media by wide margins. Srivats cited Creative Commons as a brilliant concept, whose adoption could be enormously beneficial to industry development, again in terms of breaking the failure-to-license logjam. Chip foresaw expansion of P2P usage in ways that cannot even be imagined. Leslie added that P2P will continue to define "cool." Andy noted that social networks will become the driving force behind what becomes popular. John envisioned that we will hear more about sharing as opposed to P2P as the protocol that makes sharing happen, and that wireless will be our next frontier. Bob closed by saying that at least we have moved on from last year's hand-wringing to this year's testing. Share wisely, and take care.

eDonkey Overtakes BitTorrent

Excerpted from DVD-Recordable Report

File sharers have moved away from the popular BitTorrent system and moved to eDonkey, distributed by DCIA Member MetaMachine, according to a study by Internet analysis firm CacheLogic.

eDonkey has become the dominant P2P file-sharing network in countries such as South Korea, Italy, Germany, and Spain. The study also seems to suggest that legal action to stamp out file sharing is meeting with limited success.

The movie industry started targeting operators of BitTorrent networks themselves last December. It has filed numerous lawsuits against BitTorrent server sites which linked to copyrighted material in order to undermine the ability to swap content.

In countries such as the UK, Japan, and China, eDonkey was as widely used as BitTorrent, found CacheLogic. In other countries like South Korea, it has become the most popular way of swapping content.

Some high-profile BitTorrent tracker sites have been closed down. "It's proof that legal pressure from industry groups results in the mass migration of file sharers to an alternative network, whether old or new," said CacheLogic CTO Andrew Parker.

In the US and Canada, there has been a surprising resurgence of the Gnutella file-sharing network. It was one of the first P2P services to be targeted by the record industry but has since faded into the background. "People are migrating to Gnutella as the attention of the record and movie industry is elsewhere," said Mr. Parker.

According to CacheLogic, 60% of the traffic on the Internet by the end of 2004 was made up of P2P activity.

Digital River May Pursue Acquisitions

Excerpted from Forbes Report by Kate DuBose Tomassi

Piper Jaffray senior research analyst Safa Rashtchy raised the target price on shares of DCIA Member Digital River to $56 from $45, citing increased fiscal first-quarter guidance and strong mid-quarter progress.

Digital River raised its first-quarter 2006 guidance to earnings of 48 cents per share on revenue of $77 million, from 40 cents on revenue of $70 million. Rashtchy said he sees strength across the board in the first quarter, particularly in securities.

"The securities vertical has been strong indicating that digital downloads continue to gain share of the overall market." In addition, the company's improvement in its marketing programs may also be driving upside, said the analyst.

Going forward, Rashtchy said Digital River is well-positioned to gain further market share and increase its activity with large software publishers. He believes the company "could potentially distribute Microsoft's One Care security suite and/or Vista operating system."

The analyst also expects Digital River to increase its presence in gaming this year. In addition, he sees the company acquiring companies that expand its e-marketing capabilities and enhance its electronic payment processing.

Digital River recently sold 4 million shares, giving it an extra $170 million in cash to "aggressively pursue strategic acquisitions," Rashtchy said.

LimeWire Tests Content Filtering

Excerpted from Digital Music News Report by Richard Menta

Following the MGM v. Grokster ruling by the US Supreme Court and pressure from major labels, LimeWire recently began testing a new content filtering mechanism. Details on how the filter will function are scant, though LimeWire is currently giving users the option to enable the restrictions.

"Filtering helps to ensure that you do not share files against the wishes of copyright owners," a page on the LimeWire website explained. "If you've enabled filtering, LimeWire checks the status of the files you attempt to download." And content holders themselves determine whether their content can be shared on the application. "If a file's copyright owner has requested that the content not be shared, LimeWire prevents you from downloading it," the company continues.

Other filtering releases could be on the way, especially given the issues inherent in the current beta solution. The LimeWire message implies that those who enable the filter are respecting the wishes of content providers, while file sharing in good conscience and without fear of reprisal. That could be true if all content providers were to participate, but it is doubtful that a volunteer system will pass muster with the record and film industries.

Overall, the system requires proactive compliance among various parties. The LimeWire filter puts the onus on content providers to flag media they don't want traded, while asking - but not forcing - users to agree to honor those flags.

The record industry has never been warm to volunteer scenarios like those, demanding that the P2P services be the ones to determine what is legal and what is not. Screening mechanisms like Shawn Fanning's SnoCap - which compares file-sharing requests against a database of approved materials - are more palatable to media industry interests.

Meanwhile, the larger question is whether any sort of filtering mechanism will have a meaningful impact on overall file-sharing levels. Previous observations of user behavior show that file-sharing crowds fluidly move to new services if faced with restrictive or problematic environments.

P2P Sites Switch to Fee-Charging

Excerpted from Etnews Report by Jung Jin-young

Users visiting the Soribada P2P file-sharing site will have to pay service fees for downloading music files, according to the Korea Music Producers' Association (KMPA). "We agreed with Soribada to charge 500 won for users downloading music files labeled with DRM, 700 won for music files without DRM, and 250 won for poor sound-quality music," said Seo Hee-deok, chairman of KMPA.

This is the first time that details of the deal between the leading P2P service site and music producers were unveiled. With the new service in place, "pay-as-you-use" type of fee charging is expected to become mainstream in the online music download service market.

Given that other P2P service providers are also in talks with the association for similar arrangements, Internet users will likely have more difficult times finding free music files. "We are talking with 20 P2P sites on terms of contracts," said Seo.

While Soribada is seeking to avoid full pay-as-you-use, adoption of flat fees is seen as elusive. "We agreed to pay-as-you-use fee service with KMPA, but we are talking about flat fees with other record labels," said Soribada.

Major record labels such as DoReMi Media, Manine Media, Ins Digital, and CJ Music are opposing monthly flat fees except for outdated songs.

PeerBox Takes P2P Mobile

PeerBox Mobile is a P2P file sharing application, now in Beta, for next-generation mobile devices. PeerBox allows searching for files in open P2P networks, downloading files onto the phone and sharing files with other users.

PeerBox supports the following phones: Nokia N70, 6682, 6681, 6680, 3230, 6670, 6630, 6260, 7610, 6620, 6600 Lenovo P930, Panasonic X800, X700, Samsung SGH-D720, and SGH-D730.

EU OL Music Sales Offset Physical Decline

Excerpted from Digital Media Wire Report

Sales of physical music formats (CD, DVD) in Europe are projected to fall 30% over the next five years, but online music sales will grow to represent a third of the overall market and make up for this loss, according to a report from market research firm Forrester.

While total European music sales are forecasted to grow from $11.41 billion in 2006 to just $13.21 billion in 2011, online sales in the region will skyrocket from $335.2 million this year to $4.7 billion during the same period, Forrester said.

MySpace Censors Content to Lure Marketers

Excerpted from MediaPost Report by David Goetzl

News Corp. wants to turn Madison Avenue into "ItsSpace" and the media giant is aggressively courting blue-chip marketers for its most prized Internet asset. Ross Levinsohn, President of Fox Interactive Media, said the company is looking to broaden the advertising pool for MySpace.com to attract more "brand advertisers."

The pitch? Sounding much like MTV over the last two decades, Levinsohn said MySpace is the "number-one must buy" to "reach the youth of this country." As it takes that case to major agencies, News Corp. is taking steps to bolster the ad environment on the social networking site. The infrastructure has been upgraded, accelerating page-loading time by 300 percent. Viral video and filmmaker sections have been added to bolster content offerings. And a deal to improve the search functionality is expected within the next 45 days.

But perhaps most importantly to advertisers, the company has added resources to monitor the site's mass of user-generated content. Advertisers have been reticent to experiment with MySpace since the content can be risqué and, in some cases, offensive. News Corp. now reviews 2 million images a day and has removed 200,000 profiles it felt included "questionable material." Still, Levinsohn said, the content is practically infinite with 66 million profiles, making it impossible to inspect it all.

"It's not for every advertiser, clearly," Levinsohn said.

HKBN Offers Free Movie Downloads

Hong Kong Broadband Network Ltd. (HKBN) has launched a first-of-its-kind free legal movie download platform. This service allows users in Hong Kong, irrespective of their Internet service providers (ISPs), to legally download five movies for free.

All ISP users in Hong Kong are now able to enjoy this service with the only restriction being an 18-minute download time-out. HKBN's Metro Ethernet bb100 subscribers, for example, can download an entire 4GB DVD format movie in less than 7 minutes. The symmetric nature of HKBN's 100 Mbps service means that bb100 users are able to upload at the same speed as their download.

The five movies, "Cocktail" staring Candy Lo and Race, "My Wife is 18" staring Ekin Cheng and Charlene Choi, "Heat Team" staring Eason Chan and Aaron Kwok, "Tiramisu" staring Karena Lam and Nicolas Tse, and "Shiver" staring Athena Chu, are now available for downloading.

"In today's fast changing world, bandwidth is the key to knowledge. At HKBN we are proud to offer Hong Kong world class access to bandwidth," said Ricky Wong, Chairman of HKBN.

YouTube Blocks Infringing Clips

Excerpted from What is the Word Report

YouTube.com, the popular online video-sharing site that lets users upload their own clips has decided to block copyright-infringing TV and movies by introducing a time limit of 10 minutes per file. The San Mateo, CA based company took this step after it was compelled by NBC to delete clips of the "Lazy Sunday" spoof originally telecast on "Saturday Night Live."

The site, which has increased in popularity by the spread of word-of-mouth, said in a posting on the site, "We're constantly trying to balance the rights of copyright owners with the rights of our users. We did some analysis of the videos in our system over 10 minutes in length, and found the overwhelming majority of them were full-length, copyrighted videos from TV shows and movies."

Meanwhile YouTube is teaming up with E! Networks to offer a broadband channel called "Cybersmack." The channel will host numerous user-generated videos satirizing pop culture. The channel will offer $25,000 to the best Cybersmack clip.

Commenting on the partnership, YouTube Co-founder & CEO Chad Hurley said, "We see this partnership as a sort of mash-up between the E! television viewing audience and the YouTube community, bringing the two together to promote compelling TV shows through entertaining short clips."

MTV2 and Dimension Films have also teamed up with YouTube to promote their broadband offerings even as NBC and CBS have asked the site to remove all of their content. YouTube spokeswoman Julie Supan said that since its launch last December, the site has had viewership of more than 30 million. But questions remain as to how the company intends to make money.

CNET News reports that at Digital Hollywood executives were impressed with YouTube's performance, but had questions on revenue generating methods. "It's not going to be a traditional model; that is for sure. Right now, we don't want to disrupt the user experience. But eventually, we're going to introduce extremely relevant ads that will benefit users and won't disrupt the service," said Supan.

Social Networking Entrant Pushes Music

Excerpted from Digital Music News Report

As the social networking space experiences a flood of new entrants, music continues to be a driver. The story is well known on MySpace, the king of the roost, and others are recognizing the glue that music provides. Just poking into the space is LA-based Buzznet, a community site that rallies individuals based on collective interests and multimedia assets. For example, a user can upload a photo onto Buzznet with an appropriate tag referring to a band, which in turn instantly populates a page dedicated to the group. The result is an ad-hoc community of fans, joined by a common interest. "Music is a natural fit for us," said company Co-founder & CEO Anthony Batt. "There is already community around it."

To that end, the company is brokering a raft of new music relationships. Chief among them is a deal with event promoter Goldenvoice to create an interactive destination for the Coachella Valley Music Festival. Attendees will be encouraged to upload photos, either from a mobile phone or camera, to the dedicated Buzznet page. Marc Brown, Co-founder & President, pointed to additional deals involving Rob Thomas and Matisyahu. In the case of Matisyahu, the artist is combining his snapshots from various performances with those taken by fans, creating a "total mash-up" according to Batt. And that closeness is something that users respond to. "Our users don't want an intern at the label uploading the photos," Batt noted.

So Hip It Gets Lads to Watch Ads

Excerpted from NY Times Report by Saul Hansell

"This will be over faster than your last relationship" and ".001% of your daily ad intake" are the sorts of wisecracks users see right above the video commercial that greets them when they visit Heavy.com.

And that pretty much sets the tone of knowing commercialism for a website that has become one of the most popular among a growing crop of sites attracting young people with racy, humorous video programming.

Heavy is honed especially for young men. It mixes animation, music, video games, grainy home movies of oddball characters, supermodels in bikinis, and pop culture parodies. Often, all of these elements are squished into a single two-minute clip. Advertising is everywhere.

This potent stew drew 5.5 million users to Heavy.com in February, according to comScore Media Metrix, nearly triple the audience of a year earlier.

Heavy's founders and chief executives, Simon Assaad and David Carson, both 35, say they modeled the frenetic site — with quick-triggered interactive features and almost no text — more on a video game than any other media form.

About half of the videos are submitted by amateurs, but Mr. Carson and Mr. Assaad put up only those that fit Heavy's rude and wry sensibility.

"Heavy has always been about our point of view," Mr. Carson said. "That's why we have attracted an audience." The site makes money through advertising, and all of the videos and game offerings are free.

40 Million Surf Online Daily for Fun

Excerpted from Center for Media Research Brief

According to the Pew Internet & American Life Project, the Internet is increasingly a place where Americans just hang out. Some 30% of internet users go online on any given day for no particular reason, just for fun, or to pass the time.

Compared to other online pursuits, the act of surfing for fun now stands only behind 52% of internet users sending or receiving e-mail on a typical day, 38% using a search engine, and is in a virtual tie for third with 31% getting news online.

About 25 million people went online in 2004 on any given day just to browse for fun. In the Pew Internet Project survey in December, 2005, that number had risen to about 40 million people.

In the earliest days of the Web, young, white men were the most likely people to go online just to surf around with no particular purpose or destination in mind. But this kind of idle browsing has a broader appeal now, cutting through all races, income groups, and levels of educational accomplishment.

Torrentspy Files Motion to Dismiss Suit

The Torrentspy search engine has defended itself against a copyright lawsuit brought by major Hollywood studios by filing a Motion to Dismiss in Federal Court in Los Angeles. It denies that hyperlinking to "dot torrent" text like files arising out of Internet search engine results constitutes secondary copyright infringement.

According to defendants' attorney Ira Rothken, "Torrentspy argues, amongst other things, that it does not link to Hollywood's copyrighted works. It has cooperated with Hollywood in removing objectionable links to dot torrent files; it does not actively promote copyright infringement; and it cannot be held 'tertiarily' liable for visitors' conduct that occurs away from its web search engine. This appears to be the first case where major Hollywood studios are suing a search engine that does not even link to any files copyrighted by Hollywood, in essence trying to outlaw the dot torrent file format."

Please click here for a copy of the Motion to Dismiss. To discuss the case, feel free to contact Ira Rothken at 415-924-4250 or via e-mail at ira@techfirm.com.

Coming Events of Interest

  • First Annual DCIA Conference & Expo – The first-ever global "P2P Media Summit" will cover policy, marketing, and technology issues affecting commercial development of this emerging high-growth industry. June 22nd-23rd at the Intercontinental/HI, Tysons Corner, McLean, VA. Exhibits and demonstrations will feature industry-leading products and services. Alston & Bird's Aydin Caginalp & Renee Brissette will conduct a special session on corporate value optimization for firms in the distributed computing industry. For sponsor packages and speaker information, please contact Karen Kaplowitz at 888-890-4240 or karen@dcia.info. DCIA Member Music Dish Network is our media sponsor. Plan now to attend.

  • Washington Digital Media Conference – June 23rd at the Ritz-Carlton, Tysons Corner, McLean, VA. DCIA Conference & Expo attendees can attend this executive briefing on emerging business, policy, and technology issues & opportunities at half-price. This is a must-attend event for media, entertainment and technology businesses, educational institutions, and government agencies involved in the digital distribution of media. The Washington Post calls the event: "a confab of powerful communicators and content providers in the region."

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