[JackSpratts]

Welcome To Online Piracy
Anubha Sawhney

There's a ripple across the Internet that's slowly but surely turning into a roar. It started with an article that Jeff Howe posted on Wired mapping the modus operandi of pirate networks.

The story so far... File piracy doesn't start with casual consumers. The number of files on the WWW actually ripped from CDs, DVDs and videogames bought in stores is minuscule. Piracy doesn't start with peer-to-peer networks like Kazaa either. They're way too slow. Instead, it's run by a hard-core subculture of people that are driven to obtain status as the best, fastest pirates, and to get credits that enable them to receive goods others have pirated.

They put the files up on 'topsites' where pirates with secret access codes grab them. A 'topsite' is one of 30 or so underground, secretive servers where virtually all the unlicensed music, movies and video games available on the Net originate. Thik of it like this: If Internet piracy is a pyramid, the topsites would be right at the peak.

Kaun banega topsite star? The topsites are exclusive clubs whose members compete for status by getting earlier, better content. The main goal is not to seed the common man's P2P net, but to build status and share files within a small group. Somebody on the fringe of the group can grab a file and redistribute it to a less exclusive club, as a way of building status within that lesser club. Then somebody on the fringe of that club can redistribute it again; and so on. And so the file diffuses outward from its source, into larger and less exclusive clubs, until eventually everybody can get it.

Ever since Jeff Howe's article on modus operandi of pirate networks was published, blogs across the Net have been calling it everything from frustrating to fascinating.

Here's a sample: "While an entertaining article for those lower on the chain of the Internet, it makes the ones a little bit higher in the hierarchy cringe a bit. It makes the movie bootleggers stand with their mouth wide open that such information would be released to the general public. It explains about there being 'Double Agents' in these topsites. Guess what?

Now every major topsite knows that there are security holes in their network, and they start being a little more careful about who gets access and go back and check over the people who already have access."

Another not-so-worried blogger says: "That article couldn't teach the most die-hard script-kiddy adolescent geek how to pirate software nor the most astute reader how to gain access to any of the so-called 'topsites'. If I taught you how to jump off the roof of your house, that doesn't mean you know how to fly."

Fastest finger first: What puts some people at the top of this pyramid, and others at the bottom? It's not so much that the people at the bottom are incapable of injecting content into the system; it's just that the people at the top get their hands on content earlier.

Content trickles down to the P2P nets at the bottom of the pyramid, often arriving there before the content is available by other means to ordinary members of the public. Once a song or movie is widely available, there's no reason for a user to inject it into the system.

From Howe's mouth: In response to the millions of posts discussing his article, Jeff Howe says, "We could debate whether taking the topsites out would stem the flow of content. It's true that all the content would eventually appear at some level of this network, but then, without the motivation to get it before it 'streets', the pyramid would have never come into existence, and the topsites are usually the only ones with the connections at studios, at cinemas, at labels, et al to accomplish this. But it's a moot point.

The topsites are difficult, maybe impossible to infiltrate. The larger point is the same: illicit distribution of copyrighted goods will continue unabated, at least until the larger dynamics of the entertainment industry change."
http://timesofindia.indiatimes.com/a...ow/1193518.cms





Another Way Past Windows Antipiracy Found
Joris Evers

Microsoft's efforts to fight counterfeiting have hit another snag with the posting of a new method claimed to get around a Windows piracy check.

The check is meant to prevent people with pirated copies of the operating system from downloading additional software from Microsoft. By changing a setting in a Microsoft validation tool called "GenuineCheck.exe," it's possible to generate a code that will validate the Windows software on a machine as genuine even if it is pirated, according to a Web site publicized on Thursday in a posting to the popular Full Disclosure security mailing list.

Microsoft would not confirm that the method works, but the software maker is investigating the issue, a company representative said. "It is not a surprise for us that those who never intended to pay for software would try to find some way to circumvent Windows Genuine Advantage," the representative said.

Microsoft last week made the Windows piracy check mandatory for all customers who want to download add-ons for Windows XP and 2000. The effort, dubbed Windows Genuine Advantage, requires users to verify that they have a legitimate copy of the operating system before they can get files from Microsoft's download Web sites.

Tricking the check
For the software maker, the news could be another episode of people finding a way to get around WGA. Last week, several Web sites said it was possible to bypass the piracy lock by several means, including pasting a JavaScript string into the Web browser. Earlier this year, during WGA's pilot phase, a security researcher outlined another way to trick the check.

The GenuineCheck.exe tool is meant to provide an alternative way for people to prove that their copy of Windows is an official Microsoft version. The primary WGA checking mechanism uses ActiveX, which is not supported in all Web browsers. The popular open-source Firefox Web browser, for example, does not support ActiveX.

"To make the validation experience as user-friendly as possible, Microsoft engineered a process that enables customers to validate their systems easily, and unfortunately, unscrupulous users are able to exploit that," the Microsoft representative said.

According to the Thursday posting, all a PC user apparently has to do to have GenuineCheck.exe generate a valid code on a machine with pirated Windows XP is to run it in Windows 2000 compatibility mode. This is done by downloading the tool, right- clicking on the file and selecting "properties." Then select the "compatibility" tab in the menu and change the compatibility mode.

If the method actually works, it may be short-lived. "Microsoft will be updating the validation system from time to time and plans to address these issues," the Microsoft representative said.

WGA is a stepped-up effort by Microsoft to increase the number of Windows users that are actually paying Microsoft for its software. At the moment, the company estimates that roughly a third of Windows copies worldwide are not legitimate.
http://news.com.com/Another+way+past...3-5821113.html



Jerry Garcia: The Man, the Myth, the Area Rug
Seth Schiesel

One of the icons of modern American culture now resides in a nondescript warehouse about 30 miles north of here, in a windowless, climate-controlled, heavily-alarmed room built like a bomb shelter that is called simply the Vault.

There, in towering rows of 13,000 audiotapes, 3,000 videotapes and about 250,000 feet of traditional 16-millimeter film lives the recorded history of the Grateful Dead, one of the seminal American rock bands.

The Grateful Dead ceased to exist on Aug. 9, 1995, when the band's lead guitarist and most recognizable figure, Jerry Garcia, died at age 53 of a heart attack at a drug treatment center. Yet 10 years later, the man and the band remain alive for millions of fans, and the once notoriously ad hoc Grateful Dead business operation has become a model for a music industry struggling with the Internet and digital democracy.

"When I first got into the record business I learned that it wasn't cool to be into the Grateful Dead," said Christopher Sabec, 40, a lawyer who said he saw the band more than 250 times and is now chief executive of the Jerry Garcia Estate L.L.C., controlled by Mr. Garcia's heirs. "But if you look at where the music business has been forced to go by technology, now it's not about selling records. It's about live shows and inspiring a fan base to be absolutely loyal. Hello? Who did that first? The Grateful Dead."

The Jerry Garcia company and Grateful Dead Productions are separate businesses each generating millions of dollars of revenue a year. Just how many millions is not publicly known. But consumers still buy more than a million J. Garcia-brand neckties each year, and Cherry Garcia is often the top-selling brand of Ben & Jerry's ice cream, each pint generating royalties for the Garcia heirs.

The band's four surviving members - the drummers Mickey Hart and Bill Kreutzmann, the bassist Phil Lesh and the guitarist Bob Weir - have toured occasionally as the Dead, though not this year. They control the Grateful Dead's licensing business, which oversees thousands of products sold around the world, like gas tank caps, incense burners, golf club covers and sandals. (The Garcia company receives a share of the proceeds.)

But for cultural and practical matters, the heart of the Grateful Dead's legacy resides in the 10,000 cubic feet of space in Novato, north of San Francisco. The Vault feeds a continuing business based on regular releases of old concert recordings on iTunes, on the band's Web sites and in stores, feeding old Deadheads and creating new fans.

Physically, there is only one key to the Vault, and only two people know where to find it. David Lemieux, 34, the band's archivist, is one of them. Jeffrey Norman, one of the band's engineers, is the other.

"This is it, the key to the Vault," Mr. Lemieux said, holding up the gleaming shard of metal, a sliver that to some Deadheads may be more sacred than a splinter from the True Cross.

One major way the band and the Garcia company have kept the flame alive is by regularly releasing audio and video recordings of old concerts that have been restored with the latest digital techniques. Two years ago, for instance, the band released a DVD of its performance that closed San Francisco's legendary Winterland Ballroom on Dec. 31, 1978.

"There is just no way we could have done the Winterland release without the current technology," Mr. Lemieux said in his memorabilia-plastered office.

For fans used to fuzzy old cassettes, the new releases are a revelation.

"Many of us Deadheads are experiencing a renaissance now in our appreciation for the band because such high-quality recordings are available," said Amir Bar-Lev, 33, a filmmaker from New York who said he saw the band more than 100 times. "Ten years ago I was listening to 20th-generation tapes kicking around the floor of my car. Now, thanks to all of the technology, I can hear the band in all its glory."

Mr. Weir, the guitarist, said in a telephone interview on Friday from West Virginia, where he was on tour with his band RatDog, that although Mr. Garcia sometimes resented his own celebrity, he would have been pleased that his music endured. "I'm glad people can still enjoy it," he said.

He continued: "I am a big fan of Duke Ellington and I never saw him live. I'm a big fan of John Coltrane and I never saw him live. I don't want to put us on that level, but we don't play all of this music casually or callously, and of course Jerry would appreciate people being able to experience it."

More broadly, the Grateful Dead's emphasis on touring over selling records presaged the music industry's current predicament over file-sharing on the Internet.

The Grateful Dead was the first major band to allow fans to freely make and trade recordings of its live performances in the belief that spreading the music that way would ensure long-term success. That formula was later adopted almost wholesale by other successful bands, including Phish, and fans still avidly trade live Grateful Dead recordings online.

Even though there are now high-quality recordings for sale, created using the official sound-mixing boards used at concerts, fans are still free to trade recordings made in the crowd. The band used to offer a special section of seating for amateur tapers.

"They wanted to create a space for themselves and their fans to gather and play, and that didn't sit well in the offices of the record business," said Mr. Sabec, who is perhaps best known in the music industry for discovering and managing the 1990's teen-pop group Hanson. "Now I find myself sitting in meetings where other bands are using the Dead as a model."

In the years immediately after Mr. Garcia's death, Grateful Dead merchandising brought in more than $50 million in annual gross revenue. That figure may have declined a bit since then, and the band's licensing activities are now separate from the Garcia estate's business affairs, but both entities continue to thrive.

In addition to ties and ice cream, the Garcia company has expanded into rugs and wine. An artist as well as a musician, Mr. Garcia signed his work "J. Garcia."

"I'm not trying to turn the J. Garcia brand into something you find at Target, but I am trying to broaden it," Mr. Sabec said. "There are J. Garcia carpets that my mother would be happy to have in her house, and she's not a Deadhead. If you were to position it only for people who were fans of Jerry's music, it would be a much smaller market than what we're going for."

Yet even as the Garcia company has expanded its ambitions, the band's business wing, Grateful Dead Productions, has in some ways pared down its operations in recent years, like many United States companies.

For a few years after Mr. Garcia's death, as the technology bubble expanded (Aug. 9, 1995, was also the day Netscape stock went public, signaling the coming dot-com boom), the band pursued a vision of creating a business tentatively called Bandwagon, which would function as a one-stop merchandising and online distribution operation for a variety of musical acts. In addition, the band came close to creating what would have amounted to a countercultural theme park in San Francisco.

"The whole Bandwagon thing was a function of the dot-com mania, especially spectacularly in the Bay Area," said Dennis McNally, the band's longtime publicist and historian. "There was also an idea of creating a performance space and museum called Terrapin Station, which we figured we needed $50 million to do. And in the context of the dot-com revolution, that seemed perfectly doable."

In the end, the band balked at potentially having to cede final control of the projects to outside investors. And as the dot-com bubble burst, the band went in the opposite direction. It laid off dozens of longtime employees, closing its own warehouse and largely outsourcing the logistics of the memorabilia business.

Now, the band has only about 10 employees, including Mr. Lemieux at the Vault.

Although the theme park never came to be, on Sunday in San Francisco, the city unveiled the newly renamed Jerry Garcia Amphitheater in John McLaren Park, near the blue-collar Excelsior District where Mr. Garcia grew up before moving to the better-known Haight-Ashbury neighborhood.

Backstage at the event, Mr. Garcia's older brother, Tiff, seemed to share his sibling's somewhat ambivalent attitude toward the marketing of celebrity.

"They're trying to do an Elvis on him, with all of the garments and merchandise and different items," he said. "But I'm not surprised. He meant so much to so many people, and I'm proud of the fact that one individual could draw so much attention."
http://www.nytimes.com/2005/08/09/na... tner=homepage





Big Pay Packages May Fade After Ruling on Ex-President of Disney
Jonathan D. Glater

Directors of the Walt Disney Company may have dodged a bullet, but battles over executive compensation - and especially supersize severance agreements - are here to stay.

After yesterday's ruling that Disney directors did not violate duties to shareholders when they allowed the hiring, firing and payment of $140 million in severance to Michael S. Ovitz, the company's onetime president, the relief in corporate boardrooms was palpable.

But the outcome may well end up less important than that Mr. Ovitz received so much money (and so much publicity) as he left Disney, and that shareholders were so incensed that they sued the board over it.

"The Disney case will have an impact" no matter what the verdict, said Ira T. Kay, an executive compensation consultant in the New York offices of Watson Wyatt Worldwide. "The very fact that it went to trial had a significant impact on the types of conversations in general on compensation committees, and in particular about severance plans."

In the Disney case, shareholders argued that the board should not have permitted the payment to Mr. Ovitz, and they sought to recover more than $200 million on behalf of the company. That legal effort is part of an evolution in thinking about both executive compensation and corporate governance, said David A. Fine, a lawyer at Ropes & Gray in Boston.

"Executive compensation arrangements are clearly getting much more attention these days" from regulators, shareholders, investor advisers and the courts, Mr. Fine said. "The Disney decision was just a piece in that puzzle."

A number of seemingly outsize severance payments have come under a harsh spotlight in recent months. The most recent was the $32 million paid to Stephen S. Crawford last month after just three months as co-president of Morgan Stanley; Mr. Ovitz worked at Disney for 14 months for his $140 million.

The ruling, however, does take some of the heat off corporate boards. If the judge had found that Disney directors violated their duties to shareholders, it is possible that their liability insurance would not have covered them, putting their personal assets at risk. That prospect quite naturally terrified many directors.

"It's a comforting ruling for corporate boards," said Daniel J. Kramer, a lawyer at Paul, Weiss, Rifkind, Wharton & Garrison in New York. "It confirms what most sober corporate lawyers thought the law was, and it dispels some of the fears that had been expressed previously about where the law might be headed, in terms of director liability."

Nevertheless, Chancellor William B. Chandler III, who presided, was critical of the conduct of the Disney board.

"Many lessons of what not to do can be learned from defendants' conduct here," he wrote in his opinion.

The board at Disney, the judge wrote, was "stacked" with friends of its chief executive, Michael D. Eisner, who himself suffered various "lapses" in the hiring of Mr. Ovitz. But neither those lapses nor the errors of the board amounted to breaches of duties to shareholders, the judge concluded; executives and board members acted in what they believed was the best interest of the company.

In his ruling, Judge Chandler also noted that ideas of the role of directors changed significantly after scandals at Enron, WorldCom and elsewhere. It would be unfair to apply today's standards to past conduct, he wrote.

"This court strongly encourages directors and officer to employ best practices," he wrote, "as those practices are understood at the time a corporate decision is taken."

He continued that "Delaware law does not - indeed the common law cannot - hold fiduciaries liable for a failure to comply with the aspirational ideal of best practices."

The judge's language may pave the way for future lawsuits like the Disney matter, as shareholders challenge recent conduct that could be weighed against current ideas of best practices for directors.

"As you see more and more of these golden handshakes, you're seeing institutional investors becoming more outraged and more active," said Stuart Grant, a securities lawyer for plaintiffs at Grant & Eisenhofer in Wilmington, Del., referring to the rich severance payments.

It will take time for executive compensation to reflect changing ideas of what is appropriate pay and severance, if such changes are going to occur, said Mr. Kay of Watson Wyatt, because no single company will be able to reset what has come to be the norm.

"If the market for severance is going to correct, it's going to be a multiyear, relatively slow process," Mr. Kay said. Several companies will have to reduce the severance packages they have paid, and few companies will be willing to risk offending desirable executives by taking such a step, he said. "It's going to take a few companies being more conservative."

But board members have good reason to adopt a more conservative stance in compensation matters and avoid second-guessing, said Charles M. Elson, head of the John L. Weinberg Center for Corporate Governance at the University of Delaware's Lerner College of Business and Economics.

Although the judge ultimately found that the Disney board did not breach its duties, he discussed a tough standard for the diligence required of board members, Mr. Elson said. The standard has been clarified, and directors at other times and at other companies could be held accountable under it.

"It means that you can't just make a decision with a devil-may-care attitude," Mr. Elson said, adding, "it has altered director behavior forever."
http://www.nytimes.com/2005/08/10/bu...3M7v4AB7F5+eFg





Amazon.com Preps Digital Music Service
John Borland

Ecommerce giant Amazon.com appears to be preparing a digital music service to compete with Apple Computer's iTunes at last, according to a job listing posted on a popular industry blog.

The ad, posted on Paidcontent.org (and since removed), sought a "content acquisition manager" for the company's "forthcoming digital music service."

The company has not publicly said that it intends to launch a full-fledged digital music offering. However, several music industry executives confirmed on Thursday that the company has been actively discussing plans to enter the market for several months, including proposals for a subscription- based service.

Given the substantial reach of Amazon's online retail store, a new digital music component could gain traction more quickly than those of earlier rivals. But there is no guarantee. Analysts point out that other large brands, such as Sony, Microsoft and Yahoo, all have faced slow starts in the business.

"It takes a certain dedication and focus on that part of the business to make it profitable, and to make it compelling," said GartnerG2 analyst Mike McGuire. "We've seen earlier that having a big brand and being powerful in other media or online businesses doesn't guarantee online music success."

Amazon.com has provided perhaps the biggest question mark in the digital music business for some time. Many in the music industry expected it to follow Apple's lead into the digital download business quickly.

However, the company has bided its time, allowing Apple to dominate the download market, and a handful of companies including RealNetworks, Napster and Yahoo to blaze a slower trail with their subscription models.

Amazon has long offered free downloads drawn from new releases, but these have served largely as promotions for the full CDs.

An Amazon spokesperson could not immediately be reached for comment.
http://news.com.com/Amazon.com+preps...3-5819046.html





'Massive' Identity Theft Ring Uncovered
Ingrid Marson

The FBI is reportedly investigating a criminal operation that involves the theft of confidential data from thousands of machines infected with spyware

A security firm claims to have uncovered a huge identity-theft ring that appears to be using a spyware program to steal confidential information from computers.

Sunbelt Software said the operation, which is being investigated by the FBI and Secret Service, is gathering personal data from "thousands of machines" using keylogging software. The data collected includes credit card details, social security numbers, usernames, passwords, IM chat sessions and search terms. Some of the data gathered is then saved in a file hosted on a US-based server that has an offshore-registered domain, said Sunbelt president Alex Eckelberry.

"The types of data in this file are pretty sickening to watch," Eckelberry said in a blog posting from Saturday. "In a number of cases, we were so disturbed by what we saw that we contacted individuals who were in direct jeopardy of losing a considerable amount of money."

According to Sunbelt Software, criminals have obtained access to a considerable amount of bank information, including details about one company bank account containing over $350,000 (£197,000) and another account that has "readily accessible" funds of over $11,000.

The operation appears to be linked to CoolWebSearch (CWS), a malicious program that hijacks Web searches and disables security settings in the Internet Explorer browser. Patrick Jordan, a Sunbelt employee, discovered the identity theft ring while researching a CWS variant.

"During the course of infecting a machine, he [Jordan] discovered that a) the machine he was testing became a spam zombie and b) he noticed a call back to a remote server. He traced back the remote server and found an incredibly sophisticated criminal identity theft ring," said Eckelberry. "We are still trying to ascertain whether or not this is directly related to CWS."

An FBI spokesperson was unable to confirm whether or not an investigation was taking place. Sunbelt was unavailable for further comment in time for this article.

This is the latest attempt by a criminal gang to use spyware for financial gain. In March this year the UK's National Hi-Tech Crime Unit foiled an attempt to steal £220m from the Japanese bank Sumitomo Mitsui. Keyloggers were used to relay passwords and access information to the criminals who intended to transfer the funds electronically. A man in Israel was arrested after allegedly trying to transfer £13.9m of the funds.
http://uk.news.yahoo.com/050808/152/fp4w3.html





In Hollywood, All Players but No Power
David Carr

A DECADE or so ago, a small, discrete number of individuals could go out for breakfast, typically at the Hotel Bel-Air, and pretty much decide what a majority of Americans would watch in the years ahead.

The boomer generation of moguls had names that peppered power rankings in Entertainment Weekly and Vanity Fair. They became brands of their own - Eisner, Ovitz, Semel, Diller, Katzenberg, Geffen and Guber - writ large on the wide screen they ruled.

Now they are going, gone or changing the subject. Mr. Eisner, who took Disney from a sleepy also-ran to a behemoth, is out. DreamWorks SKG, the creative love child of Jeffrey Katzenberg, David Geffen and Steven Spielberg, is likely to be sold to NBC Universal. Terry Semel and Barry Diller both made graceful lateral moves into digital realms. Peter Guber is still making movies at Mandalay, but perhaps because he is no longer running a studio, found time to serve as a juror in the shoplifting trial of Winona Ryder.

Change, even of the tectonic variety, overtakes all industries. But these moguls were hunting bigger game: they and the rest of us thought they would run not only the Hollywood studios but also the giant media companies, like Viacom, Time Warner and Sony, that owned the studios.

They shipped billions of dollars in revenue and hundreds of millions in profit to their parent companies, but, with the notable exception of Mr. Eisner, they did not have much to show for it in return. Instead of using the leverage of cash flow and profit to take over their owners, they were leaned on year after year to come up with still more. They created a new version of Hollywood, but failed to master the corporate intrigues that would let them rule not just the studio lot, but also the business world beyond.

IN conversations - none of them for the record - several studio directors managed to sound both defensive and arrogant. Worn out by the expectations of their owners and tired of being banged on by their audiences, they sounded less like masters of the universe than prisoners of the current paradigm.

"In the same way that audiences have lost their taste for film, filmmakers have lost their passion," said David Thomson, author of "The Whole Equation: A History of Hollywood," adding: "It is not surprising that some of the moguls are giving up as well. They are as depressed and tired of the business as the rest of us."

So if this generation of creative moguls didn't turn Hollywood into the center of the universe, what is their legacy? There were some great films - "Schindler's List" and "Terms of Endearment" come immediately to mind as studio achievements that will endure when the archeologists dig in - but mainly they created a world that is now governed by the wants and needs of 17-year-old boys on any given Saturday night.

The bygone moguls institutionalized the tent pole, movies meant to be an event and not just entertainment. Now, weekend box office figures, once an obscure industry metric, have become a matter of public moment. And sequelization, whether of a lame TV series or a blockbuster, has become the primary business.

The math problems they helped create, the opening grosses and DVD revenue, are being left to a different generation, and a different kind of leader. Brad Grey, now head of Paramount, managed talent and made television. He works for Tom Freston, who rose to prominence at MTV. Michael Lynton, who runs Sony, had a stint at Disney earlier in his career, but has spent much of his life working in publishing and at AOL. Barry Meyer, the chief executive of Warner Brothers, came up in television, as did Bob Iger, the new honcho at Disney, and Peter Chernin at 20th Century Fox is the consummate corporate executive who came up through the ranks. It is a long walk from the current vanguard to the Eisner-Ovitz-Diller crowd, with their cowboy tactics and outsize ways.

Back when they were at the height of their powers, the boomer moguls operated from the golden gut, greenlighting projects with the wave of a hand. But the days when company heads would offer notes on dialogue have been supplanted by a heads-up from the marketing guys about product placement and plot points that might help ancillary revenue. The tent pole, which Mr. Spielberg all but erected with "Jaws" and "E.T.," creating huge movies that preoccupied the cultural conversation, has grown into a thicket, a forest of big-budget projects that makes it problematic for any one, no matter how expensively marketed, to stick out.

That is part of the reason that DreamWorks is on the block. With a roster of eight or so movies a year, the demi-studio does not have the muscle to fight its way into theaters. Warner Brothers, Universal, Paramount and Sony are able to negotiate space because they pull up to the door with a dump truck full of movies. And those big bets need to be hedged. With "The Island," a recent DreamWorks film that cost $120 million and tanked to the tune of a $12 million opening weekend, there was not another big film on the way to fill in the money pit.

Mr. Katzenberg will remain as a significant force in the industry as head of the publicly held animation unit, and Mr. Spielberg will make as many movies as he wants for as long as he wants, but in general, the mini-major experiment is over. All the talk of a new, high-tech studio and a major new music company came to naught.

"Much has been written about the disappointment at the box office this year and various arguments have been made about technology and home entertainment," said Jeremy Zimmer, a board member of the United Talent Agency. "But I think that the audience is reacting to the lack of quality movies. They have been disappointed too many times when they have made the decision to leave their house and go see a movie, and whoever is running the studios is going to have to figure out how to rebuild that relationship."

The people who built the current version of Hollywood did so by coming up with movies that people felt compelled to see - not as a matter of marketing, but as a matter of taste. What was once magic, creating other worlds in darkened rooms, has become just one more revenue stream. The movies have been commoditized to even more lucrative ends, and the men who made it so will shift in their seats as the credits roll.
http://www.nytimes.com/2005/08/08/bu...ia/08carr.html





Nielsen, Long a Gauge of Popularity, Fights to Preserve Its Own
Lorne Manly and Raymond Hernandez

As it does every Father's Day, Real Men Cook, a charity devoted to encouraging African-American men to stay involved with their families, held its annual street fair this June in about a dozen cities across the country.

Amid the grills and stoves serving up delicacies, corporate sponsors like State Farm Insurance and Volvo were on hand, seeking to entice new customers. And in eight of the cities, handing out pens, balloons and T-shirts from its booth, was a company that does not sell anything to the public - Nielsen Media Research, the television ratings arbiter.

Nielsen's sudden interest in Real Men Cook - along with the $100,000 it says it spent to help sponsor the Father's Day event - underscores the efforts the company has undertaken to remake its image after an industry dispute turned into a public contretemps with racial and ethnic overtones.

The fight - centering on whether Nielsen's new local ratings system severely undercounted minority viewers and ultimately hindered the developments of shows geared at those audiences - has given the company a crash course in Washington and street politics.

Since the early spring of 2004, the company has spent more than $4 million to hire some of the nation's premier lobbyists to counter a savvy campaign conducted by Rupert Murdoch's News Corporation, a team of longtime Clinton strategists hired by the media conglomerate, and a coalition of black and Hispanic community leaders. Before 2004, Nielsen had not spent a dime on lobbying. Nielsen has also sprinkled more than $200,000 among minority organizations like the National Urban League, the National Council of La Raza, the Rainbow/PUSH Coalition and the Dragon Boat Festival in San Francisco, according to Nielsen officials.

The lobbying and outreach efforts represent a remarkable departure for Nielsen, a company not particularly known for its responsiveness to complaints and which prefers to settle disagreements with television network and advertising clients in private.

But Nielsen executives say they had no choice. "It's pretty rare for a business issue to turn into a long-term political attack by one of your clients," said Susan D. Whiting, president and chief executive of Nielsen.

Nielsen has experienced some success in the public relations wars, picking up the support of prominent black leaders, including the Rev. Jesse Jackson, and working out reconciliations with former adversaries like Univision Communications, the Spanish-language broadcaster.

But Nielsen still faces a battle in Washington, where lawmakers are considering measures that would complicate its business.

Nielsen's wake-up call came in the early spring of 2004. The company, a division of the Dutch company VNU, was in the early stages of introducing a new way to measure local television audiences, and the system had just arrived in New York.

The technology, called local people meters, replaced set-top boxes and paper diaries, and offered advertisers and TV networks something they had never had before: detailed local demographic data every day of the year about who was watching which shows and in what numbers.

But the test results in New York alarmed executives at News Corporation. The Fox and UPN affiliates that the company owns suddenly found themselves staring at seemingly inexplicable drop-offs in viewing, particularly double-digit percentage declines among minority audiences. Those two station groups carry shows that attract significant minority audiences.

With television advertising revenue in local markets nearing $22.5 billion a year, any ratings decline would wreak havoc on the station groups' bottom lines as local people meters reached the country's largest markets.

The News Corporation asked Nielsen to postpone the official start of the service in New York and to fine-tune the technology. Nielsen declined, arguing that while certain programs may have lost minority viewers, the meters more accurately measured actual viewing choices than before, and those viewers had just migrated elsewhere, mainly to cable networks.

But the News Corporation and its allies - whose ranks have grown to include corporations like the Tribune Company - said that explanation did not answer a more fundamental question: Why were the people meters failing to register the viewing preferences of many black and Hispanic homes?

Nielsen executives said these omissions had nothing to do with race or ethnicity, but occurred in homes with the greatest number of people and TV sets, where viewers fail to key in their preferences.

Nielsen soon found itself overwhelmed by public criticism. A newly formed coalition called Don't Count Us Out appeared in the spring of 2004, attacking Nielsen in print and television ads, at news conferences and demonstrations, and in phone calls and e-mail messages. The Rev. Al Sharpton berated Ms. Whiting in her office.

"There was so much controversy in the local press in New York, it was beginning to impact our business," said Ms. Whiting, citing in particular articles in The New York Post, a Murdoch paper. While Nielsen's customers are the advertisers, their agencies and the broadcast and cable networks, the company needs viewers who agree to be monitored, and the buzz saw of negative publicity could endanger the company's recruitment of Nielsen families.

Nielsen turned to a coterie of experienced lobbyists and media strategists, including those with ties to Democrats and minority leaders around the country, according to Nielsen and those it hired.

One of the first people Nielsen approached, according to company officials, was Bill Lynch, a veteran political operative in New York City Democratic circles who was once a senior political adviser to the city's first black mayor, David N. Dinkins.

In 2004 alone, Nielsen paid nearly $1.35 million - about half of the $2.8 million total it spent that year - to Mr. Lynch's firm, Bill Lynch Associates, according to federal filings.

Mr. Lynch did not return phone calls, but Ms. Whiting called him "an invaluable resource" who introduced Nielsen executives to elected officials and helped them decide which black and Hispanic leaders they needed to approach. Mr. Lynch phoned one of his closest associates, Representative Charles B. Rangel, a Manhattan Democrat and one of New York's most prominent black politicians. Mr. Lynch asked him to meet with Ms. Whiting, Mr. Rangel said.

He did, and ultimately - along with Ms. Whiting - announced the creation of an independent task force that would look into ways of assuring the accurate counting of African-American and Latino viewers.

"They've done a whole lot of things to show that their intentions are sincere," Mr. Rangel said.

Nielsen's counteroffensive did not stop there. The company also turned to Wexler & Walker Public Policy Associates, a lobbying firm in Washington that coordinated the campaign in the capital, where the Nielsen critics originally found receptive hearings from Democrats and, as the battle has shifted to the legislative front, from leading Republicans.

In one victory for Nielsen detractors, Senator Conrad Burns, Republican of Montana, recently introduced the FAIR (Fairness, Accuracy, Inclusivity and Responsiveness in Ratings) Act, which would require that any new services offered by ratings companies -namely Nielsen - be accredited by the Media Ratings Council, a relatively weak industry oversight organization, before they can be put in place.

In 2004, Nielsen paid Wexler & Walker $260,000.

Nielsen also took its campaign to California, where it hired Joseph R. Cerrell of Cerrell Associates in Los Angeles to handle its media and lobbying campaign there. In turn, Mr. Cerrell hired several consultants, including Karen Waters, the daughter of Representative Maxine Waters, one of Los Angeles's most prominent black Democratic leaders, who people on both sides say is a Nielsen defender.

Nielsen critics have privately questioned whether the hiring of Karen Waters was intended to please the congresswoman. Mr. Cerrell dismissed that notion, saying he had hired her for her strong ties in the black community. "The mother was already on Nielsen's side before I got involved," said Mr. Cerrell.

Neither the congresswoman nor her daughter returned phone calls seeking comment.

Nielsen's allies have also sought to play to wariness among minorities toward Mr. Murdoch, whose News Corporation owns the Fox News Channel, a cable news network that appeals to conservative audiences. "It's interesting that News Corporation is taking an interest in protecting minorities," said Mr. Jackson. "It's not their reputation."

Gary Ginsberg, a News Corporation spokesman, disputed that contention, saying: "News Corporation has been a consistent supporter of minority opportunity in hiring, programming and philanthropy."

The advice Nielsen collected appears to have paid off, in some cases. Mr. Jackson noted approvingly that Nielsen had made efforts to reach out to blacks and Hispanics - including the sponsorship of a workshop on its new ratings system at a recent Rainbow/PUSH convention in Chicago. Nielsen, whose monopoly status has frustrated its television and advertising clients for decades, has become increasingly vigorous in finding out what concerns clients may have. Last Thursday, Ms. Whiting was in Chicago for the first meeting of a new group of eight of the biggest advertisers in the country.

Despite Nielsen's moves, the sniping shows no signs of abating. Nielsen has accused Don't Count Us Out of being little more than a front organization for News Corporation. The founders of the coalition deny that.

Tom Herwitz, president of station operations for the Fox television stations group, said Nielsen's local people meter system posed a potential barrier to the success of shows geared in part to minority audiences, like UPN's forthcoming "Everybody Hates Chris," produced by Chris Rock.

"One of the biggest obstacles to 'Everybody Hates Chris' becoming the breakout television show of the year is the fact that 40 percent of its core audience isn't being measured by Nielsen in these top markets," said Mr. Herwitz, noting that the News Corporation owns nine UPN affiliates in cities like Los Angeles, New York and Chicago.

Mr. Herwitz said Nielsen should find better uses for its money than a media and lobbying campaign. "The reason they have to spend so much money is that they are so wrong on the facts," he said. "If they had spent the money fixing the problem, then all their other problems would have gone away."
http://www.nytimes.com/2005/08/08/bu...08nielsen.html





Hollywood's Profits, Demystified

The real El Dorado is TV.
Edward Jay Epstein

Multiple-Choice Quiz

Is Hollywood's biggest money-maker:


a) Movies?
b) DVDs?
c) Television?

The best-kept secret in Hollywood, especially from Wall Street, is that the movie studios' biggest profit center is not theatrical movies, or even DVD sales; it is TV licensing. If the details of the profits remain clouded to outsiders, it is no accident. The studios purposely blur together their three principal revenue sources—the box office, video sales, and television licensing—into a single portmanteau category called "studio entertainment" in their quarterly and annual reports. Keeping audiences in the dark may be a time-honored Hollywood tradition, but this breakdown can be demystified by consulting the studios' internal numbers, which they furnish to the Motion Picture Association on a confidential basis.

Last year, the six major studios—Disney, Fox, Warner Bros., Paramount, Universal, Sony, and their subsidiaries—had total revenues of $7.4 billion from world box-office sales, $20.9 billion from world video sales, and $17.7 billion from world television licensing. Revenues, however, are what companies record, not what they earn. And, in the case of Hollywood, the revenues from movies, DVDs, and TV yield very different earnings.

Once upon a time—before the TV and VCR—studios earned virtually all their profits from a single source: the theater's box office. Nowadays, in the new Hollywood, the world box office is a money loser: In 2004, the studios lost an estimated $2.22 billion on the $7.4 billion they took in from the box office. This sad reality is not a result of the high cost of making movies, inefficiencies, or of any sort of studio accounting legerdemain. The simple fact is that the studios pay more to alert potential audiences via advertising and to get movie prints into theaters than they get back from those who buy tickets. Consider, for example, Warner Bros.' movie The Negotiator, with Samuel L. Jackson and Kevin Spacey. It was efficiently produced for $43.5 million, scored a world box office of $88 million, and appeared to be a modest success. In fact, Warner Bros. collected only $36.74 million from its theatrical release after it had paid check-conversion and other collection costs, the theaters had taken their cut, and the MPA had deducted its fee. Meanwhile, to corral that audience, Warner Bros.' advertising bill was $40.28 million, and its bill for prints, trailers, dubbing, customs, and shipping was another $12.32 million. So, after the movie finished its theater run, without even considering the cost of making the movie, Warner Bros. had lost $13 million. Why? For every dollar Warner Bros. got back from the box office, it shelled out about $1.40 in expenses, which was about average, if not slightly above par, for studio movies.

This might seem equivalent to the joke about a manufacturer who says, "We lose on every item but make it up on volume," except that Hollywood has another way of making up the loss—the so-called back end, which includes home video (now mainly DVD) and TV licensing.

Home video is both more complex and more profitable. With the advent of the DVD, home video has become a vast retail business, with studios selling both new and past titles, as well as television programming such as The Sopranos, Friends, or Chappelle's Show, at wholesale prices that can go as low as $5 a DVD. Studios, which have meticulously analyzed these costs, estimate that manufacturing, shipping, and returns costs average 12.4 percent; marketing, advertising, and returns costs average 18.5 percent; and residuals paid to guilds and unions for their members and pension plans come to 2.65 percent. So, about two-thirds of video revenues are gross profits (which participants, such as stars, producers, and directors, may share in once the movie breaks even). In 2004, the studios' estimated video gross profit was $13.95 billion.

But the studios' real El Dorado is television. What makes television licensing, both at home and abroad, especially profitable for the studios is that virtually all the expenses required to market a television program, including tapes and advertising, are borne by the licensee. The studios only have to pay the residuals to the guilds and unions, which varies between movies and TV and average roughly 10 percent. The studios get to keep the other 90 percent. In 2004, this amounted to slightly more than $15.9 billion, making it the studios' single-richest source of profits.

This El Dorado comes from many tiers of the television industry. In 2004, studios made $3.9 billion from licensing their films, shorts, and TV series to the American broadcast networks—all of which are now owned by the corporate parents of the studios, creating a cozy, not to say incestuous, relationship. Another $4 billion came from licensing studio films to pay-per-view TV. All the studios have an "output" arrangement with pay-per-view TV channels to sell them an entire slate of films at fixed prices. Warner Bros., for example, sells all its films to its corporate sibling HBO, and Paramount sells all its films to its corporate sibling Showtime. Overseas, almost all the main pay-per-view TV outlets are owned or controlled by the studios' corporate parents. Finally, $9.8 billion comes from so-called library sales, through which the studios license their movies and TV programs over and over again to cable networks, local stations, and foreign broadcasters. Fifty-nine percent of this immense $17.7 billion of revenue from television licensing comes from America, which is not surprising, considering that on an average day fewer than 2 percent of Americans go to movie theaters, while more than 90 percent watch something at home on TV. And without these profits from TV, no Hollywood studio could survive.

Even though the television profit center is often overshadowed by the public's fascination with box-office results, it accounts for the direction Hollywood is taking in three significant ways. First, it explains the relentless marriages between the principal outlets for profitable entertainment—TV networks—and the Hollywood studios, which have been television's primary content-providers since 1970. After Rupert Murdoch was unable to buy a network and boldly created his own Fox network, Michael Eisner bought both ABC and ESPN for Disney in 1995 —a coup that changed not only Disney but the landscape of the entire entertainment economy. The other entertainment giants quickly followed suit. Today, the studios' corporate parents own or control all six over-the-air networks, as well as 64 cable networks, accounting for almost all the prime-time television audience. (Viacom, even after it is divided into two separate units, will be controlled by a single corporate parent—Sumner Redstone's National Amusement Inc.)

Second, it explains why so many of Hollywood's new leaders hail from TV. Robert Iger, Eisner's replacement as CEO at Disney, was president of ABC television; Sir Howard Stringer, the first non-Japanese chairman of Sony, was president of CBS television; Jeff Bewkes, the head of Time Warner's new Entertainment & Networks Group (which includes Warner Bros. and New Line), was president of HBO; Tom Freston, the new co-president of Viacom, was president of MTV; Peter Chernin, the president of the Fox Entertainment Group, was head of Fox Broadcasting; and Brad Grey, the new head of Paramount, was a television producer. Their ascensions simply confirmed that what used to be a business centered in movie houses has been transformed into a business centered around the TV in the home.

Finally, it explains why so-called studioless studios find it difficult to survive in Hollywood. The big six studios, with vast libraries of movies and TV programs, can count on this income flow no matter what happens at the box office or video stores. For example, even though Sony has a batch of movies this summer, its profitability is assured by the licensing fees flowing in from its library of more than 40,000 hours of movies and TV episodes. No such luck for the independent studios. With no comparable libraries, or, for that matter, corporate sibling alliances to ease their access, they need a constant quota of hits to keep their heads above water. Consider DreamWorks SKG, run by three of the most successful and creative executives in Hollywood's history—Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Despite its clout, DreamWorks was not able to produce anywhere near enough hits to prevent it from burning through most of its capital. Though it is currently profitable, DreamWorks is attempting to become part of a larger media conglomerate by selling itself to NBC Universal.The problem for these wannabe studios is that without a juicy slice of the $17.7 billion television pie, they cannot compete with the studios that have this rich cushion to fall back on.

The union between Hollywood and TV has paid off handsomely. The 2004 MPA Consolidated Sales Report—another confidential document— shows that the six studios' revenues from television licensing went from $6.8 billion in 1994 to $17.7 billion in 2004—a nearly $11 billion increase. And this does not include the fortunes that studios now earn from selling TV series on DVD. Unfortunately, Hollywood's movies are coming to play an ever-smaller part in the big picture.
http://slate.com/id/2124078/





From open…

Open-Source Audio Growing On P2P
John Borland

CacheLogic, a network management company that monitors traffic being sent over its ISP clients' systems, has a new study out with interesting observations about file formats being traded through peer to peer networks.

Among them is that while MP3 files still account for the bulk of audio swaps (about 68 percent), the open-source Ogg Vorbis format now accounts for 12 percent of music trading. This use is coming primarily in Asia, and primarily using the BitTorrent technology, the company said.

In terms of volume, video files far outstripped music, a natural result given their much larger size. About 61 percent of peer to peer data traffic was dedicated to video, while 11 percent was audio. The remaining "other" category accounts for games, documents, and other less-popular files.

The company also said that the eDonkey network now carries more video traffic than BitTorrent, a reversal of last year's observations.
http://news.com.com/2061-10802_3-5827071.html





To closed. These guys are in charge of copyrights. It explains a few things.

U.S. Copyright Office poll: IE-only OK?
Paul Festa

Signaling a new addition to the list of browser-specific Web sites, the U.S. Copyright Office solicited opinions on a planned Internet Explorer-only zone.

The office, a division of the Library of Congress, invited comments through Aug. 22 on an upcoming Web service for prospective copyright owners that may launch with support for only limited browsers.

"At this point in the process of developing the Copyright Office's system for online preregistration, it is not entirely clear whether the system will be compatible with Web browsers other than Microsoft Internet Explorer versions 5.1 and higher," the office said in its notice. "In order to ensure that preregistration can be implemented in a smoothly functioning and timely manner, the office now seeks comments that will assist it in determining whether any eligible parties will be prevented from preregistering a claim due to browser requirements of the preregistration system."

The Copyright Office's request for comments goes to the heart of the battle over Web market share and Web standards. Web standards advocates have long argued that inconsistencies in the way browser makers implement standards--that is, W3C (World Wide Web Consortium) recommendations--force Web developers to write different pages for individual browsers. Another concern is that Web page and application developers have to perform quality assurance testing multiple times for different browsers.

The Copyright Office site in question is a preregistration system for unpublished, commercial works-in-progress. Scheduled to launch Oct. 24, the system would let a film studio preregister a movie, for example, so that the studio could prosecute copyright violations that resulted from scenes or copies prematurely distributed over the Net before the work was complete.

In its request for comments, the office made clear that it plans to support other browsers in the future. In an interview, an attorney with the office said that the sticking point was Siebel software that guaranteed compatibility with only selected browsers--including both IE and Netscape 7.02, a browser with negligible market share--in the current Siebel 7.7 software.

The Copyright Office said it planned to upgrade to Siebel 7.8, which supports Netscape 7.2, Firefox 1.0.3 and Mozilla 1.7.7, but not in time for the Oct. 24 launch.

Neither the Copyright Office nor Siebel said they planned to support other browsers like Opera or Apple Computer's Safari.

Siebel defended its selective support of Web browsers.

"We're running a business, and testing is extremely costly," said Stacey Schneider, director of technology product marketing. "We optimize against what our customers demand. For Siebel 7.8, it became clear, especially for the government sector, that there's demand for Mozilla. But there are hundreds of vendors out there with their own browsers. And not many applications support many more than what we do."

The Copyright Office said original comments and five copies should be mailed to Copyright GC/ I&R, P.O. Box 70400, Southwest Station, Washington, D.C. 20024-0400.
http://news.com.com/U.S.+Copyright+O...3-5827627.html





Oddball Science Helps "Locked In" People Communicate

University of South Florida psychologist Emanuel Donchin and his students are perfecting ways to help people who are paralyzed yet fully conscious - with intact cognitive systems - communicate via a brain computer interface (BCI). Although the patient is unable to communicate, the electrical activity in their brains is normal. Through the BCI it becomes possible for users to “type” on a “virtual keyboard” using their brain waves.

The BCI, says Donchin, can help patients who suffer from amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) - a rare progressive neurological disorder that ultimately leads to a complete paralysis of voluntary muscles in all parts of the body; cerebral palsy; or patients “locked in” following a brain stem stroke.

“In essence, we are trying to provide the brain with new channels for communication and control by capturing and analyzing the electrical or electroencephalographic (EEG) activity produced in the brain,” he explained. “Our goal is to restore communication functions.”

To create an assistive “mental prosthesis,” Donchin’s extensive work is focused on capturing and reporting unique brain activity that occurs upon the visual observation of a rare or “oddball” event. According to Donchin, the “oddball paradigm” relies on a response to deviant stimuli embedded in a series of standard stimuli, such as letters, symbols and commands flashing randomly on a keyboard-like screen. By analyzing the electrical activity as event-related brain potential (ERP) generated by the oddball event, the user in Donchin’s studies focuses attention on the character to be communicated as elements of the display are flashed on the screen.

“The chosen character is the one eliciting a ‘P300,’” said Donchin. “Thus, by detecting which rows and columns in the display elicit a P300 the computer can determine the character the patient is trying to ‘type.’”

In collaboration with the Wadsworth Institute at SUNY-Albany, Donchin’s group has conducted numerous studies with healthy and disabled volunteers who, wearing electrodes on their scalp attaching them to the BCI, were placed in front of an electronic screen display of 26 letters of the alphabet and other symbols and commands in a six-by-six row and columns flashing in random sequence. Test subjects were able to “operate” a virtual keyboard when their EEG reactions to oddball events in the random flashing were analyzed. Researchers found greater electrical response in the rarely presented, or oddball, stimuli and the spike in the subjects’ EEG at time of the oddball event created a means of communication.

“Ideally, the subject can spell out a message by successively choosing among the 26 letters,” explained Donchin. “We are examining the operating characteristics of this communication channel and analyzing the speed with which there was an EEG focus on the letter of interest.”

Test subjects were able to communicate their choice of a letter at the rate of about one character every 26 seconds.

“This is, of course, a slow rate of communication,” said Donchin. “But, considering there is no other channel of communication, even this slow rate is welcome.”

Since coming to USF, Donchin with his student Eric Sellers tested more than 15 ALS patients and have established that, in general, the system works although many adjustments in the procedure are required to allow the use of the BCI in patients’ homes.
http://www.newswise.com/articles/view/513597/?sc=swtn

















Until next week,

- js.

















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