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December 24, 2007
Volume XX, Issue 5

Veoh Viewership Grows 760% in 2007

Veoh Networks, the industry-leading peer-to-peer television (P2PTV) service, enjoyed exponential growth during 2007, and experienced increasing viewer demand for a broad variety of episodic, longer-form, and on-demand online video entertainment.

During the year, Veoh's audience grew to 21.5 million unique monthly viewers from 2.5 million. This represents an average increase of 20% per month and a total year-over-year increase of 760%!

Veoh viewers demonstrated high levels of engagement in 2007, consuming a total of more than 30 million hours of content in November. The average viewer now consumes more than 80 minutes per month, a rate that continued to grow throughout the year, even when Veoh introduced advertising in Q4.

Downloads of the VeohTV beta application, which enables high-quality PC-to-TV viewing and provides remote control and DVR capabilities, grew rapidly since it launched in June 2007 and continue to rise. Over the past two months, first-time active VeohTV beta installations have averaged a rate of 900,000 per month.

The average video-view length on Veoh.com is now 6 minutes per video. In the VeohTV beta, the average video view length is 19 minutes per video. More than 40% of views on Veoh occurred during early evening and primetime TV hours rather than off-peak TV viewing hours.

"Viewers are becoming much more comfortable watching programming online, and as more and more players enter the space, the services that provide the most compelling user experience and discovery opportunities are the ones that will separate themselves from the pack in 2008," said Steve Mitgang, CEO of Veoh Networks.

"The exponential growth of Veoh's service shows that our innovative approach to creating a true television-like experience on the web is making a real connection with viewers. In addition, our open platform is attracting the best content - both studio-backed and independently produced - providing us with the largest collection of longer-form programming on the Internet."

Veoh Networks SVP of Marketing & Programming Jennifer Betka will deliver a keynote address at the upcoming P2P MEDIA SUMMIT LV, the DCIA's first-ever Conference within CES, on January 6th.

Omemo Launches Groundbreaking P2P Network

MP2P Technologies has beta-launched Omemo, a groundbreaking service that creates a virtual hard drive in which users may save files in cyberspace rather than on their local hard drives. Omemo's distributed storage network is fast and scalable, creating a nearly limitless supply of storage space and a repository for files including digital music, video clips, images, software, and documents.

Omemo's unveiling underscores a shift in how both businesses and consumers approach computing. Users at all levels are increasingly using the web to access applications and files stored in computer databases from various locations and via mobile devices. Moreover, gains in broadband penetration among homes, offices, and data centers now offer previously unparalleled access and opportunity for cost savings by harnessing the power and popularity of P2P.

Researchers from Microsoft, in collaboration with the Polytechnic University in New York, recently concluded that video publishing services such as YouTube and MSN Video could save up to 95% of their bandwidth costs by implementing a P2P file-sharing system, like Omemo.

Unlike Google's anticipated, but not yet delivered, storage offering, Omemo empowers its users to share resources by creating an open-source based P2P network that brings together available free space from hard drives willingly shared by users. It enables users to add, share, and organize their own content forming an exhaustive, live multimedia library managed exclusively by the Omemo community.

"Omemo is essentially a multimedia version of the wildly popular Wikipedia but built upon our P2P network," said Pablo Soto, CEO of MP2P Technologies. "Our development team has worked diligently to create something new to advance P2P file sharing and bridge it to the 'wikiocracy' born out of the social media revolution. Welcome to the O-Drive."

"Omemo shares resources, not files. In fact, the Omemo network is so vast that it is capable of hosting countless copies of the entire Wikipedia website or could host the Radiohead digital storefront without any of the bandwidth issues they experienced with their ambitious 'In Rainbows' release."

Vuze Raises $20 Million, TiVo Founder Joins BOD

Excerpted from TechCrunch Report by Mark Hendrickson

BitTorrent-based P2PTV service Vuze , which was previously known as Azureus, has raised $20 million in a Series C round of funding led by New Enterprise Associates (NEA) and joined by existing investors Redpoint Ventures, Greycroft Partners, BV Capital, and Jarl Mohn.

The round brings Vuze's investment total to $34 million after a Series A of $2 million with BV Capital and a Series B of $12 million with Redpoint, Greycroft, BV Capital, and Mohn. As part of this Series C, TiVo Co-Founder Mike Ramsay is joining Vuze's Board of Directors.

The company has reached an installation base of 15 million. Vuze users install a downloadable client to begin loading (and seeding) TV and movie content from 100 content partners, including some bigger names such as the BBC and Showtime.

Vuze recently petitioned the FCC to restrict Internet throttling by ISPs, a practice which threatens the BitTorrent protocol on which the service depends.

Vuze CEO Gilles BianRosa will deliver a keynote address at the upcoming P2P MEDIA SUMMIT LV, the DCIA's first-ever Conference within CES, on January 6th.

Report from CEO Marty Lafferty

Photo of CEO Marty LaffertyReuters' Antony Bruno took a fascinating look at The Year in Digital Music this week, covering a period of accelerating change for this category, in dramatic contrast to the relatively slow growth of 2006, when there was very little advancement in this space. 

Above all, in our view, 2007 set the stage for new entries in P2P music services, which will be led by QTRAX, an offering poised to conduct the most successful launch in the history of online music next month in Cannes.

Several new digital music services debuted in 2007, reflecting not only an increasingly progressive attitude among labels and publishers and an openness to explore new business models, but also a significantly changing competitive landscape.

The tenor of the year for online music services was reflected at the artist level as well. In July, Prince broke ranks with SonyBMG and released his new album, "Planet Earth," for free with a London Sunday newspaper to more than two million fans, and then to attendees of his enormously successful three-week concert stand. "It's direct marketing, and I don't have to be in the speculation business of the record industry, which is going through a lot of tumultuous times right now," Prince said at the time.

In October, Radiohead made waves with its equally iconoclastic decision to sell its new release directly from its website, and let fans set the price, a precedent changing move on many levels. A week later Madonna left her long-term major label for LiveNation. Then Trent Reznor followed by exiting Interscope Records.

Among the higher-profile online experiments to end were MTV's Urge, which essentially was replaced by Rhapsody America, a service of RealNetworks, and the Sony Connect music service, which met a similar fate with a number of staff members being reassigned to other units within Sony.

The largest brand not to call it quits, and instead to pave the way for prospective P2P music networking attributes, was Zune. Microsoft upgraded its music service during 2007 by adding social media features like user profiles (aka Zune Cards), friend lists, and widgets that users can post to other social networks.

These changes portend especially well for QTRAX, which will capitalize on, rather than try to curtail, the massive consumer adoption of P2P for music redistribution. The number of unauthorized tracks being traded on open file-sharing networks monthly now exceeds the licensed paid services by fifty-to-one-hundred times, depending on geographic territory, and is continuing to grow.

In the meantime, a number of firms, led by Snocap and Lala, experimented with more distributed commerce approaches that should be taken further in the P2P marketplace, starting with QTRAX - where digital vending machines called widgets let artists offer downloads from their own social network profiles, as well as from their fans' profiles, rather than forcing consumers to visit digital megastores like iTunes, whose business has flattened during the year.

2007 was also a particularly big year for non-P2P music launches. Amazon at last rolled out its music service, which offers DRM-free MP3s from EMI, Universal Music Group (UMG), and several independent labels. In the short time it's been commercially operating, the service has become the third largest digital retail outlet on the net - after iTunes and eMusic - even without licenses from SonyBMG or Warner Music Group (WMG).

SpiralFrog also finally went live to mixed critical reaction. It functions much like music subscription services with iPod-excluding DRM technology, except that it requires users to view ads at least once per month rather than pay a monthly fee.

Slacker, seemingly out of character with the connotations of its moniker, was rather productive in 2007 with two service launches. The first, in the spring, marked the start of another free, ad-supported service, a kind of customized online music radio offering. It then followed up this fall by transferring that service to a portable device that uses Wi-Fi to update channels, and a subscription tier that offers users more functionality for a monthly fee.

Arguably the largest surprise of the year has been a Cinderella social music network. After WMG initiated a lawsuit against Imeem, the playlist-streaming service implemented filtering technology and an advertising system from Snocap to compensate rights-holders. After languishing in obscurity for years, a positive by-product of threatened litigation was the convincing of all four major labels, starting with WMG, to sign up for a cut of ad revenue when users play their songs.

The DCIA believes that 2008 will be the year that licensed P2P music will finally come into its own to displace the unabated copyright infringement that has grown into a global phenomenon with music file sharing. For three years, QTRAX has been securing the necessary licenses, developing its operating technology and systems, and preparing its launch plan to ensure its success in the marketplace.

With a preview of what's in store for listeners to be described by QTRAX Chairman & CEO Allan Klepfisz at the closing keynote of P2P MEDIA SUMMIT LV, the DCIA's first-ever Conference within CES, followed by the service's widely anticipated launch at MIDEM/MIDEMNET, QTRAX is set to rock the world, ushering in a whole new era for authorized P2P music distribution.

At last, the promise of P2P technologies to deliver unprecedented choice and unparalleled quality of service (QoS) for musical entertainment will be realized, with rights-holders compensated for every transaction, and all members of the distribution channel, including consumers, benefiting in many ways. We look forward to seeing you after the holidays in Las Vegas or Cannes. Share wisely, and take care.

Social Network Ad Spending to Grow in '08

Excerpted from Online Media Report by Mark Walsh 

Ad spending on online social networks worldwide will nearly double, to $2.2 billion in 2008 from $1.2 billion this year. 

Most spending will come from the US, where social network advertising is projected to grow to $1.6 billion next year, from $920 million in 2007. That's still a fraction of overall US online advertising, which eMarketer estimates will hit $21.4 billion this year.

The ad growth is fueled by an expanding social networking population. 37% of US adult Internet users visited a social networking site at least once a month in 2007. By 2011, almost half of adult users and 84% of teens will be on social sites.

"The continued growth of social networking seems assured unless teens stop social networking as they become adults," said eMarketer Senior Analyst Debra Aho Williamson.

Converting large and growing audiences into significant ad revenue is the challenge for top social networking sites. To that end, Facebook and MySpace are diversifying ad opportunities beyond marketer profile pages to formats including search, display ads, and widgets.

Michael Barrett, Chief Revenue Officer (CRO) at Fox Interactive Media, said at the recent UBS Media conference that MySpace now gets about 40% of its ad revenue from brand advertising, 30% from search, 20% from performance-based ads sold directly, and only 10% from inventory sold via third-party ad networks.

Both MySpace and Facebook have also recently unveiled behavioral ad platforms aimed at mining the voluminous personal data users provide through profile pages and other site activities for the benefit of advertisers.

"If social network marketing delivers on its promise of peer recommendations, the flow of advertising dollars will turn into a flood," Williamson said.

The Year the Music Industry Broke

Excerpted from MTV.com Report by James Montgomery

In April, Trent Reznor released "Year Zero," a concept album about a future society teetering on the brink of apocalypse. It was supposed to be a grand work of fiction, but it could just as easily have been about the music industry in 2007 - a bleak, burned-out world where the sky fell on a daily basis and the rivers ran red with the blood of record execs. That the album didn't sell well only furthered the analogy.

Make no mistake about it, 2007 was a b-a-a-a-d year for the industry. According to Nielsen SoundScan, album sales were down 15% from 2006, a trend that's continued for eight straight years now; big-name artists jumped ship in increasingly complicated - and messy - ways; and the powers-that-be seemed to get even more heartless and disconnected, thanks to a series of lawsuits, feuds, and terrible decisions.

In fact, you could probably say that 2007 was Year Zero. Things started to change because they couldn't possibly get any worse. MTV.com's three-part series on the future of the music industry begins with a blow-by-blow recap of just how bad the year was:

Part 1 - The Year the Music Industry Broke: In 2007, CD sales continued their freefall and superstars began bailing from major labels. And that's just the beginning.

Part 2 - What Makes a Star These Days? CD sales are just a small part of it. We take a look at other ways artists are getting their names out there and making money.

Part 3 - The Future: What will the music industry be like in a year? Five years? We spoke with experts - they don't know either but have some fascinating theories.

Japanese File-Sharing Population Explodes

Excerpted from TorrentFreak Report

In just over a year, the number of Internet users file sharing in Japan has increased by a staggering 180%. The average number of files downloaded has more than doubled.

According to results of a new survey, the numbers of Internet users in Japan sharing music, movies, and software has increased dramatically to reach an all-time high.

The survey - carried out online and financed and operated by a trio of industry organizations, similar to their well-known US counterparts - RIAJ (music), the Japanese MPAA, and ACC (software) - concluded that the number of Internet users sharing media climbed from 3.5% in June 2006 to 9.6% by September 2007, a near 180% increase.

The numbers of files downloaded increased by a large amount, too. June 2006 saw an average of 194 files downloaded per user, which increased to 481 by September this year. Audio files topped the download charts with 211 per user, with video coming in next with 183. People downloaded an average of 43 images, 33 documents, and 14 pieces of software.

The survey found that the favorite P2P sharing application in Japan is Winny with 27%. LimeWire, which is very popular in the West, took 18.8%, with WinMX at 15%.

BitTorrent, which is incredibly popular all over the world with tens of millions of users, ranked 6th with 7.4%.

Japan hit the file-sharing news headlines earlier this year when a bizarre virus on the Winny network attacked files and displayed strange messages.

TorrentFreak looks forward to being able to report a dramatic growth in Japanese BitTorrent users next year.

BitTorrent Debuts Ad-Supported Live-Streaming

Excerpted from Tech Digest Report

Everyone's favorite online property, BitTorrent, has just launched a massive Watch Now live-streaming section, with over 1,000 films and TV episodes, all for free.

Instead of waiting for downloads, users can now simply "live-stream," in full-screen size, while BitTorrent generates revenue through advertising on the streams.

To use the P2P streaming service, currently, you have to live in the US, and you'll need to install BitTorrent DNA, an application which is bundled with the mainline client. Not only will the stream download data, but it will also upload to other people, watching the same stream, just like your usual BitTorrent downloading session.

The beta-launch, if successful, will be made available to the rest of the world next year, once sponsors are secured for those countries. With time, we should also see more high-profile shows as are gradually becoming available on P2PTV competitor Joost.

Joost Scores a Win with NBA Channel

Excerpted from Washington Post Report by Kenneth Li

Joost on Monday launched a National Basketball Association channel on its online video service that will offer highlights from the past and present.

The deal comes months after a similar partnership with Major League Baseball.

Joost, created by the founders of eBay's Skype Internet phone service and file-sharing service Kazaa, also offers a channel from the National Hockey League.

Financial terms of the deal were not disclosed.

"By making games, highlights, and shows available on Joost, the NBA is ensuring that its fans can enjoy the action where they want, when they want, while simultaneously interacting with other fans from around the world," Yvette Alberdingk Thijm, Joost Executive Vice President of Content Strategy and Acquisition, said.

CacheLogic's John Dillon on P2P CDNs

Excerpted from Digital Podcast

I met with CacheLogic's Chief Marketing Officer (CMO) John Dillon at Digital Hollywood. John talked about CacheLogic's approach to content distribution. The company provides a native P2P content distribution network (CDN) that competes with companies like Akamai and Limelight Networks.

CacheLogic has developed what it calls Velocix, a media delivery platform that combines P2P technology with a global network of content caches built using the vendor's P2P Management Solution. Content is cached on these servers; and that means large media files - such as movies, TV programs, and games - can be downloaded over a broadband connection in minutes instead of hours.

The real benefits, however, start to kick in when end users' computers start contributing to the content distribution as well. This increases the capacity dramatically and cuts the costs at the same time.

A number of other companies have tried to provide similar services using a client-only approach. 

CacheLogic's base network acts like a super P2P network that is available even if local peers are not. That increases availability on the network and helps speed up the last segment download which can be a problem on P2P services based only on distributed clients.

If you need to move large files, CacheLogic is worth checking out.

Mininova Adds Content Distribution Service

Excerpted from TorrentFreak Report

The popular BitTorrent site Mininova officially launched its Content Distribution (CD) service, an easy way for indie publishers to share their content with a wide audience, for free of course.

All the files published with the new CD service will be placed on the front page as featured content. Publishers don't need to have any knowledge of BitTorrent because Mininova will create the torrent and make sure it is seeded.

This service will not only save publishers a lot of bandwidth, it will also help them reach a huge audience. Mininova is listed among the 50 most visited websites on the Internet, and has nearly 30 million unique visitors a month.

"The reason we developed this service is that we're getting e-mails from (mainly indie) content producers. Many of them are interested in publishing their content on Mininova, but that's not an easy job. Most content producers have no technical knowledge of P2P and BitTorrent at all. We're changing this with the introduction of CD," wrote Niek on the Minninova blog.

A few months ago, The Red Band Film Company announced that it will use Mininova's publisher platform to distribute its upcoming TV show "Pariah Island." Red Band Executive Producer Christopher Paris is excited about the new service, and said, "Mininova CD offers real power to independent media producers who need to reach consumers, but who don't have access to the established channels, which are locked up by the giant media corporations."

"Consumers want licensed, independent media; mainstream distribution methods have failed to keep pace to meet that demand. By using Mininova CD, producers can get their product into consumers' hands without the overhead, expense, and aggravation of working with mainstream distributors."

Mininova's CD service is starting off with a lot of games, but is suited to all kinds of media, such as movies, music, and software. BitTorrent, which launched its own content distribution platform last year, will syndicate the free content from its network with Mininova.

Mininova's CD is a great outlet for indie publishers. Great films with a small budget are now being watched by millions of people, something that wouldn't be possible without BitTorrent. Mininova's CD now makes this even easier for these artists to distribute their content, without having to worry about seeding the files.

ROK Powers Warid Mobile TV Deployment

Excerpted from Fakeera Report

ROK Entertainment Group, the UK-based mobile applications development company, has reached an agreement with Pakistan mobile operator, Warid Telecom, to provide streamed mobile TV over Warid's existing 2.5G network. Warid Telecom, which is part-owned by Singtel, aims to launch the multi-channel TV offering as a subscription-based service in a matter of weeks.

Commenting on the announcement, ROK CEO Laurence Alexander said, "Warid is a highly innovative and fast-growing mobile operator that quickly realized the massive potential of mobile TV streaming live and on-demand channels over its existing network across Pakistan. We are confident of significant up-take of the service when we launch in a matter of weeks."

ROK is in the midst of a global deployment of its streamed mobile TV service to more than 30 mobile operators worldwide. In May this year, ROK announced that it had agreed to be acquired by US publcly-listed company CyberFund in a share exchange agreement.

As part of its global deployment, ROK already powers mobile TV services for clients including Avea in Turkey, AIS in Thailand, Telenor in Pakistan, and Vodacom in South Africa. It also offers its services direct-to-subscribers in conjunction with Nokia E-series devices across Europe.

PlayFirst Raises $16.5 Million in Series C Funding

PlayFirst, a leading publisher of casual games, has raised $16.5 million in its Series C financing round led by DCM. Existing investors, including Mayfield Fund, Trinity Ventures, and Rustic Canyon Partners, also participated in the round. Previously, PlayFirst raised a total of $10 million in its Series A and B rounds, bringing the current total of venture capital raised to $26.5 million.

"Since its founding in 2004, PlayFirst has been a driving force in the explosive casual games industry," said Peter Moran, General Partner, DCM. "The company's initial success with micro-transactions this year has demonstrated that PlayFirst is among the smartest, savviest, and most visionary companies in casual games. With a number of immediate opportunities to expand on its new business model - and its ability to create strong intellectual property (IP) like "Diner Dash" - PlayFirst is in position to continue its leadership role in this dynamic space."

PlayFirst plans to use the funding to accelerate both web and game development and to satisfy the increasing and ever-evolving demand for high-quality casual game experiences. Based on the initial success from new business models and new brands including "Chocolatier," "Dream Chronicles," and "Wedding Dash," PlayFirst will continue to expand and shape the casual games market.

"PlayFirst has a history of breaking new ground, and with our introduction of virtual goods into Diner Dash we continued that trend in 2007," said John Welch, CEO & President, PlayFirst. "We are thrilled to have the backing of DCM and the continued support of our existing investment partners to help us grow the casual games industry into the mass-market, highly profitable business that industry insiders and analysts expect it will be."

According to analyst firm DFC Intelligence, the casual games/online games market is expected to reach $2.2 billion by 2012. David Cole, Analyst, DFC Intelligence, said, "Innovative companies willing to diversify platforms, create quality content, move beyond the $20 business model, and introduce innovations like micro-transactions to casual games, will continue to drive this industry forward."

From Obscurity to Fame on the Net

Excerpted from NY Times Report by Devan Sipher

Ingrid Michaelson, a 28-year-old singer-songwriter whose self-produced album "Girls and Boys" reached No. 2 on the iTunes pop chart, is enjoying an enchanted transformation as a recording artist.

Ms. Michaelson's climb out of obscurity started, as is so often the case these days, on the Internet. Now she is known to many "Grey's Anatomy" fans for her quirky, heartfelt songs that were featured over the past year on the ABC television series. After a cross-country music tour, she is performing on Wednesday at the Bowery Ballroom in Manhattan, and she pointed out that the concert sold out a month ago without any advertising. She has added a concert on February 15th at Webster Hall.

Not bad for someone who, until May, was teaching in an after-school theater program in the Stapleton neighborhood of Staten Island, where she still lives with her parents, a dog, and a pet rabbit in the house she has inhabited since she was born.

"It's so uncool, it's cool," said her mother, Elizabeth Egbert, the Executive Director of the Staten Island Museum.

Ms. Michaelson has inherited her mother's dry wit, which she combines with youthful enthusiasm and a penchant for funky eyeglasses. "Apparently my glasses make me sound just like Lisa Loeb," she deadpanned, alluding to articles that compared her to Ms. Loeb, a well-known singer.

Ms. Michaelson began her music career in 2002 as a barista at the Muddy Cup, a coffee bar and performance space in Stapleton, where she performed weekly. By 2003, she had produced her first album, "Slow the Rain," and was playing at the Bitter End in Manhattan.

She called those shows a sobering experience. "I learned pretty quickly that just because you're playing at a good venue doesn't mean people are going to come see you," she said.

So she decided to throw caution to the wind, or, more specifically, to the Internet. She completed "Girls and Boys" in 2006 and loaded the music onto a MySpace page, where it caught the attention of Lynn Grossman, the owner of Secret Road, a music licensing and artist management company in Los Angeles.

"I listened to her song 'Breakable' about 40 times in a row, and I completely fell in love with the song," Ms. Grossman said, referring to a surprisingly buoyant song about human fragility.

Ms. Grossman's visceral reaction to the material astonished her. After years in the music industry, she said, she had considered herself desensitized. "It's really rare when something pierces through," she said.

So she immediately contacted Ms. Michaelson, pledging to get a song on "Grey's Anatomy," which was Ms. Michaelson's dream.

Yet Ms. Michaelson remained skeptical. "You get so many false promises from people that you don't expect anything to happen," she said.

But things did happen. And fast. Old Navy chose her song, "The Way I Am," for a sweater commercial. VH1 selected her for its artist discovery program, making her the first unsigned artist to appear on the channel. And radio stations, including WPLJ-FM (95.5) in Manhattan, added her songs to their playlists.

"I had a three-year plan, and we achieved all those goals in 10 months," Ms. Grossman said. As for "Grey's Anatomy," the series used not one but three of the songs from Ms. Michaelson's album. Then the producers took the unusual step of asking her to try writing something specifically for the show.

She grabbed the opportunity and created "Keep Breathing," a song that juxtaposes a plaintive melody with deceptively simple lyrics. "I like to say a lot in a very small amount of words," Ms. Michaelson said.

The song played through the closing minutes of the season finale in May, with the last line, "All we can do is keep breathing," repeating incessantly over layers of reverberating percussion and instrumentation.

"I love songs that have tension, tension, tension, and then release," Ms. Michaelson said. "We feel it in our bodies. We hold in the tension, and then we release and exhale."

After a whirlwind year, this might be a good time for Ms. Michaelson to exhale. But that's easier said than done. The music business is notoriously unpredictable, and she is all too aware that her fairy tale success story did not happen by the book.

"I worry this is all going to disappear in a few months, and I'll have to wait tables again," she said. "I get anxiety-ridden, and I can't relax."

She took a breath and added, "I should sing my own songs to myself."

Robertson Pans Imeem, UMG Death Sentence

Excerpted from Digital Music News Report

Imeem recently sealed a deal with major Universal Music Group (UMG), a revenue-sharing arrangement lauded as a fresh model for the recording industry. The negotiation was the last and final major label arrangement for social networking upstart Imeem, and part of a broader revenue diversification move by companies like Universal.

But not everyone is so upbeat on the arrangement. Michael Robertson, original founder of MP3.com and a notorious industry cage-rattler, heaped criticism on the tie-up during a Wednesday blog. "Far from a breakthrough, it is a death sentence for Imeem," Robertson wrote, citing discussions with individuals close to the negotiations.

"Under a dark cloud of looming lawsuits, Imeem entered into a crushing financial agreement that allows it to survive as long as venture capital money continues to flow into the company, but spells almost certain financial calamity once outside funding halts."

Robertson was quick to criticize an aspect of the arrangement that calls for a per-penny payment on streams, if advertising revenue fails to meet certain thresholds. In addition, Robertson pointed to a $20 million upfront payment, and similar demands by other majors.

"A more accurate description would be an ownership position with substantial upfront payments, plus required ongoing payments regardless of revenue generated by Imeem," Robertson relayed. 

"To put it another way, it is the same onerous deal labels have foisted on digital music companies for the last decade."

Why the Exaflood Won't Drown the Internet

Excerpted from Ars Technica Report by Nate Anderson

In December, 1995, Bob Metcalfe wrote a famous column for InfoWorld in which he predicted that the Internet would suffer "gigalapses" at some point in 1996. 

According to his scenario, the massive traffic of the time was building like a wave about to break on the unsuspecting villagers who had just begun to rely on this "Internet" thing for e-mail and some primitive web browsing. Fantastic failures would be the norm as overloaded networks struggled to push the bits along.

Metcalfe knew his networking; this is the man who worked on Ethernet and founded 3Com, after all. His column's call to arms certainly achieved one effect: it riled up a lot of network engineers who claimed that 1996 was in no way going to be the "Year the Net Crashed."

And of course, it didn't. There were no gigalapses in 1996, and things have been chugging along more or less smoothly for another decade since.

In early 1997, after it had become clear that his predictions had proven considerably more apocalyptic than reality warranted, Metcalfe made his mea culpa. He took to the stage at the Sixth Annual World Wide Web Conference in Santa Clara to eat his words. Literally.

Up on stage, Metcalfe brought out a cake designed to resemble his column. The crowd booed. "You mean eating just a piece of cake is not enough to satisfy you? I kind of suspected it would turn ugly," said Metcalfe, according to a Reuters write-up of the event.

He then took a copy of his original article and, predating the current "Will it blend?" craze, pulped the column in a blender along with some liquid and drank the entire slurry in front of a cheering crowd. Whatever else it was, the event represented excellent value for the money.

In a note to the North American Network Operators Group, Metcalfe then admitted that "I was wrong. I ate the column. I am sorry. I am not worthy."

Despite Metcalfe's column-drinking, doomsday predictions about the collapse of the Internet have never been hard to come by. Most recently, concern has focused on the rise of Internet video, one of the key drivers of traffic growth over the last couple of years. Should Internet traffic surge more quickly than networks can keep up, the entire system could clog up like a bad plumbing job.

A scholar at the Discovery Institute, Brett Swanson, kicked off the current round of debate about Internet capacity with a piece in the Wall Street Journal. Swanson warned that the rise in online voice and video were threatening the Internet, especially at its "edges," those last-mile connections to consumers and businesses where bandwidth is least available.

"Without many tens of billions of dollars worth of new fiber-optic networks," he wrote, "thousands of new business plans in communications, medicine, education, security, remote sensing, computing, the military, and every mundane task that could soon move to the Internet, will be frustrated. All the innovations on the edge will die."

What we are facing is nothing less than a "coming Exaflood."

Swanson's word refers to the exabytes of data expected to cross the Internet within the next few years (an exabyte is one thousand petabytes; each petabyte is one thousand terabytes), along with the sinister suggestion that this information will wash across the Net's routers in a biblical wave of destruction. Swanson believes that the challenge of the Exaflood can be met.

Swanson is not alone in forecasting massive growth. The US Internet Industry Association (USIIA) released a report in May on "The Exabyte Internet" in which the group talked about the "ramifications on Internet public policy as we grow from a Megabyte Internet to an Exabyte Internet." Cisco released a report on the "Exabyte Era." 

Clearly, these exabytes pose a risk to our precious tubes; will they clog them up?

Here's the problem: data on the Internet is exploding. IDC estimates that 161 exabytes of digital content was created and copied in 2006; in 2010, that number could grow as high as 988 exabytes. Not all digital content passes across the Internet, of course, but much of it does and more of it will as online backup systems become pervasive.

Cisco's estimates for IP traffic are in line with this growth rate in digital content. The network equipment maker estimates that IP traffic will quintuple between 2006 and 2011, and it says that P2P traffic alone will account for three exabytes of data each month by that time. Cisco notes that three exabytes is equivalent to 750 million DVDs.

If network providers can't or won't upgrade their networks fast enough, delays and outages could be the result. And it's not just the core of the Internet that is the focus of these concerns; in fact, the major companies that run the largest networks in the world are the ones most likely to substantially upgrade their networks to keep pace. Instead, the problem could come at the edges of the network, the last-mile connection to homes and businesses.

Part of the problem is that the size of media files is growing quickly. Music files, once commonly offered at 128kbps, are now routinely offered at 265kbps or 320kbps. Video files sizes are also exploding with the rise of HD formats. 

Simply downloading these files from a company's servers could make for real congestion in the last mile, and this was as a special problem for cable operators, which often share bandwidth among all users of a single node. HD won't even be the worst of it, as new 4K video (4,000 pixels across) threatens to balloon file sizes even further over the next decade.

But the growth in file sizes is made worse by a concurrent increase in the use of P2P as a delivery mechanism. Distribution gets pushed form the center of the network to the edges as users increasingly become both the consumers and providers of content, so the tubes could be clogged in both directions. 

Much of this traffic may not even reach the public Internet when large ISPs like AT&T have both the uploader and downloader as subscribers. The USIIA describes this transition as a traffic shift "from the Internet backbone to a peered system in which content is streamed directly to consumers," and the group notes that it will require ISPs to upgrade the most expensive part of their networks to keep pace: the last mile.

New services like video rental are also making the move online and should hit the mainstream within several years. Even now, when online video distribution is just beginning to take off, Microsoft alone uses an estimated 5,500TB each month in bandwidth just to send movies and television shows to Xbox 360 consoles. Social networking, not usually thought of as a high-bandwidth proposition, can certainly slurp up the bits. 

According to Cisco estimates, MySpace alone moves 4,148TB each month. Even gaming requires big bandwidth. "World of WarCraft," by itself, moves over 2,500TB of data a month, more than Yahoo's US operations.

Keep in mind that the entire US Internet backbone transferred only 6,000TB a month back in 1998. Now, a decade later, individual US sites like YouTube require nearly twice that amount.

The USIIA cites a research study from Teleography that found Internet traffic increased by 75% in 2006, while capacity grew by only 47%. Should such trends continue, we could be in for some trouble. One approach to the problem is simply adding more bandwidth. 

It's the most obvious solution, of course, and it's one suggested by people like industry analyst David Isenberg. Isenberg argues that it's simply cheaper to "overprovision" the Internet, even by a factor of two, than it is to resort to traffic shaping and packet management tools on a large scale.

Not everyone agrees that this approach is feasible. The USIIA, for instance, says, "Though additional capacity is an important part of the overall strategy, it will not in itself resolve all of these issues." That's because Internet traffic is growing faster than capacity, but also because of the difficulty in upgrading the edges of the network, not just the center (where such upgrades are relatively simple).

Nemertes Research, in its recent report on the subject, concluded that, "Demand for Internet and IP services is increasing exponentially, while access investment is proceeding linearly. An exponential curve will always intersect a linear one given enough time." Nemertes believes that this will happen sometime around 2010. 

When it does, the Internet won't collapse, but individual users will "increasingly find themselves encountering Internet brown-outs or snow days, during which performance will seemingly inexplicably degrade."

To their credit, most people involved in writing about the "coming Exaflood" have kept the alarmism dialed back. Nemertes is clear that the effects on the Internet could be substantial, but that no amount of data is likely to bring the entire set of networks to a grinding halt. 

The USIIA, likewise, sounds the alarm bell but notes that "the numbers do not yet mean an Internet in imminent danger of collapse." Cisco says in the very first line of its executive summary, "The Internet is not collapsing under the weight of streaming video."

And despite warning that "all the innovations on the edge will die," Brett Swanson closed his Wall Street Journal piece by claiming that the crisis could be averted with "tens of billions of dollars worth of new fiber-optic networks."

So that's alright, then. The Exaflood may be rolling in upon us, and it may threaten the Internet with a data tsunami, but the crisis can be averted if enough cash is tossed in the direction of the problem. And ISPs - whose business data transmission is, after all - will no doubt do whatever it takes to keep the Internet "snow days" away.

Internet 2008: Making the Connection

Excerpted from Media Life Report by Heidi Dawley

The wonderful thing about the Internet for users is that it's ever-changing.

The not-so-good thing is that the pace of change is hard for marketers to keep up with, and that's no more so than with social networking. Social networking exploded in 2007, led by MySpace and Facebook, but marketers are still struggling to figure out how to capitalize on that growth, even as they hike their ad spending on those sites. That will be among the big challenges of 2008. 

"We are in a period of experimentation," observes David Schatsky, President of JupiterResearch, the research outfit. "Social media as a phenomenon, and what a social media experience is, continues to evolve. If Facebook and MySpace didn't change, then 2008 would be a year when marketers could figure out how to use them. But they keep changing."

As it was, social networking dominated 2007, following several years of huge growth, and it will again dominate in 2008, as the big Internet wave. This will occur against a backdrop of rising broadband penetration and double-digit growth in ad spending. 

"If I had to choose the most interesting thing about 2008, the social media and social marketing stuff has the greatest buzz around it. It is compelling," Schatsky says. 

The second big wave will be Internet video, which started with the success of the user-generated video sites but quickly spread to all manner of websites. 2007 was a huge year, and 2008 will be huge as well. Yet it will be a challenging year for marketers, and in ways not dissimilar to those for social sites. 

The challenge will be in coming up with an advertising model uniquely suited to online video. Is it TV? Is it the movies? Is it the Internet? Or is it something entirely different? What forms of ads work best?

Of the two, social media and video, social media has the deeper roots. MySpace launched in 2003, and by 2005 it had grown so that Rupert Murdoch's News Corp. jumped in to purchase it for $580 million.

In 2007, the momentum of social media was picked up and carried by the surging growth of Facebook, following a change in rules that expanded its user base from college kids to anyone over 13.

More strong growth is ahead. eMarketer is forecasting that the percentage of US adult Internet users visiting social networks at least once a month will grow from 37 percent in 2007 to one half of the adult Internet population in 2011.

Among teens, eMarketer forecasts a rise from 70% to 84% in the same period.

As for ad spending on these sites, eMarketer expects that to nearly double in 2008, to $1.6 billion from $920 million in 2007. And even then, it will be but a small part of total internet ad spending, pegged to reach $27.5 billion in 2008.

For online video, both JupiterResearch and eMarketer are forecasting that ad spending will quadruple over the next four years up from $775 million this year, while also remaining but a small part of total online ad spending.

Borrell Associates, a company that researches local Internet, also sees fast growth. "There are a lot of conditions combining to make that a rapid growth area," says Colby Atwood, President of Borrell, who cites the high uptake of broadband as one.

In fact, Atwood sees the move into online video as part of a larger trend. Advertisers, he believes, are beginning to move their ad money away from traditional forms of online advertising, like pop-ups, banner ads, and listings. Instead they are moving more money into paid search, e-mail and online video. This is something that he expects to continue in 2008.

"These areas are all popular because they are easier to measure, and easier to calculate return-on-investment (ROI)," says Atwood.

It is also a symptom of the fact that folks are learning how to use the web in ways they hadn't thought of initially.

Coming Events of Interest

P2P MEDIA SUMMIT LV - January 6th in Las Vegas, NV. This is the DCIA's must-attend event for everyone interested in monetizing content using P2P and related technologies. Keynotes, panels, and workshops on the latest breakthroughs. The Conference will take place in N260 in the North Hall of the Las Vegas Convention Center and the Conference Luncheon in N262-264. This DCIA flagship event is a Conference within CES - the Consumer Electronics Show.

IPv6 - Connectivity, Community & Consumer Electronics - Monday January 7th from 3-4 PM at The Venetian, Las Vegas, NV. This CES panel will discuss how the new IPv6 protocol will impact the consumer and enterprise experience of a connected world. Topics will include mobility, interoperability, media content distribution, and what IPv6 means for consumer electronics manufacturers.

CCNC 2008 - The Fifth Annual IEEE Consumer Communications & Networking Conference, January 10th-12th at Harrahs, Las Vegas, NV. Now co-promoted by the DCIA. The latest research developments and technical solutions in the areas of home networking, consumer networking, enabling technologies (including middleware), and novel applications and services. See www.ieee-ccnc.org for details. 

MIDEM/MIDEMNET  - January 26th-31st at the Palais des Festivals in Cannes, France. Never has there been such demand for music. By putting you in direct contact with nearly 10,000 music and technology professionals from over 90 different countries, MIDEM connects you with the players matching this unprecedented demand. Delegates from the recording, publishing, live, digital, mobile, and branding sectors gather to do deals, network, learn, and check out new talent.

Digital Music Forum East - February 26th-27th in New York, NY. Major and indie music label executives, artists and their representatives, and technology and consumer electronics leaders come together for this "must attend" event. Now in its 8th year, Digital Music Forum East is the leading event focused on the intersection of technology and music. Don't miss the opportunity to be part of the industry's future.

P2P ADVERTISING UPFRONT NY - Sponsored by the DCIA March 11th in New York, NY in conjunction with the Media Summit New York (MSNY). The industry's premiere marketplace focused on the unique global advertising, sponsorship, and cross-promotional opportunities available in the steadily growing universe of open and closed P2P, file-sharing, P2PTV, and social networks, as well as peer-assisted content delivery networks (CDNs).

Copyright 2008 Distributed Computing Industry Association
This page last updated July 6, 2008
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