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December 7, 2009
Volume XXVIII, Issue 11

Don't Miss the P2P MEDIA SUMMIT at CES on January 6th

Register now for the 2010 International Consumer Electronics Show (CES) and sign-up for the extraordinary P2P MEDIA SUMMIT at CES taking place on Wednesday January 6th.

Don't miss this seminal industry event being held once again at the Las Vegas Convention Center. There's no better way to get a head-start on what to expect in the New Year from the forefront of online service development than by personally attending.

The third-annual P2P MEDIA SUMMIT at CES will feature keynotes from top peer-to-peer (P2P), social networking, and cloud-computing software companies; tracks on policy, technology and marketing; and panel discussions covering content distribution and solutions development. Enterprise deployment as well as consumer adoption trends will be covered.

A key theme will be the use of P2P and cloud computing for games. DCINFO readers can now view Abacast's archival video of the DCIA's first special event on this topic here.

Josh Silverman, CEO of Skype, the P2P industry's greatest financial success, will also deliver the keynote address at the Leaders in Technology Dinner (LIT) at CES on Friday January 8th.

The DCIA is an allied association of the Consumer Electronics Association (CEA).

Verizon Business Helps Enterprises Harness the Power of the Cloud

Cloud computing is transforming how information technology (IT) resources are delivered. For today's enterprises, it is not a question of if they will adopt "cloud" or Internet-based services, but how and when.

Verizon Business is helping enterprises down this critical path with its new Cloud Computing Program - a set of IT consulting and managed services that offer enterprises a holistic approach to transitioning to the cloud, while addressing specific security, privacy, performance, and governance requirements. 

The Verizon Cloud Computing Program also helps enterprises manage, monitor, and maintain their clouds, whether applications are delivered from an enterprise's own data center, or one operated by Verizon or a third party. 

This lifecycle-centric program offers enterprises a flexible, vendor-neutral approach to understanding the cloud environment, using a five-tiered process: assess, design, migrate, manage, and secure. By leveraging the company's experts in data center virtualization, application management, and security, 

Verizon Business works with enterprise customers to create a secure, cloud computing environment, while giving them the level of support desired, no matter where they are in their cloud computing deployment.

Cloud computing, the use of Internet-based technology to supply IT resources, enables enterprises to employ computing resources in the quantities and duration dictated by business requirements, thereby paying for only the resources used and avoiding the need to build-out for peak capacity requirements by buying new equipment and adding staff. 

Of key concern is advising client-partners on which business applications should be moved to the cloud in order to better use data center resources, enhance performance, and control IT costs, as well as identifying the best cloud environment - public, private, or a hybrid combination of the two.

"It is now clear that cloud computing is part of the future of IT," said Joe Crawford, Executive Director - IT solutions and Hosting Product Management, Verizon. "While many businesses recognize the many benefits associated with cloud computing, concerns still persist over security, performance, and governance. With our market-leading IT capabilities and experience from building and deploying our flagship cloud offering, Computing as a Service (CaaS), Verizon Business is well-positioned to advise enterprises on their cloud computing strategy."

Gartner, a leading worldwide information technology research and advisory firm, forecasts that the market for cloud services will grow to $150.1 billion by 2013, from an estimated $46.4 billion today. The Verizon Cloud Computing Program is part of the company's comprehensive approach to cloud computing. 

From CaaS to IT consulting services, Verizon Business is making it easier for customers to build the right foundation to meet their often complex requirements. 

The Verizon Cloud Computing Program joins the company's extensive portfolio of IT and hosting solutions. Supported by a global team of professional services experts and backed by a secure and reliable technology infrastructure, Verizon Business' IT solutions enable customers to meet the most pressing IT demands.

PPLive Receives New Round of Funding

Excerpted from Sina Tech Report

CEO Tao Chuang of Chinese P2P streaming video provider PPLive confirmed that the company has completed a new round of funding worth more than $15 million, and has joined the Shanghai municipal government's guidance fund.

Industry sources say that PPLive has received an investment from SAIF Partners, and that previous investors BlueRun Ventures and Draper Fisher Jurvetson (DFJ) also added to their investments. 

Tao also said that prior to this round of funding, PPLive received a strategic investment from Chinese Internet search giant Baidu.

Tao added that he believes that PPLive has completed its roll-out of critical network resources, and now has sufficient cash flow to support continuing operations going forward.

82% of US Kids Are Gamers

Excerpted from Digital Media Wire Report by Mark Hefflinger

82% of US kids aged 2-17, or 55.7 million, consider themselves to be gamers, according to a survey conducted by market research firm NPD Group

The smallest segment of this group (9.7 million) is 2-5 years-old, while the largest segment (12.4 million) is aged 9-11. Those aged 12-14 spend the most time playing games each week, at 10.6 hours, with time spent gaming dropping off among older teens. 

"The decline in teen usage of videogames is likely due to diversifying, maturing interests, which translates into stiffer competition for their mind and wallet share," said NPD Group analyst Anita Frazier. 

"In addition to competition from other areas of the entertainment space, more school work, activities, and parent-imposed time limits on gaming are factors which the data suggests may be contributing to this dip in older teen engagement." 

Across all age groups, the survey found that kids use an average of 2.5 systems or devices for gaming; over half (51%) play games online.

Report from CEO Marty Lafferty

Photo of CEO Marty LaffertyWe encourage industry participants to review the notice published this week in the Federal Register seeking public comment on the US Federal Communications Commission's (FCC) proposed rulemaking regarding "Net Neutrality."

Comments are due on January 14th. If you would like to contribute your views as part of our submission, please call 410-476-7965 or e-mail FCCNN@dcia.info by December 31st. 

We also urge you to visit www.openinternet.gov and get involved in the process.

The FCC's draft language under consideration is as follows:

"The purpose of these rules is to preserve the open Internet. These rules apply to broadband Internet access service providers only to the extent they are providing broadband Internet access services.

The Internet is defined as the system of interconnected networks that use the Internet Protocol (IP) for communication with resources or endpoints reachable, directly or through a proxy, via a globally unique Internet address assigned by the Internet Assigned Numbers Authority.

Broadband Internet access is defined as IP data transmission between an end-user and the Internet. For purposes of this definition, dial-up access requiring an end-user to initiate a call across the public switched telephone network to establish a connection shall not constitute broadband Internet access.

Broadband Internet access service is defined as any communication service by wire or radio that provides broadband Internet access directly to the public, or to such classes of users as to be effectively available directly to the public.

Reasonable network management is defined to consist of: (a) reasonable practices employed by a provider of broadband Internet access service to: (i) reduce or mitigate the effects of congestion on its network or to address quality-of-service (QoS) concerns; (ii) address traffic that is unwanted by users or harmful; (iii) prevent the transfer of unlawful content; or (iv) prevent the unlawful transfer of content; and (b) other reasonable network management practices.

Subject to reasonable network management, a provider of broadband Internet access service may not prevent any of its users from sending or receiving the lawful content of the user's choice over the Internet; running the lawful applications or using the lawful services of the user's choice; or connecting to and using on its network the user's choice of lawful devices that do not harm the network; and may not deprive any of its users of the user's entitlement to competition among network providers, application providers, service providers, and content providers.

Subject to reasonable network management, a provider of broadband Internet access service must treat lawful content, applications, and services in a nondiscriminatory manner.

Subject to reasonable network management, a provider of broadband Internet access service must disclose such information concerning network management and other practices as is reasonably required for users and content, application, and service providers to enjoy the protections specified in this part.

Nothing in this part supersedes any obligation a provider of broadband Internet access service may have-or limits its ability-to address the needs of law enforcement, consistent with applicable law; or to deliver emergency communications; or to address the needs of public safety or national or homeland security authorities, consistent with applicable law.

Nothing in this part is intended to prevent a provider of broadband Internet access service from complying with other laws."

The FCC also notes that, "The increasing capability of broadband Internet access service providers to offer differentiated services and prices for traffic flowing over their networks has spurred a debate about the public policy implications of using that capability. In particular, some parties have expressed concerns that, absent appropriate oversight, broadband Internet access service providers could make the Internet less useful for some users or applications by differentiating traffic based upon the user, the application provider or the type of traffic."

"Other parties have suggested that the problems 'are all potential problems, not actual problems' and that the 'fundamental inability to demonstrate any evidence of an actual market failure confirms what all the rhetoric in the world cannot obscure: Net neutrality is a solution in search of a problem.''

Previously, FCC Chairman Julius Genachowski summarized the FCC's pre-existing four principles intended to preserve and maintain an open Internet, which have guided FCC policy since 2005, in a single statement:

"Network operators cannot prevent users from accessing the lawful Internet content, applications, and services of their choice, nor can they prohibit users from attaching non-harmful devices to the network."

Then he added two more. Fifth: "Non-discrimination - broadband providers cannot discriminate against particular Internet content or applications." And sixth: "Transparency - providers of broadband Internet access must be transparent about their network management practices."

While we are generally supportive of these principles, as previously noted, we remain concerned that the inherent stringency of detailed rulemaking based on them could freeze innovation in areas of rapid technological advancement and change. Ironically, premature government regulation could actually be detrimental to the preservation and maintenance of a free and open Internet. This is particularly true in the area of non-discrimination, where burdensome regulations could have an effect that would be the opposite of what is intended.

It is essential that the Chairman's commitment to "do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity" inform all such rulemaking efforts.

We fully agree that unlawful practices should not be sheltered by these principles. But we believe that where new business models have not yet been established, continued experimentation and a search for solutions that capitalize on the disruptive capabilities of broadband networks - and the sophisticated Internet-based software applications that run on them - must be the priority.

This quest should take precedence over a continuing emphasis on enforcement aimed at protecting old models, which has not proven to be a winning strategy. Once new revenue streams have been defined, it may even be more beneficial to rights holders, consumers, and other participants in the online distribution chain to revise and update copyright laws rather than to settle for mere co-existence with rules that are no longer adequate or applicable.

The genius of Internet innovators is enormous indeed, and the fewer obstacles they face, the greater the future benefits will be.

Finally, the application of these principles must take into account practical realities, in terms of such differences as capacity constraints, usage patterns, and market competition, unique to various broadband networks (e.g., wireline vs. wireless) that will change as they evolve.

In the fullness of time, we envision not so much a convergence towards just one Internet with different access points as the emergence of a growing panoply of dynamically interconnected P2P networks and fungible computing clouds. Ad-hoc sets of connections will quickly coalesce and dissipate as users group, separate, and regroup in diverse configurations to accomplish a multiplicity of tasks. Consumer demand truly should be allowed to be the key driver of this evolution, not federal regulation.

In the meantime, voluntary private sector initiatives seem preferable to even the best intentioned federal regulations. In 2007, Laird Popkin, CTO of Pando Networks, and Doug Pasko, PMTS of Verizon Communications exemplified this with regard to an enhanced P2P networking protocol, dubbed P4P. P4P was developed by Haiyong Xie, a doctoral candidate in computer sciences at Yale University, under the guidance of Professor Richard Yang.

The P4P protocol promised to relieve network congestion. Theoretically, P4P would enable broadband providers to securely share network topology information with P2P application distributors so that their file-transfer efficiency could be improved by an astonishing eighty percent - to the benefit of all parties, including consumers.

With P4P, Internet service providers (ISPs) should be able to enjoy an enormous savings of network resources, and P2P programmers should benefit from accelerated delivery speeds and quality improvements - not degraded service.

Pasko and Popkin called upon the DCIA to start the P4P Working Group (P4PWG) and, under their tutelage, the P4PWG grew from a handful of interested ISPs and P2Ps to approximately one hundred such organizations with a global footprint.

The P4PWG not only validated the promise of P4P, it also demonstrated that P4P could exceed its initially projected potential.

The P4PWG conducted advanced simulation studies, field-tested the P4P protocol under various conditions, published results, formalized the working group's structure as a non-profit corporate alliance, submitted technical specifications to the leading Internet standards-setting body, and now its members are in the process of commercially deploying P4P so that its benefits can be realized all over the world.

The DCIA believes that the best way to ensure continuing development of the Internet - and the innovation, opportunity, and prosperity associated with successfully doing so - is through a combination of the high-level principles articulated by Chairman Genachowski, case-by-case examinations by federal agencies of questionable practices in well established market segments, and voluntary private sector initiatives, like the P4PWG, that bring together directly affected parties to find technological and commercially viable - as opposed to regulatory - solutions.

The flexibility of this kind of a dynamic process will yield more progress than the rigidity of a static regime bound in conventional rulemaking and enforcement procedures. Share wisely, and take care.

P2P Industry Leader Skype Courting Carriers

Excerpted from Telephony Online Report by Ed Gubbins

After years of taking telecom service share from traditional providers, P2P industry leader Skype is looking to cozy up with carriers.

The company recently broke free of legal entanglements with its former parent, eBay. Under its new owners (an investor group that includes Silver Lake Partners and Andreessen Horowitz) the company is focusing in the near term on carrier partners. Its CEO, Josh Silverman, has hinted at possible deals in the works with Chinese mobile operators in particular but is more explicit about the timing.

"You should expect to see more carrier deals in 2010," Silverman told Dow Jones Newswires. "The attitude of carriers has shifted a lot in 18 months, and we think that is a trend that is going to continue."

Not only have carrier attitudes shifted a lot - toward third-party voice services on their networks - the entire landscape has as well. Skype competitors come in all shapes and sizes now, from little-known mash-ups and features on existing services to the big kahuna, Google, whose acquisition of VoIP start-up Gizmo5 this month seems aimed at taking advantage of Skype's long-lived corporate distractions.

Silverman is taking aim at Google's strengths by downplaying the importance of innovative features that have fueled the rise of Google Voice.

"This is not about adding new features anymore," Silverman told the NY Times. "This is about making the few things that matter work really well."

That sentiment makes Silverman sound more like a carrier than an over-the-top (OTT) web services firm, in line with the company's new partner strategy. And that thinking may be partly the result of the difficulty Skype had with its application developer program, which the company closed this fall because not enough people were using it.

Going forward, Skype may focus new feature innovations more toward its business customers, though that effort will take a while. Silverman said the company wants to create purpose-built enterprise software but acknowledged it could take three-to-five years to do so. In that time, plenty of attitudes in the enterprise communications space are bound to shift as well.

Cloud Computing Most Dynamic Segment of IT Industry

Excerpted from Experian QAS Report by James Glass

Cloud computing has been named as the most dynamic segment of the software and IT services industry by a new study. Research carried out by consultancy business PAC predicted that the market for cloud computing will experience annual growth of more than 20% for the next 12 years, reports V3. 

Frederic Giron, a Director at PAC, said that cloud computing was increasingly providing a genuine alternative to more established software products. "Open source is also playing an important role in the customization of information systems, enabling service providers to better serve customer needs," he added. 

Giron went on to state his belief that cloud computing, along with service-orientated architecture, was playing a key role in what he termed the "industrial revolution of software." Earlier this month, David Cearley, Vice President of research company Gartner, said that he expected cloud computing to be a "broad, long-term phenomenon", reported ITWire.

Abacast Upgrades Online Radio Ad Insertion Service

Abacast, a provider of P2P-based online streaming and downloading solutions, announced this week the availability of version 2.3 of its flagship Ad Insertion Service (AIS).

Responding to the online radio industry's need for new revenue sources, AIS v2.3 provides new key features focused on increasing online station revenues.

This includes support for multiple advertising networks and prioritizing based on cost-per-thousand (CPM) or sales entity. Broadcasters can maximize their revenue by playing high CPM ads or ads sold by the station first, followed by ads sold by one or more Abacast Ad Network Partners.

"AIS's ad prioritization feature enables us to now monetize much more of our inventory," said Dawn 'Luna' Brunke, Online Content Director at Three Eagles Lincoln. "Management and tracking of inventory has allowed us to better serve our clients."

The new inventory forecasting features include real-time graphs of available vs. sold inventory projected into the future based on audience history. Stations are alerted in advance when ad sales are not meeting expectations, enabling them to engage with Abacast Ad Network partners to sell unsold inventory.

AIS version 2.3 also adds support for Spacial Audio's SAM Broadcaster platform. AIS can be used as the ad management and reporting tool on top of SAM, providing industry leading inventory monetization tools and third party Ad Network Providers to that platform.

"Abacast AIS is a core part of our online radio vertical solution along with our premier player, radio-specific analytics, royalty reporting, ad network partners, and hosted streaming including P2P options to enable cost-effective 128Kbps delivery," said Abacast Co-President Jim Kott.

"With this release, Abacast continues to build on its commitment to provide our online radio customers with the best possible value."

TVTrigger Integrates Television & BitTorrent into Lovable Package

Excerpted from Lifehacker Report by Adam Pash

In concept, it's pretty simple. TVTrigger lets you choose favorite shows - and then automatically downloads the latest for you as soon as it's available.

We've seen similar tools (like TED) before, but TVTrigger takes things a step further. It's got full episode lists, cast lists, and plot synopses. It can play trailers of episodes, and fully integrates with BitTorrent searches and downloads.

Although TVTrigger has a built-in BitTorrent client, you can choose to open torrent files with your preferred BitTorrent client if you don't want TVTrigger handling your downloads.

It's a little rough around the edges, but TVTrigger would probably feel a whole lot friendlier for beginners than the normal BitTorrent procedure. TVTrigger is a free download, Windows only.

"Call of Duty: Modern Warfare 2" Review

Excerpted from PC Gaming Report

"Call of Duty: Modern Warfare 2" as just a game, and not the genocidal product of pure, maleficent evil it's been made out to be since the infamous announcement of IWNet, is really, really good. The single-player campaign is unflinching and uncompromising, and bravely goes deeper into its own fiction, leaving behind any semblance of authenticity in favor of a campaign more defining and personal. Its multiplayer is a lot of fun, with minor adjustments culminating into a better base game than Modern Warfare's online component. Evaluating Modern Warfare 2 as just a game, though, wouldn't be fair.

Modern Warfare 2's multiplayer forgoes dedicated servers in favor of Infinity Ward's P2P and matchmaking system, IWNet. In short, it works. IWNet finds games quickly, and all but one of the matches I've been in worked well. The game masks ping average by representing your connection with bars, so if a 100-ping average sounds absolutely unplayable, then tough luck, or hope you're the host, which gives you that 0-ping advantage.

There are issues, however, that do bother me - there's no way to moderate and kick players, there's no way to set timers and adjusters except in private matches, and you can't filter for a map you want to play, just hope the game hooks you up with the map you wanted. It's way more restrictive and suffocating, much more than I thought it would be. IWNet is basically the same system that's been used for the console versions, and it's kind of incredible how easily this has been put up with and easily accepted. People are actually okay with not being able to choose your own maps? There's no anger over not having the option to get in on a 24/7 map? I know I'm sounding increasingly elitist, but honestly, how is such a closed system so accepted? The world deserves better.

Even with all the drawbacks, Modern Warfare 2's multi-player succeeds, just because the gameplay is so good. It's still largely the same game as Modern Warfare, with tweaks and balances that make sense. Perks like the notorious Martyrdom have been sorted under Deathstreaks, which are perks that are activated if you die enough times in a row. The same goes for the Modern Warfare perk, Juggernaut, which is now a Deathstreak that buffs your health for 10 seconds. XP has also been scaled, so that you get experience in 50s and 100s at a time for a kill, making rewards more delicious, even if it's just a perception thing. Bonus XP are also doled out for doing that little extra, like taking out a guy before he reaches his Killstreak or for finally getting out of your dismal Deathstreak. These are small alterations, but noticeably changes how the multi-player plays, and it's changed for the better.

Zorap Gets $1.35 Million for Video Chat with File Sharing

Excerpted from Digital Media Wire Report by Mark Hefflinger

Zorap, the provider of a free video chat service that includes music and video sharing features, has raised $1.35 million in new funding from private investors, PaidContent reported, citing a regulatory filing. 

Founded in 2007, Zorap allows users to create private chat rooms with up to 50 friends, where users can share webcam feeds, video chat, send text messages, and share a range of media files.

Cloud Computing is Obama Administration Priority

Excerpted from EDL Consulting Report

The Obama administration sees Software as a Service (SaaS) as an essential enabler of ability and cost savings and views cloud computing as a priority, a high-ranking federal information officer said Sunday.

Casey Coleman, Chief Information Officer (CIO) for the General Services Administration (GSA), told ZDNet that federal officials are developing strategies to adopt cloud-based technologies in a way that complies with security and privacy mandates. 

"Productivity and work flow-type applications that would ordinarily reside on the desktop are areas where SaaS solutions can play a key role," she said. Coleman said that the government is required to follow control and security rules established under the Federal Information Security Management Act (FISMA), and claimed that Obama administration officials are examining how to apply these rules to cloud computing providers. 

Most existing regulations were established before the current wave of SaaS technology. A number of prominent state and local government agencies have already begun moving to the cloud. In October, the Los Angeles City Council chose to switch to Google's cloud-based e-mail service over competing proposals from Microsoft, and analysts expect many smaller municipalities to follow suit.

Zattoo's New Strategy to Make Money from Web TV 

Zattoo is the peer-to-peer television (P2PTV) aggregator of broadcast television stations that caused some controversy last year over its syndication of UK TV channels online. Recently, when I had the chance to speak with Zattoo CEO Beat Knecht, he explained that while there was a debate to be had on this issue, it was no longer his focus. Like the rest of the online video and IPTV market, his focus is on monetization.

Zattoo has been organized into three areas: ad products, the environment in which these ads are consumed and the benefit (or not) of a web TV site having a linear counterpart. This last can be both a benefit and a hindrance. It can be difficult to establish an independent business model when you're the junior partner; however, the failure of Joost to live up to the hype was partly the result of low levels of awareness. The UK's public service broadcasters all promote their sites on TV to drive usage.

Yet whether it's big-brand TV channels, web TV companies or even newspapers, there's a growing sense the original revenue assumptions for online content were wrong. This is also the case for Zattoo. Knecht admits, "The original monetization assumption was twice what we could make, but we've adjusted projections and the model works." Zattoo has adopted a dual-revenue-stream model, collecting subscriptions in some European markets and just ad revenue in others.

Without a parent company, monetization of TV online is the only way sites like Zattoo can continue to exist. This requires not only keeping overheads to a minimum but establishing relationships with ad networks that offer a shot at the TV ad budget, as opposed to fighting over low-value, high-volume cost-per-click advertising.

To target TV budgets, Zattoo has developed high-value, lower-volume video ad formats that are situated in the right environment for branding campaigns. Additionally, it works with Smartclip, a video ad network that not only claims TV-like volumes but also converts usage data into the same or similar metrics as spot advertising. This is to make it easier for media agencies to add online video to the mix. It's worth considering whether Europe's IPTV platforms are pursuing similar opportunities. Despite there being more than 100 European IPTV services, there's little development and innovation.

Monetization isn't the only aspect of Zattoo that Knecht is revisiting. People are using the site for different reasons and in different ways than conceived. "Originally there was an assumption that use of Zattoo would be mobile - at work or in the airport lounge, for example," he says. In practice, 90% of use is in the home. Yet the least cited reason for using the site is when the main screen in the home is occupied. The most popular reason is that users want TV content on in the background while on their home PC.

This may contribute to, according to Zattoo's own figures, the comparatively high number of minutes the average Zattoo user is served each month - 500. This probably reflects a difference in the level of viewer engagement with the content being viewed - graph 2 illustrates simulcasts on Zattoo are often put on in the background, while the user carries out other activities online. This multitasking behavior is something we saw a lot of during the Ashes and Wimbledon, but is probably less common when it comes to on- demand.

The Zattoo experience has taught us that while opportunities exist on a pan-European basis, because TV channels and platforms are nationally-centric businesses, making the most of them is difficult. It's also taught us that web TV viewing might have a lot in common with the multitasking behavior we associate with other online activity. It's further evidence that our original revenue assumptions for online were wrong and 2010 will see continued restructuring and shake-out in the market.

It will be an interesting ride for SeeSaw in 2010. To survive in the web TV market it's necessary to go after TV ad budgets rather than compete with online ad spend. The UK is comparatively more advanced in this area than other European markets, but many of the opportunities exist on a pan-European basis. It's increasingly important to take note of the reason and environment in which online viewing is taking place - it might not be quite what you expected.

Spotify Appoints New CTO

Excerpted from GigaOM Report by Paul Bonanos

P2P music streaming service Spotify didn't take long to fill its vacant Chief Technology Officer (CTO) position. The European streaming music provider said today that Oskar Stal, who spent eight years at mobile commerce service provider mBlox, has joined the company as CTO. Stal's arrival comes just over a month after the abrupt but reportedly amicable departure of Andreas Ehn as CTO.

Well-funded Spotify's revenue strategy places great importance on success in the mobile sphere. It offers both a free streaming service that includes advertising on the desktop, as well as a premium version that eliminates ads and is accessible on mobile phones.

Spotify had intended to introduce its service in the US sometime in late 2009, but recently pushed the launch back to 2010 as content owners have stalled licensing deals for their music catalogs. The service is currently available in Sweden, Norway, Finland, the UK, France, and Spain.

Rebel Digital's Robin Kent on "Can Music Be Free?"

Excerpted from Music Ally Report

Previously Chairman & CEO of advertising giant Universal McCann, now founder of Rebel Digital, Robin Kent understands the economics of ad-supported media from both sides of the desk.

Q: Is ad-supported music dead?

A: I think the overall picture is that it's not really been tested yet. First. the Internet advertising market has not gone in the direction that people have predicted. Digital might have overtaken TV ad spending in the UK but it's a long way off from doing that in the US - perhaps a decade away. Everyone was predicting that by now the US would be getting to $40 billion, not $25 billion. So there has to be a paradigm shift in the type of advertising being used. Branded advertising has to make a major breakthrough. Until then it will be difficult for any site to attract big advertising at big prices.

Q: Why is there enough ad money to support some kinds of sites but not music services?

A: The problem with advertising is that the majority of the money goes to search - in the US 70% of ad dollars go to the top 10 sites - Google, MSN, AOL, etc. - and something like the top 89% of the 25 billion goes to the top 50. So for a start-up site to be able to deliver significant ad dollars is impossible regardless of what types of models.

Because advertising is done by computers these days, if you can't sustain a site on network advertising things will be tricky. The networks are buying everything at the lowest possible rates. A good CPM (cost per thousand) would be 70 cents in the US. If you have a website with a lot of ad space you're pretty much filling your site with network ads and you're in the sub dollar range - if you're a big site with a lot of impressions you're using a lot of Google AdSense dollars coming in at 4 or 5 cents, then your average CPM drops below 50 cents. Think about that on a 99 cent song and you see the problem. If you have a model that works in that environment you have an opportunity.

Q: If so few of these sites are making money, what is their business strategy?

A: Everybody who has entered this space so far today has seems to have an ambition to be bought by Google quite quickly. Maybe that's not the approach because it leads to accepting unacceptable deals from labels and putting out a variation of a service that might not be ideal. Take as an example Last.fm being bought by CBS - Last.fm doesn't get mentioned in the US any more. For these services it's about how quickly can we build something and how quickly can we exit - it was the downfall of Ruckus, MySpace, and iMeem. MySpace at least has the power of Murdoch behind it but it can't compete against Facebook so it's rebuilding itself as a music site.

Q: Does the music industry have a responsibility to help make free, legal music work?

A: The music industry demands a lot from these start-ups, but ultimately it's their content and because no-one knows where these services are going to end up, of course they're going to say 'if I'm going to go along with this I'd like fail-safes here, I want a big chunk of your advertising money upfront and I'd like a penny a play."

But that coupled with the ad environment means in my opinion a totally free model is unsustainable. Can it be sustainable in the future? If you look at the past what happened to Spiralfrog, it wasn't prepared to pay a penny per play, it was only prepared to do the ad share. Universal and EMI were up for that but not Sony and Warner;€¦ and if there isn't the catalog and the audience you run out of your investors' money.

Although there may be investments by labels in these companies - they did the same with MySpace Music and it doesn't mean they're going to help. The labels' point is: you guys want our content, you need to give us as many assurances as possible, and of course we'll take equity. But that doesn't mean they're loving partners - in theory if that were the case they'd rush to get Spotify launched in the US.

Q: What is your opinion on the new generation of free licensed music services?

A: Everybody has to be commended for trying.

I felt that iMeem was a poor user experience, most users were in Asia and they weren't monetizing them in Asia. When they ran out of investor money it was over. iMeem has now given up and gone to MySpace.

The Spotify guys are really good, they have a vision, it's just that they're going to have trouble implementing it. Between the fickle consumer and the struggling labels there are a lot of moving parts. What I'm now hearing about Spotify is that users love it and there's not much advertising, so why not have your music for free. But their biggest issue is that they're not going to prove that they can deliver revenue.

As a consumer I like Spotify - it has a great interface, it's easy to find what you want, the music plays well. The problem I found is that when the radio ads appear they are incredibly annoying. They come between the songs but there's not enough of them to pay what the record labels want. Once Spotify sells more radio ads it's going to drive the consumer away. Maybe it drives them to a pay model but there's no evidence from Rhapsody or Napster that there really is that much interest in the subscription model as it exists today.

I'm still involved in QTRAX and they're in Asia finalizing funding and they have a deal with Baidu whose music traffic can get forwarded to QTRAX in China thereby legitimizing them, which is a good sign for QTRAX in Asia. Also the QTRAX model doesn't rely on advertising in its entirety - it can generate advertising so it falls into the category of freemium.

Grooveshark is basically a bunch of young guys from Florida - they have a lot of very interesting ideas on how they're going to move forward - we have to move from the completely free model to the freemium model. There have to be other ways to generate money aside from advertising. The ad dollars may be there in the future but the market hasn't matured enough to know that. When the market knows you're an ad-supported site they're going to screw you.

Q: What about Guvera, the new free service whose deal with Universal announced last week?

A: The guy's nuts if he thinks that ad model is going to succeed - MySpace must already be out selling that model but there's no way you can survive on that. Not enough premium advertisers will jump out and build a channel. You can't control the quantity that come and if you're delivering a CPM at 70 cents but delivering customers a 99 cent MP3 you're out of business. They've only raised eight or nine million dollars but when you deal with the labels, they'll eat that up in a short period of time.

Q: How long will it be before one of these free services manages to make a success of the model?

A: If we fast forward five years when Internet advertising is bigger, advertisers are being more creative, something could pop up and could surprise everyone. By then the music industry situation won't have got any better: they can't stop infringement, so they'll be more open.€¦ Some of the services today have got to try and survive in the hope that they will prosper in the years to come. Labels have to be patient - if you they're expecting a quick return, it's not going to happen because it isn't there.

Torrent Site MiniNova Removes Infringing Materials

Excerpted from Tom's Hardware Guide Report

Is the age of BitTorrent coming to a critical bend? It certainly seems so, as the The Pirate Bay (TPB) has taken down its tracker for good, and now we learn that MiniNova is going legit.

"Today is an important day in the history of MiniNova," the site administrators wrote last week in a blog. "From now on, we are limiting MiniNova.org to our Content Distribution service. By doing so, we comply with the ruling of the Court of Utrecht of last August."

MiniNova is referring to ruling last summer when a judge ordered the site to remove all copyright infringing links within three months or else face up to 5 million euros in penalties.

"Unfortunately the court ruling leaves us no other option than to take our platform offline, except for the Content Distribution service," the admins wrote.

Interestingly, MiniNova launched its Content Distribution service in 2007, which it calls a success. While it hasn't been a mass market success for mainstream content producers, MiniNova names Dutch band Silence is Sexy as one who has released a complete album on the torrent site and received the Interactive Award in 2009 for its use of the distribution method.

Despite that, it doesn't seem that Content Distribution is the sole future business model for MiniNova.

"We are still considering an appeal at this moment," the side administrators said.

isoHunt Asks Court to Legalize Operations

Excerpted from Digital Media Wire Report by Mark Hefflinger

isoHunt, a service that aggregates links to downloadable media content, has filed a statement of claim against the Canadian Recording Industry Association (CRIA), asking a judge to rule that its service does not infringe copyrights, according to published reports. 

The company first asked a judge to rule on the legality of its service last year, after receiving cease-and-desist notices from the CRIA. A Canadian court in March denied isoHunt's request for a summary ruling declaring the service to be legal, meaning the case would have to be taken to a full trial to proceed. 

Gary Fung, the Founder of isoHunt, has now exercised that option, arguing that the service merely provides links to other sites. "I have high hopes for Canadian copyright laws and Canada's courts to not make the mistakes that have been made elsewhere in the world. We must fight the increasing noise we are drowned in," Fung wrote in a note on the isoHunt message board.

Court Rejects OpenBitTorrent Shutdown

Excerpted from Strategy Eye Report

A Swedish court is rejecting calls to order the shutdown of a website alleged to be operating a re-branded copy of the BitTorrent tracker previously used by file-sharing site The Pirate Bay (TPB).

Hollywood movie studio lawyers claim that OpenBitTorrent (OBT), provided by ISP Portlane, is serving as a replacement for the recently closed TPB tracker and providing an unauthorized gateway to copyrighted movies, games, and music. The court is ruling that in order for Portlane to be considered as infringing copyright, it must be guilty of more than just providing Internet access to OBT.

"The court has not touched on the link between the OBT tracker and TPB, and that all the .torrent files on TPB include OBT's tracker as the default tracker. The day we checked, there were 550,000 works that file sharers could download through the tracker," said Hollywood lawyer Monique Wadsted.

Spanish Anti-Piracy Measure Under Fire

Excerpted from NY Times Report by Eric Pfanner

The government of Spain has proposed new measures to curb the digital infringement of music and movies, but the bill has upset people on both sides of the debate over file sharing, with copyright owners calling it insufficient and Internet companies denouncing it as heavy-handed.

The proposal, detailed this week, calls for the creation of a government-sponsored commission with the power to investigate and shut down websites accused of being a conduit for infringement.

The bill stops short of a law recently approved in France, under which individuals who download unlicensed copyrighted material could lose their Internet connections.

In Spain, music companies and other copyright owners want the government to enact a similar law. "We do not think just going against the websites can be effective," said Fabrice Benoit, Managing Director of Universal Music Spain.

Internet service providers (ISPs) have also withheld support for the government's proposal.

Meanwhile, bloggers and representatives of web-based businesses met with Culture Minister Angeles Gonzalez-Sinde on Thursday to protest the plan, even though, unlike in France, the Spanish proposal could not result in anyone being disconnected from the Internet.

"The Internet should be free and not have any interference from groups that seek to perpetuate obsolete business models and stop the free flow of human knowledge," opponents of the bill said in a "manifesto" distributed on the web.

This week, music industry groups presented a petition signed by more than 2,500 musicians calling for stronger action against unauthorized copying, which is not a criminal offense in Spain.

Coming Events of Interest

Future of Film Summit - December 8th in Santa Monica, CA. This inaugural event brings together top executives, creators and professionals from major and independent movie studios, film distributors, talent agencies, law firms, financiers and digital media companies for high-level discussions and debate.

P2P MEDIA SUMMIT at CES - January 6th in Las Vegas, NV. The DCIA's seminal industry event, featuring keynotes from top P2P, social networking, and cloud computing software companies; tracks on policy, technology, and marketing; panel discussions covering content distribution and solutions development.

2010 International CES - January 6th-10th in Las Vegas, NV. The industry's largest educational forum to help companies expand their businesses and understand new technology. Over 200 conferences and more than 300 expert speakers encompass International CES.

MIDEM & MidemNet - January 23rd-27th in Cannes, France. MIDEM  is where music professionals from across the industry meet face-to-face to do business, analyze trends and build partnerships. MIDEM brings together music leaders looking for concrete solutions and insights. MidemNet's renowned digital business conference program is now included free with your MIDEM registration.

Vator Splash Event - February 4th in San Francisco, CA. Vator, a leading platform for innovators and entrepreneurs to broadcast themselves, is holding its inaugural Vator Splash Competition to find 10 promising early-stage start-ups to present at this special event. Enter the competition today using the 25% discount code: VatorDCIA.

P2P MARKET CONFERENCE - March 9th in New York, NY. Strategies to fulfill the multi-billion dollar revenue potential of the P2P and cloud computing channel for the distribution of entertainment content. Case studies of sponsorships, cross-promotion, interactive advertising, and exciting new hybrid business models.

Media Summit New York - March 10th-11th in New York, NY. MSNY is the premier international conference on media, broadband, advertising, television, cable & satellite, mobile, publishing, radio, magazines, news & print media, and marketing.

Copyright 2008 Distributed Computing Industry Association
This page last updated December 13, 2009
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