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BearShare Settles

May 8, 2006
Volume 13, Issue 4

New Napster May Offer Upside

Excerpted from Forbes Report by Mary Crane

Napster unveiled its new online music service at Napster.com, which allows users to listen to over two million songs in the Napster catalog up to five times for free. The new site is offered in addition to the Napster subscription music business and only requires a free user name and password to access Napster tracks.

Piper Jaffray analyst Gene Munster said the new ad-based service, which attracts approximately two million unique visitors per month, adds potential for earnings upside in 2006. The analyst maintained his "outperform" rating and $6 price target on Napster shares.

Napster.com aims to become a community site where listeners can listen to songs for free, make recommendations, post reviews, and sign up for Napster subscriptions. New features on Napster.com include NapsterLinks, where users can link to Napster tracks, and the Narchive, a public music archive.

"Napster was born of the idea of eliminating all barriers to discovering, enjoying, and sharing music, and of putting the power in the hands of fans," said Napster CEO Chris Gorog.

The key to Napster.com’s success is the company’s ability to secure initial advertisers "right out of the gates," according to the analyst.

Current advertisers on Napster.com include Samsung, House of Blues, Activision, the 2006 Bonnaroo Music and Arts Festival, Touchstone Pictures, the Guitar Center, Disney, and the US Navy.

"We found the site intuitive and believe a non-tech person shouldn’t have any problems," Munster said of the site in a research note to investors.

Skype Intros 2.5 Beta and Skypecasting

Excerpted from TMC Report by Erik Linask

DCIA Member Skype, the global Internet calling provider, has released Skype 2.5 Beta, its latest software edition allowing users to make voice and video calls for free over the Internet.

Skype’s newest features and enhancements make it even easier to set up a Skype account and to stay in touch with friends, family, and colleagues for free.

The newest version of Skype simplifies registration and dialing, while improved conference calling and other advances provide excellent voice quality. Simple prompts while Skyping allow users to adjust how they manage their Internet connection to ensure they have the best possible call quality. Localized payment options in more than fifteen currencies have also been built in.

Skype 2.5 customers can talk for as long as they like with over 100 million Skype customers across the world without worrying about the cost or the distance of the call.

Skype also is pilot testing its Skypecast product. Skypecasts enable groups of up to 100 people with like interests — anything from collegiate paintball tournaments to ‘80s pop music to collecting hot-pepper sauces — to participate in live conversations moderated by a host, who is able to mute, eject, or pass the virtual microphone to participants when they wish to speak. Hosting or participating in a Skypecast is completely free.

Skypecasts can be promoted on any website using simple HTML snippets.

Softwrap Signs with Funcom

DCIA Member Softwrap, a leader in digital rights management (DRM) and electronic software distribution (ESD) has partnered with Funcom, a world-leading developer and publisher of multi-award-winning games including "Age of Conan," "The Longest Journey," and recently released "Dreamfall."

Softwrap is providing Funcom with anti-piracy technology allowing it to sell games directly from its eStore and through any of its affiliates.

"Funcom chose Softwrap for its robust security and ease-of-use both from an end-user and developer’s perspective," commented Trond Aas, Funcom CEO. "Softwrap has been extremely efficient, friendly, and professional to deal with. We look forward to many titles being distributed electronically with the Softwrap technology."

The sale of "Dreamfall" will be processed by ask|net AG, a leading provider of global e-commerce outsourcing solutions. Softwrap has integrated its technology with ask|net AG allowing the game to automatically unlock on successful purchase, ensuring a seamless end-user experience.

The protected game can be shared with friends or family who will also be given the opportunity to purchase from within the application if they wish to play the game thereby creating viral sales.

Dylan Solomon, a spokesperson for Softwrap commented, "This is one of the most innovative companies in the games space. We are very excited to be working with Funcom to release ‘Dreamfall’ in electronic format."

Report from CEO Marty Lafferty

Photo of CEO Marty LaffertyDiscounted hotel rates at the Intercontinental Holiday Inn at Tysons Corner will be activated this week for the June 22nd–23rd P2P MEDIA SUMMIT, and the DCIA is continuing to add exciting speakers and special sessions.

As previously announced, there will be keynotes from peer-to-peer (P2P) program distribution executives representing the world’s largest file-sharing networks, the best-connected P2P service offerings, and the most advanced file-sharing software applications available today.

There will also be stimulating panels featuring diverse leaders from this emerging high-growth industry. As one our special sessions, Friend Media Technology Systems (FMTS) will introduce its new P2P information system.

The P2P Digital Watermark Working Group (PDWG) will hold its quarterly meeting in conjunction with the P2P MEDIA SUMMIT and publicly report on its progress to date. Based on PDWG’s formative meeting hosted by INTENT MediaWorks at Digital Hollywood, an updated mission statement is now being circulated among attendees.

PDWG’s mission will be to work jointly and cooperatively with leading content and technology companies to ascertain appropriate and voluntary practices for the use of digital watermarking as a step to facilitate the legitimate consumption of licensed content through the P2P distribution channel.

Its objectives will be to provide P2P systems with the ability to effectively identify infringing copyrighted content and establish practices for the deployment of watermarking technology implementations to meet that goal in a way that can be sustained by all necessary participants.

Participants include DCIA Member organizations; digital watermarking technology and solutions providers; copyright owners, including representatives of the motion picture and music industries (such as movie studios, record labels); copyright owners’ trade organizations; and information technology (IT) companies involved in digital media platforms.

PDWG’s path to progress will be to publish the mission and objectives as well as calls for additional participation in the working group; draft and reach agreement on a digital watermarking pilot study, including test plan, timeline, and deliverables; organize and conduct the digital watermarking pilot study to ascertain an efficient means for identifying and filtering infringing copyrighted content on P2P networks; and prepare and publish voluntary DCIA recommended practices based on results of the pilot study.

Qualified interested participants may sign-up at PDWG@dcia.info or by calling 888-864-3242.

Live showcase entertainers for the June 22nd DCIA Conference networking cocktail reception now include Drew Gonsalves, the band leader and singer-songwriter for Kobo Town, as well as Kirsten DeHaan and Scooter Scudieri.

Drew is a singer and songwriter whose music blends traditional calypso and reggae. Prior to Kobo Town, Drew formed the reggae calypso funk fusion group Outcry along with bassist Stuart Watkins and drummer Robert Milicevic. In 1999, Outcry released the album "New World Raging," which was received with great enthusiasm in Drew’s native Trinidad and among music fans throughout the world.

The June 23rd DCIA Exposition is being held in conjunction with the Digital Media Conference, and your registration for the full DCIA Conference & Exposition includes that event as well.

Now in its third year, the Digital Media Conference is a "must-attend" event for media, entertainment, and technology businesses, educational institutions, and government agencies involved in the digital distribution of media.

Exhibits and demonstrations will feature industry-leading products and services. Additional exciting speakers and special sessions will be announced in coming weeks.

Don’t miss the opportunity to participate in this 2006 inaugural event. You may register online or call 888-864-3242 to register. For sponsor packages and speaker information, please contact Karen Kaplowitz, DCIA Member Services, at 888-890-4240 or karen@dcia.info. Share wisely, and take care.

Digital River 1Q Profit Up 17%

Excerpted from MSN Money Report

DCIA Member Digital River, an e-commerce software maker, said Thursday first-quarter profit climbed 17 percent, driven by a surge in sales.

Income for the quarter, which was reduced by $3.4 million for stock option expenses, was $16.4 million, or 41 cents per share, up from $14 million, or 35 cents per share, last year. Excluding stock option expenses earnings were $20.7 million, or 50 cents per share.

Revenue for the quarter was $78 million, up 43 percent from $54.5 million last year. Analysts polled by Thomson Financial expected the company to earn, on average, 48 cents per share on $75.72 million in revenue.

Shares of Digital River traded at $44.12 in the after-hours session, down $2.70, or nearly 6 percent, from Thursday’s closing price of $47 on the Nasdaq.

Looking forward, the company said it expects to earn 28 cents per share on $70 million for the second quarter. Excluding stock option expenses, earnings are projected to be 37 cents per share, a penny short of analysts’ expectations for 38 cents per share on $69.6 million in revenue.

For the full year, the company projects $300 million in revenue, and earnings of $1.36 per share – or $1.70 per share excluding stock option expenses. Analysts expect $1.68 per share on $296.9 million in revenue.

Centale Patent Apps & Revenue

DCIA Member Centale, an online marketing and technology solutions firm, has filed six patent applications for a new Wi-Fi Network with the US Patent Office and is reporting record revenues from its new Interactive Marketing Division (IMD).

Centale believes that while many companies claim the ability to deliver content wirelessly, no one has yet delivered an independent wireless entertainment application. These competitors simply stream licensed content through browsers on end-user cell-phones for a hefty monthly fee that few users have agreed to pay.

Centale will launch a Wi-Fi application free to the end-user with over 10,000 rotating channels of audio and video content to choose from, including networks and stations worldwide, many of which cannot be found on other paid networks including satellite.

"We are excited about the potential impact of this soon-to-be-released network platform. We will continue to accelerate aggregation of audiences to the desktop and wireless devices through delivery of next generation platforms that enhance end-users’ online and wireless experiences," said Centale President Juan Ferreira.

"These platforms will be funded by advertisers that also provide various ancillary revenue opportunities producing ongoing cash flow with little ongoing expense."

Centale also reports that its new IMD recorded gross revenue of $107,350.00 for the month ending April 30th compared to $30,899.50 gross revenue recorded for the month ending March 31st.

Centale attributes this growth to two of the company’s services. Centale offers a deliverable database of over 100 million demographically segregated records. The second driver is their desktop executable platform. On behalf of advertisers, Centale can deliver an opt-in desktop executable that enables advertisers 24/7 communication access to participants, thereby increasing advertiser ROI.

Jon DeYoung, Chairman & CEO of Centale, commented, "I’m pleased to report that our new Interactive Marketing Division’s sales more than tripled from the previous month and I look forward to reporting continued strong sales growth in the future."

DAVE.TV Video Sharing Site

Excerpted from Online Media Daily Report

IPTV entertainment network DAVE.TV announced the launch of its new social broadcast network featuring user-programmed broadcast channels as well as a user-generated video content system on its network at www.dave.tv.

DAVE.TV – which stands for Distributed Audio Video Entertainment Television – is a PC-based service, on which users can sign up to distribute their own content to a broad audience. The content can all be streamed directly to users’ TVs from their laptops or the DAVE.TV xPort, or streamed to portable devices using a media PC center.

Telcordia Auto Media Centers

In collaboration with the Ford Motor Company, DCIA Member Telcordia revealed a completely wireless-enabled Ford 500 sedan. This latest development from Telcordia’s world-renowned Advanced Technology organization demonstrates Telcordia’s innovative approach to leveraging technology and capitalizing on new market opportunities as the lines between some of the consumer’s most treasured assets – cars and communications – blur.

The 500 showcases a seamless transition between car, MP3 player, GPS, and location-based-services (LBS), enabling consumers to simplify their lives by converging communication and entertainment into one automotive environment.

The highly-rated 500 sedan was provided by Ford to Telcordia to equip the vehicle with complete wireless technology that will do everything from remotely unlocking doors, to playing MP3 audio to providing detailed diagnostics that keep a car in shape and fuel-efficient. Telcordia’s IP-based end-to-end service platform is technology-agnostic across cellular and WiFi networks and is satellite-enabled for GPS and roadside assistance.

Elements of the telematics solution are being incorporated with the Telcordia Maestro IMS Portfolio of products, services and applications that enable carriers to offer any service, over any network, via any device.

"The Telcordia telematics solution demonstrates the innovative spirit and forward-thinking momentum for which Telcordia is known," said Adam Drobot, President & CTO, Advanced Technology Solutions, Telcordia. "The Telcordia technology, along with Ford’s vision for superior quality and customer satisfaction is a natural fit as we work together for a better, more exciting experience for consumers."

File Sharing is the New E-Mail

Excerpted from Business 2.0 Report by Om Malik

Three startups are betting that they can harness P2P technology to solve a growing problem: conveniently sharing photos and home videos with friends and family.

The three outfits that are exiting stealth mode this week – Pando Networks, Perenety, and WiredReach – have developed products that aim to supplant e-mail for sharing digital photo albums, home videos, and other weighty files.

Digital cameras and camcorders are fast increasing the resolution they capture, which in turn leads to larger files. But Internet service providers (ISPs) typically block users from sending files bigger than 10 megabytes to prevent large e-mail attachments from clogging up their systems. For e-mail recipients, it’s no easier: even though free services like Yahoo Mail and Google’s Gmail now offer gigabytes of storage, it’s easy to run through that limit with just a few photo albums or videos.

"Most of us attach dozens of photos to an e-mail and send them to our friends and family," says Pando co-founder Yaron Samid. "It is quite a big hassle, and you are never sure if the e-mail gets to the person you are sending."

There are websites like Flickr and YouTube, of course, where users can post photos and video – but those are designed for material you want to share with the world, not just a few friends or family members. Photo-sharing websites like EasyShare, Snapfish, and Shutterfly all share a common flaw: the need to upload photos to a web server, a process which just gets lengthier and more prone to error the bigger the files get.

That’s where file sharing comes in. Unlike e-mail or website uploads, which have to go through a central server, file sharing connects two computers directly for more efficient content transfer – what’s known as "P2P networking."

P2P networking came to the forefront in the late 1990s when Napster made it relatively easy for far-flung users to share music files. Napster drew the ire of the music industry, only to be replaced by the more exotically named Kazaa, distributed by DCIA Member Sharman Networks, Gnutella, and other networks.

File sharing made it easier to download large files, but difficult to trace where copyright-infringing movie and music came from.

This new wave of file-sharing startups isn’t aiming to share music or Hollywood movies, however. It’s using the technology to speed and simplify the problem of moving a large file from computer A to computer B.

Pando’s Samid founded the company in December 2004 with Laird Popkin, a former director of digital technology for Warner Music, and Robert Levitan, the co-founder of media website iVillage, now owned by GE’s NBC Universal unit. The three started developing Pando’s application, which lets users drag and drop files into a "package" which they can then e-mail to friends.

Rather than containing the photo and video files themselves, Pando’s package just contains information about the location of the files. The recipient gets a link to download Pando’s software, which begins downloading the files as soon as it’s installed.

Pando uses the same technology found in BitTorrent, a relatively new file-sharing system that’s been gaining popularity among the geek set, but which still remains beyond the grasp of the average computer user, according to Samid.

"Our goal was to bring the power of BitTorrent to the mainstream user who just wants to e-mail Mom some heavy photos and videos," he says. So far, the plan seems to be working. The company has more than 315,000 users, with 6,000 signing up every day. They share 15 terabytes of data on an average day.

To keep Pando from being used by music and movie copyright infringers, Pando has restricted the number of people to whom you can send a Pando package, and limited the file size to one gigabyte, enough space to hold about 45 7-megapixel photos.

While Pando has tried to keep its application close to the e-mail-attachment model, Perenety has modeled its Shooter application after DCIA Member Skype, the voice-over-Internet-protocol outfit which was bought by eBay, says co-founder Xavier Casanova.

It may seem like an unlikely comparison, but Perenety, which is now conducting a limited test of Shooter, is emulating Skype’s one-to-one connectivity and buddy-list features. Just as Skype connects two PCs directly for a call and tells you which people are available to talk, Perenety connects PCs directly for speedier file transfers and lets you know when your contacts share new files.

"We have developed this technology so that it is optimized for one-to-one file transfers and sharing," says Casanova. Every time a friend uploads new photos into Shooter, people who have previously received files from that person get an alert, just like you get when a buddy signs on to your instant-messaging network. Like Pando, it has a one-gigabyte file-size limit.

WiredReach’s BoxCloud service, which has yet to launch publicly, also models itself after popular instant-messaging software. Unlike Pando and Perenety, it won’t have limits on file size or the number of people you can share a file with.

Of the three startups vying to replace e-mail, Pando has the biggest lead in users, even in its limited beta-test phase. That suggests that keeping the process of sharing large files as close as possible to the familiar experience of sending e-mail attachments may be the smartest way to go.

One thing’s clear: unless we all agree to ditch our digital cameras and stop promising to send Mom pictures, this problem isn’t going away anytime soon.

P2P for Network Security

Excerpted from Internet News Report by Sean Michael Kerner

Peer-to-peer approaches work for a variety of different technologies. But can P2P work for serious network security? A company called InfoExpress thinks so with the use of Dynamic Network Access Control (DNAC).

Network Access/Admission Control technologies, commonly referred to as NAC, typically involve either hardware infrastructure or client-side software approaches in order to secure a network.

Dynamic NAC (DNAC) changes that paradigm by introducing a P2P approach that offers the promise of easier deployment, management, and scalability. Stacey Lum, CEO of InfoExpress, said that DNAC offers advantages of both software and hardware infrastructure.

Instead of a hardware appliance to control NAC functions and enforcement, as is the case with vendor solutions from Cisco, Juniper, and others, DNAC utilizes the collective power of a network of "enforcer" PCs to provide NAC policy enforcement.

A policy server acts to define the network community and guests and helps to "elect" the enforcer PC endpoints. As opposed to software based NAC approaches, DNAC enforcer endpoints do not enforce themselves, only other nodes on the network.

"In a sense it’s like a neighborhood watch scheme," Lum explained. "Except you deputize some people to actually call the police."

Lum argued that DNAC solves the first major barrier to adoption for a NAC solution. "The ease of use and ease of deployment is a huge issue and is the first barrier most customers have to cross."

Scalability is also a barrier to adoption of traditional hardware infrastructure based NAC approaches. Lum said DNAC solves that issue because the "enforcer" population can grow as the network grows.

Eric Ogren, senior security analyst at the IT research firm Enterprise Strategy Group, is of the opinion that the peered approach offered by DNAC can work very well.

"I like the fact that it does not require incremental hardware on every LAN segment, does not require software installation on every end-point, and seems easy to manage once deployed," Ogren said. "DNAC can do a nice job of ensuring that only endpoints with compliant configurations participate in the network."

Canadian Artists Protest Labels

Excerpted from Reuters Report by Etan Vlessing

Canadian musicians, including Avril Lavigne and Sarah McLachlan, have formed a lobby group to speak out against US-style anti-piracy measures called for by the major labels.

Steve Page, lead singer with the Barenaked Ladies and co-founder of the Canadian Music Creators Coalition (CMCC), told a Toronto press conference Monday that using DVD locks and P2P lawsuits to halt music file sharing online only angered fans.

"The more you push your audience away, the more you destroy the industry," Page said.

The CMCC was launched last week with backing from Lavigne, McLachlan, and artists such as Randy Bachman, Chantal Kreviazuk, Sam Roberts, Sum 41, Feist, Blue Rodeo, and Billy Talent.

It follows six major Canadian independent music labels, including DCIA Member Nettwerk and True North Records, pulling out of the CRIA, which represents major record labels here.

Major Hollywood studios and record labels have recently stepped up lobbying efforts in Ottawa for harsher copyright laws through ratification by Canada of the 1996 WIPO (World Intellectual Property Organization) Internet treaty.

Page insisted CRIA did not, and should not, speak for Canadian artists when urging WIPO, DRM, and lawsuits to halt music piracy. "We want a seat at the public policy table," he said.

Andrew Cash of the Cash Brothers, another Canadian band, said CRIA aimed less at protecting Canadian artists than sustaining a business model made increasingly obsolete by the Internet and other emerging digital technologies.

"Suing our fans is destructive and hypocritical, and digital locks are risky and counterproductive," Cash argued, echoing a brief sent Monday to the Federal Ministers of Heritage and Industry in Ottawa.

The Canadian artists argued their future lay less in the sale of music in record stores than in sharing their music online to foster performance careers and merchandise sales. "Music executives need to get their heads out of record stores," Page said.

He added that Barenaked Ladies made money on their website by allowing fans to purchase video copies or recorded CDs from recent concerts, or by making select music cuts available on iTunes.

The Canadian courts and high-speed Internet access providers have so far proved reluctant to do the major labels’ bidding and police music piracy, and have instead sought a balance between the interests of creators and consumers.

DRM Debates Continue

Excerpted from Digital Music News Report

The debate over digital rights management (DRM) technology continued to bubble Tuesday, sparked by Yahoo Music chief David Goldberg. During a Musexpo roundtable, Goldberg reiterated his disagreement with a sales approach that involves protection technologies.

"One of the best solutions is to stop pretending that DRM for digital is a good thing," he said. "It helps technology companies, but it’s not helping music companies or artists." The comments are not the first time that Goldberg has stepped out on the issue, and other industry heavyweights like Nettwerk Music Group head Terry McBride have also expressed disagreement over industry use of DRM.

Other executives, including PassAlong Founder and Senior Vice President of Marketing Scott Hughes, urged a balanced approach that allows content owners to establish usage parameters on their music. But Goldberg pointed to a younger music buyer that refuses to play ball, and readily grabs unprotected tracks. "It is easier to get music illegally than legally," Goldberg said. "iTunes is not working for kids, it’s older people like us that use it," he said.

Meanwhile, data from P2P tracking firm BigChampagne continues to support that assertion, while per-user paid download numbers are growing but still lackluster. On that point, Forbes media editor Peter Kafka noted that the average iPod carries just twenty paid tracks, despite overall iTunes Music Store sales of one billion downloads. Still, it remains unclear if overall sales levels are being stunted by the presence of DRM, or if factors like pricing are playing a larger role.

Sharing Firm Settles Music Case

Excerpted from Wall Street Journal Report by Sarah McBride

Free Peers’ BearShare, a file-sharing service, settled allegations of copyright violation with the music industry for $30 million, plus a pledge to stop facilitating illegal music sharing.

Separately, iMesh, another file-sharing company, yesterday said it was acquiring the bulk of the assets of Free Peers, including BearShare, for an undisclosed price. iMesh itself agreed to settle with the recording industry in 2004 for $4.1 million.

"iMesh is committed to transitioning the compelling experience of P2P file sharing to an authorized marketplace," said Chief Executive Robert Summer. The BearShare software available on the site still allows downloads of copyrighted songs, but the company said it was working on changing that.

The BearShare settlement was reached with a group of major record labels, represented by the Recording Industry Association of America (RIAA). In September, several file-sharing companies received cease-and-desist letters from the RIAA after a key court ruling buttressed the industry’s legal position against open sharing of copyrighted music. BearShare is the first of that group to reach a settlement.

The music industry has been building on the favorable US Supreme Court ruling it received in June in a key case involving the file-sharing company Grokster, which was accused of facilitating copyright violations. In that ruling, the court found that copyright holders could sue file-sharing companies for encouraging people to violate copyrights. Grokster settled in November. Another defendant, StreamCast’s Morpheus, is fighting on.

EFF Asks for End to Lawsuits

Excerpted from Ars Technica Report

Condemning the RIAA’s endless litany of litigation, concerned consumers and the Electronic Frontier Foundation (EFF) have taken a stand and started a petition requesting that our elected representatives stop exploitative and detrimental file-sharing lawsuits. Referring to a plan for voluntary collective licensing that would enable the music industry to increase its profits without having to perpetuate its futile war against file sharing, the EFF petition calls for the music industry to adapt its business model and accept the technological realities of the modern world:

"We oppose the recording industry’s decision to attack the public, bankrupt its customers and offer false amnesty to those who would impugn themselves. We call instead for a real amnesty: the development of a legal alternative that preserves file-sharing technology while ensuring that artists are fairly compensated."

Coming Events of Interest

  • Workshop RFID & The Internet of Things – May 9th in Amsterdam, Holland. Participants will develop scenarios for an Internet of things ranging from scripts for small rituals to outlines of societal changes of epic scale. Sessions will also be dedicated to lectures on current technology, theory, and implementations of RFID. Experienced staff will be present for technical assistance on workshop projects.

  • Internet Dating Conference – May 18th in Beijing, China. A business conference covering the online dating industry and the social networking industry in Asia and the Far East. Topics include management, marketing, and technology. It will be attended by the owners and top executives of the major Asian online dating firms.

  • First Annual DCIA Conference & Expo – June 22nd-23rd at the Intercontinental Holiday Inn, Tysons Corner, McLean, VA. The first-ever global P2P MEDIA SUMMIT will cover policy, marketing, and technology issues affecting commercial development of this emerging high-growth industry. Exhibits and demonstrations will feature industry-leading products and services. For sponsor packages and speaker information, please contact Karen Kaplowitz at 888-890-4240 or karen@dcia.info. DCIA Members Music Dish Network and Javien are our media and e-commerce partners respectively. 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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