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Old 19-10-06, 10:01 AM   #1
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Default Peer-To-Peer News - The Week In Review - October 21st, '06

"The notion that a track I buy in DRM is protected and one without DRM isn't is a fallacy. It's all nonsense. Music is never going to be protected, and anybody who tells you that is not being honest." – David Goldberg

"What remains is future." – Printed on black pins handed out by Patti Smith at closing of CBGB’s Monday morning

"You’re going to see a lot more from online bartering in the future. This is just in its infancy." – Richard Pickering

"When I was a minister, some women resisted me. Once I became president, not even one." – Edgar Faure

"Kids, they'll find some other club. You just got a place, just some crappy place, that nobody wants, and you got one guy who believes in you, and you just do your thing. And anybody can do that, anywhere in the world, any time." – Patti Smith

October 21st, '06

Russian Site Goes on Media Offensive
Alex Veiga

The operator of a Russian Web site that sells music cheaply went on a media offensive Tuesday to deny accusations that it violates copyrights on songs by major artists.

In an online exchange with reporters, representatives from Moscow-based Mediaservices, which owns the AllofMP3.com Web site, asserted it is running a legitimate business.

"The company has been unfairly characterized as a pirate Web site," Vadim Mamotin, the firm's director general, said through a translator. "Nothing could be further from the truth."

AllofMP3.com typically charges under $1 for an entire album and just cents per track. By contrast, an album at Apple Computer Inc.'s iTunes Music Store and other licensed services typically costs about $10 and a song 99 cents.

Mediaservices maintains that it pays taxes in Russia and that 15 percent of every sale is sent as royalties to the Russian Multimedia and Internet Society, a licensing body it claims is responsible for compensating copyright owners.

The society has "offered to pay the record companies the royalties they collected but (has) been rebuffed," said Mamotin, who asserted the recording industry is trying to gain leverage before entering direct negotiations with Mediaservices or the licensing group.

By paying royalties to the licensing group, Mediaservices claims AllofMP3.com is in compliance with Russian laws.

However, the company has never had a license from major recording companies to sell music in the first place, a requirement under U.S. copyright laws.

The music industry also contends that the Russian licensing group doesn't have the authority to collect and distribute royalties.

"It's a completely spurious claim," said Adrian Strain, a spokesman for the International Federation of the Phonographic Industry. "They haven't respected the rights of the rights holders and have exploited their works without asking permission."

AllofMP3.com does caution computer users outside Russia to make sure they are not violating local laws by downloading music from the site.

The world's largest recording companies - Vivendi's Universal Music Group, EMI Group PLC, Warner Music Group and Sony BMG Music Entertainment - have copyright infringement lawsuits pending in Britain against the operators of AllofMP3.com.

Recording companies have also sued Internet service provider Tele2 in Denmark in an effort to force the company to block its subscribers from having access to AllofMP3.

U.S. officials have cited the site as an example of Russia's lax enforcement of intellectual property rights. U.S. Trade Representative Susan Schwab is pressuring Russia to better protect copyrights and patents in negotiations over Russia's bid to join the World Trade Organization.

"We have made it very clear that AllofMP3.com is a clear violation of intellectual property rights and it would be hard to imagine (Russia) getting into the WTO with a site like that up and running," said Sean Spicer, a spokesman for the U.S. Trade Representative.

But Mamotin insisted that his site "is not a barrier to Russia's entry into the WTO."

During the online news conference organized by Washington D.C.-based public relations firm Qorvis Communications, Mediaservices declined to respond to questions about how much money it has made from music sales or how much it has paid out to Russian rights societies.

Free-For-All Over Russian Music Site
Thomas Crampton

A Moscow-based Web site that the U.S. Commerce Department has branded as the world's highest-volume online seller of pirated music announced plans Tuesday to release hundreds of thousands of albums free.

Low prices and ease of use have made AllofMP3 a consumer favorite among music download sites, but the site - which claims to operate legally under Russian copyright law - faces continuing legal battles with the music industry and harsh criticism from the U.S. government.

On Tuesday, the credit card company Visa International said it had suspended card service to the site, citing concerns over copyright issues.

The U.S. trade representative, Susan Schwab, has warned that continued operation of the site signals a lack of respect for intellectual property law that could jeopardize Russia's long-sought entry into the World Trade Organization.

The company, which lists no telephone number on its Web site and normally declines all comment, undertook a rare public relations offensive Tuesday. Vadim Mamotin, director general of the site's parent company, Mediaservices, spoke through a translator during an interview by telephone with the International Herald Tribune and then participated in an online chat with 59 journalists. Defiant, Mamotin maintained that the company operated legally under Russian law.

"In six years of operation we have never been convicted by a Russian court or declared illegal," Mamotin said, speaking through the translator. "Under Russian law we are 100 percent legal."

The site, which claims five million subscribers and a growth rate of 5,000 a day, remunerates artists by paying 15 percent of its revenue to a collecting agency, the Russian Multimedia and Internet Society, or ROMS by its initials in Russian, Mamotin said.

Organizations representing global authors, composers, music publishers and record companies issued a statement, however, calling for closure of the site and reaffirming their stance that both ROMS and AllofMP3 operate illegally.

"Under the copyright laws of virtually every country in the world, including Russia, it is illegal to distribute recordings without the permission of the rights owners," said the statement signed by groups, including the International Federation of the Phonographic Industry, the International Confederation of Societies of Authors and Composers and the Recording Industry Association of America. "ROMS has no mandate from international rights holders to license the site in or outside of Russia."

The battle with AllofMP3 comes as the Internet continues to bring upheaval to the music industry by radically changing distribution models. Some players, like Pirate Bay in Sweden, continue to operate illegally, while others, like Napster and Kazaa, have come into the legal fold in order to offer services in cooperation with the music industry.

Also Tuesday, the International Federation of the Phonographic Industry said it had initiated legal action against 8,000 people in 17 countries, aiming at computer users who illegally share their music collections over the Internet. The IFPI, which represents record companies around the world, said many of the people who were the subject of the suits were the parents of children who had been illegally sharing music files, The Associated Press reported.

AllofMP3 said Tuesday that as of Wednesday, its business model would move toward an ad-supported distribution of free content. The company, which previously charged about $1 an album, plans to offer consumers a new software program that allows them to download any song from the site for free. AllofMP3 claims to have a catalogue of hundreds of thousands of albums, increasing at a rate of 1,000 per month.

Users of the new service will only be able to listen to songs by using the AllofMP3 software, and the songs will be usable on just one computer at a time. The interface, called Music for the Masses, will initially be available for Microsoft Windows, with an Apple version arriving in several weeks, Mamotin said.

Consumers who wish to transfer their songs between computers or to a music device like an iPod or another MP3 player, will have to pay for the music.

The idea, Mamotin said, is to make the offering attractive enough to win new customers and build a big enough community to attract advertising.

"We eventually plan to run advertisements on the music player," Mamotin said. "We will lose revenue from music sales, but we hope that the advertising will more than make up for it."

Mamotin said he and a handful of other programmers started AllofMP3 as a collective project in 1998. Most members of the group were students writing code for accounting programs, he said.

Mamotin said he loved music himself, particularly the Beatles, a group whose music is available on AllofMP3.com, but whose publishing company, Apple Corps, has always refused to license any works for online distribution.

For all the success and controversy over his selling digital music over the Internet, Mamotin said he preferred hearing his Beatles on old-fashioned vinyl.

"With digital music you lose that organic sound from vinyl," Mamotin said. "There are some things you cannot transfer to digital."

AllofMP3 Threatens Legal Action Against Visa and MasterCard
Thomas Mennecke

AllofMP3.com has become the new media focal point for online music distribution. The key question is whether AllofMP3.com’s methods for online music distribution are legal. Thus far, AllofMP3.com appears to have achieved de facto legality, considering the Russian government's inability to comply with the RIAA and IFPI's request to shut the gray market music site down.

Realizing that little was being accomplished via the Russian government, the IFPI took the clever step of striking AllofMP3 at its financial revenue source - credit card payments. According to Ars Technica, the IFPI lobbied Visa reject payments from AllofMP3.com. The plan worked, and according to an IFPI spokesperson, the plug was pulled in early September.

"IFPI drew to Visa's attention the fact that allofmp3.com was not licensed by its members," the spokesman told Ars Technica. "Visa has a policy position of not supporting such sites and had its facilities removed accordingly. In fact, the facility was removed in early September."

If this is the case, AllofMP3.com has remained quiet on the issue. Only since Wednesday has news of Visa's cutoff surfaced. And today, AllofMP3.com has resumed its public relations blitz, claiming Visa and MasterCard's decision to discontinue its relationship has no legal justification.

"The company believes the action taken by the world’s largest payment processors is arbitrary, capricious and discriminatory because Visa and MasterCard lack the authority to adjudicate the legality of AllofMP3’s activities and its determination that the company’s activities were illegal is patently erroneous and without legal merit. AllofMP3 has not been found by any court in the world to be in violation of any law."

Hinting at the IFPI's lobbying of Visa and MasterCard, AllofMP3.com continued by stating that Visa and MasterCard have no right to reject the Russian music store based on the interpretation of a non-legal entity.

"It is evident that Visa and MasterCard made the decision on factors other than legal grounds since the decision was not based on an adjudicated verdict by any court in the Russian Federation or, for that matter, anywhere in the world. To disqualify AllofMP3 based on a payment processing company’s whim is irresponsible and sets a bad precedence."

What's next? AllofMP3.com is not taking this situation lightly. It threatens the existence of their business model, as the reported DRM/adware option would surely spell the end of AllofMP3.com. Its likely AllofMP3.com will first attempt to settle its banishment from Visa and MasterCard through appeal. If they fail, then a legal battle is certain to erupt.

"AllofMP3 will pursue every course of action, including legal options, to reverse Visa’s and MasterCard’s decision."

Compulsory Licenses Cover Ringtones
Susan Butler

The Copyright Office has decided that compositions used for ringtones may be subject to a compulsory license. The decision is a victory for record labels that want to offer ringtone operators the master rights and publishing rights as one package.

“This decision injects clarity into the marketplace -- clarity that will help satisfy fans’ hunger for the latest hits from today’s best artists by affording record companies and ringtone providers the ability to move new offerings quickly and easily to consumers," says Steven Marks, executive VP/general counsel for the RIAA. "Ultimately, we’re all seeking a vibrant mobile market. This decision helps us further that goal.”

Last month, the Copyright Royalty Board (CRB) referred the question about ringtones and compositions to the Copyright Office for a decision. The CRB wanted to know whether compositions used for ringtones -- monophonic (single melody line) or polyphonic (melody and harmony) -- or for master ringtones (taken from a master recording) fall under the compulsory license provisions of section 115 of the Copyright Act. If so, the CRB would determine rates through its rate-setting proceeding. If not, then publishers would be free to withhold permission to use the compositions unless labels or ringtone providers negotiate a license and a royalty rate for each use.

Under section 115, anyone, like a record label, may obtain a mechanical license or a digital phonorecord delivery (DPD) license to record and distribute "phonorecords" of compositions that were previously recorded and released in the United States. The rate is set by statute, which is periodically adjusted through a copyright tribunal proceeding.

In its 35-page opinion, the Copyright Office concluded that ringtones and master ringtones are "phonorecords" under copyright law. As a result, delivery of ringtones by wire or wireless technology makes them a digital phonorecord delivery.

As long as the ringtones are merely excerpts of a larger musical work or from a preexisting sound recording, then the composition used for the ringtone is subject to the compulsory license, the decision says. For the composition to fall under the compulsory license, the ringtone may not recast, transform or adapt it -- or include additional material -- in such a way that it becomes an original work of authorship (i.e., a derivative work). If it does, then a license must be negotiated with the copyright owner.

"We are disappointed in the Register's decision, which could hurt songwriters significantly and represents an unprecedented broadening of the compulsory license for musical works," says a National Music Publishers' Assn. spokeswoman. "Of particular concern is that copyright owners who have negotiated ringtones licenses in the free market for years will now be subject to government regulation. We see no justification for this, and are currently reviewing our legal options."

The decision also makes the portion of a composition that has been recorded only as a ringtone subject to a compulsory license as well. "If a newly created ringtones is considered a derivate work, and that work has been first distributed with the authorization of the copyright owner, then any person may use the statutory license to make and distribute the musical work in the ringtone," the opinion states.

Briefs from interested parties arguing what statutory rates should be for ringtones and other formats are due to be filed with the CRB in mid-November.

Universal Music Group Sues two Web Sites
Alex Veiga

Universal Music Group is suing the operators of two video-sharing Web sites, claiming they illegally let users share music videos and other copyright material without permission.

Universal Music, the world's largest recording company, filed separate lawsuits against Grouper Networks Inc., operator of Grouper.com, and Bolt Inc., which runs Bolt.com. Sony Corp.'s Sony Pictures Entertainment acquired Grouper for $65 million in August, and Universal Music said it may add the film studio as a defendant.

Video sites have become wildly popular over the past year, drawing millions of visitors who often find clips from movies and music videos along with homemade footage from users. Just this week, Google Inc. agreed to buy one of the top such sites, YouTube, for $1.65 billion.

Universal Music recently signed a content licensing agreement with YouTube. The recording company said it sought licensing deals with both Grouper and Bolt, but reached agreements with neither.

In lawsuits filed Monday in U.S. District Court in Los Angeles, Universal Music claimed Grouper and Bolt actively play a role in violating copyright laws by "copying, reformatting, distributing and creating" works derived from music videos and songs owned by the label.

In one example cited in the Grouper lawsuit, a search turned up several Mariah Carey videos that could be viewed and downloaded. A video for her song "Shake It Off," had been viewed more than 50,000 times, the lawsuit said.

A similar search on Bolt.com generated a list of clips featuring Mary J. Blige, including the video for "Enough Cryin," which had been viewed more than 1,000 times, the lawsuit said.

Universal Music, a unit of French telecommunications and media company Vivendi, is seeking unspecified damages derived from any profits by the defendants, or $150,000 per copyright work that was allegedly distributed on the sites without permission.

In a statement Tuesday, New York-based Bolt said it had yet to receive a copy of the lawsuit, but added that it has always complied with music companies' requests to remove any copyright video after the fact.

A call seeking comment by Sausalito-based Grouper was not immediately returned.

Music Industry in 8,000 New File-Share Lawsuits
Kate Holton

The music industry has launched a fresh wave of 8,000 lawsuits against alleged file-sharers around the world, escalating its drive to stamp out online piracy and encourage the use of legal download services.

The International Federation of the Phonographic Industry (IFPI), which represents the world's music companies, said on Tuesday the new cases were brought in 17 countries, including the first ones ever in Brazil, Mexico and Poland.

The trade group said more than 1 billion music tracks were illegally downloaded last year in Brazil, the largest market in Latin America. Record company revenue has nearly halved in Brazil since 2000, IFPI said.

IFPI has said some 20 billion songs were illegally downloaded worldwide last year.

The industry has now filed about 18,000 lawsuits in the United States, the largest market for music sales, and 13,000 in the rest of the world.

The legal proceedings involve both criminal and civil suits and are aimed at "uploaders" -- people who put copyrighted songs onto Internet file-sharing networks to offer to music fans without permission.

The IFPI said many of those targeted for legal action were parents whose children had been illegally file-sharing. Others facing law suits included a laboratory assistant in Finland and a German parson.

The group added that more than 2,300 people had already settled their case for illegally file-sharing copyrighted material with an average payout of 2,420 euros ($3,034).

John Kennedy, chairman and chief executive of IFPI, told Reuters in an interview he was encouraged by the group's progress, although he said the fight against online piracy would be an ongoing battle.

"It's not getting easier but we are encouraged enough by the results to keep on going," he said via the telephone from a trip to Brazil. "It will never go away completely."

He said the success of high-speed broadband was combining with the threat of legal action and fears of computer viruses to encourage more and more users to opt for legal online services.

While the cost of pursuing individual legal cases has been very expensive, he said the music industry had benefited from its settlement of more than $100 million in July this year with long-time antagonist Kazaa, one of the world's best known file-sharing networks.

"It put some money back into the war chest to try to clean up the online world," he said. "Legal offerings will only thrive and open in different countries if there is a chance of them succeeding."

Legal downloads represent about 11 percent of total music sales, but still do not make up for declining CD sales. Total music sales declined 4 percent in the first half of 2006.

Kennedy said the drive to see digital sales make up for the loss in the physical format was the "holy grail" for the music industry and said he hoped to see it happen by 2007.

Swedish File Sharers Fined
Jan Libbenga

Two men who made music and films available for download over the internet have been fined by courts in two separate cases in Sweden on Wednesday, according to Swedish site The Local.

A 44-year-old man from Borås who was prosecuted for making four recordings available of Roxette, Eurythmics, Mauro Scocco and Jakob Hellman, is the first person to be fined in Sweden for sharing music online. A second 32-year-old man from Norrköping has been convicted of making Swedish film Rånarna available online.

The Swedish pro file sharing movement (http://www.theregister.co.uk/2006/09...toral_assault/) had hoped the judges would look at a similar case in Västerås a few months ago, where the Swedish Court of Appeal decided there was insufficient evidence in a case of a 29-year-old Swedish man suspected of uploading a movie. The only evidence was that his ISP confirmed the IP address belonged to the Västerås man. The Västerås court argued that house searches were needed to prove that file sharing had been carried out from a particular PC.

The Norrköping court now says there should not be a higher burden of proof in file sharing cases.

Yoko Ono Sues Record Companies

Yoko Ono has sued two music companies in the US for $10m (£5.35m), claiming she is owed royalties from sales of her late husband John Lennon's records.

The claim, filed in Manhattan's Supreme Court, accuses EMI and its subsidiary Capitol Records of "willfully and knowingly under-reporting royalties". EMI/Capitol spokeswoman Jeanne Myer said there are "sometimes differences of opinion" on royalties. But Ms Myer refused to comment specifically on the Ono case. Ono's file claims that EMI and Capitol hid the "true use and disposition of Lennon's recordings".


The papers also accuse the record companies of "intentionally and systematically rendering dishonest and grossly deficient accounting statements". Ono's lawyer, John LiCalsi, refused to comment on the case.

Ms Myer added: "Artists from time to time request audits of their royalty accounts". She said contracts are sometimes subject to interpretation, "but 99 times out of 100 these things are resolved in an amicable way".

Record Labels Turn Piracy Into a Marketing Opportunity
Julia Angwin, Sarah McBride and Ethan Smith

A video clip from Jay-Z's live concert in June at Radio City Music Hall is popping up on all sorts of illicit music-sharing hotspots. But Jay-Z isn't upset.

That's because the rapper, at the request of Coca-Cola Co., agreed to allow distribution of the eight-minute clip -- which included promotions for Coke -- on the peer-to-peer sites, using technology usually used to thwart music pirates.

The unusual alliance demonstrates a new tack being taken by the music industry to deal with the challenge posed by widespread music piracy. For years, the industry has been suing individual downloaders and file-sharing services, hoping to discourage the practice. In a tactic little known outside the music industry, record labels have also started to hire outside companies to plant "decoy," or fake, files on the sites. (One such company, ArtistDirect Inc.'s MediaDefender, says it has deployed decoys for as many as 30 of the top 100 Billboard songs at any given time.) The decoy files frustrate users because they fail to download even though, thanks to the companies' technical expertise, they often claim the top spot in search results for a tune.

But now there's a growing recognition among some record executives and performers that the people who are downloading illegally are frequently huge music fans and that marketing to them may be more desirable in the long run than suing or otherwise harassing them.

Hence the alliance between Jay-Z and Coke. By inserting promotional material into the decoy files, and then planting those files prominently on file-sharing sites, record labels and other marketers can turn what is now an antipiracy tool into an advertising medium. "The concept here is making the peer-to-peer networks work for us," says Jay-Z's attorney, Michael Guido. "While peer-to-peer users are stealing the intellectual property, they are also the active music audience," and "this technology allows us to market back to them."

Concert outtakes aren't the only content. Audioslave, Ice Cube, Yellowcard and other music groups have used decoy files for their own version of viral marketing. With help from niche companies like Sparkart LLC and NFA Group's BuyDRM, they put snippets of a song into the files with the promise that a stream of the entire song will be "unlocked" for everyone once the promotion is forwarded to enough people. The hope is that this will motivate people to send the file to lots of friends.

Alternative rock band Dashboard Confessional tried that approach with its single "Don't Wait" to promote its latest album, "Dusk and Summer," released jointly on the independent Vagrant label and Universal's Interscope label. "It just emanated out of one more thing we could do on the Internet, because that's where our customers are," says Dashboard's manager, Rich Egan, who credits filesharing rather than radio airplay with the performer's success.

Right now, only about 1% of the decoy files on peer-to-peer sites include promotions or ads, but the potential audience is huge. While many well-known peer-to-peer services such as eDonkey and Grokster have been shut down by legal action, new ones pop up all the time. In September, an average of nine million people were logged on to the services at any given time, up from 6.8 million two years ago, according to BigChampagne, which tracks the industry. By comparison, last month YouTube attracted about two million visitors a day and MySpace.com attracted 16.8 million visitors a day, according to comScore Media Metrix.

The typical downloader is a tech-savvy male between 14 and 25 years old. "It's a wonderful audience that is very difficult to reach through any other means," says Mitchell Reichgut, a principal at Jun Group, the ad agency in Norwalk, Conn., that crafted the Coke promotion.

The record industry's approach toward downloaders began to change after last year's landmark Supreme Court ruling on Grokster. The Justices found that file-sharing companies like Grokster could be held liable for copyright infringement if their products encouraged consumers to swap music or movies illegally. Before the ruling, record labels worried that they might undercut their legal arguments if they used peer-to-peer sites for their own purposes. Now, "we're basically free to exploit these billions of fake files we're putting out," says Randy Saaf, chief executive of MediaDefender.

Still, marketing on peer-to-peer sites is "a bit of a tricky dynamic for entertainment companies," says Mr. Reichgut. He says many of his clients in the entertainment industry don't want to be identified.

Not so reticent is EMI Group PLC's Virgin Records, which says it's in talks with MediaDefender about marketing options. "It's an opportunity that will hopefully lead to a better experience for the artists, the labels and the consumers," says Virgin Chairman Jason Flom.

Labels typically must approve file-sharing marketing projects, says Peter Katsis, an executive at The Firm, an entertainment-management company. Coke, which devised the Jay-Z promotion as part of a bigger marketing push, says it wouldn't have gone ahead without the agreement of Universal Music Group, Jay-Z's record company. Helping facilitate the deal was Jay-Z's unusual role at Universal: He heads Def Jam Records, the Universal label that releases his albums. Coke did a similar decoy-file promotion using another Def Jam artist, the R&B act Ne-Yo, earlier this year.

Coke says that 3.5 million people downloaded the Ne-Yo video during the six weeks it was on the peer-to-peer networks, and the Jay-Z concert clip has already been downloaded more than 2.5 million times. "It has so far exceeded our goals that you should look for us to do more," says Katie Bayne, senior vice president of Coca-Cola North America.

Some music acts are using peer-to-peer sites to gather marketing data. Over the summer, MediaDefender ran a promotion for the alternative music group Gin Blossoms. File sharers looking for songs got files with links that asked if they wanted to win a free iPod preloaded with Gin Blossoms tunes. If they clicked on the link, they landed on a page that asked them to fill in demographic data, including name, age and email address, and 25% of them did. MediaDefender executives say they were surprised so many responded, but they believe that placing the questionnaire on ArtistDirect, a well-known music site, gave the promotion legitimacy.

Meanwhile, some file-sharing sites are fighting back against the marketing-infused decoy files, which they consider spam. When they release new versions of their filesharing programs, they are including tweaks that can make planting the covert ads more difficult. The latest version of LimeWire, for example, won't allow people responding to other users' searches to easily include a link to a Web page.

At the same time, MediaDefender and other decoy-file distributors are constantly trying to beef up their own technology. "It's a constant cat and mouse game," says MediaDefender's Mr. Saaf.

Music Companies Grab a Share of the YouTube Sale
Andrew Ross Sorkin and Jeff Leeds

YouTube’s young founders may have been the biggest beneficiaries of last week’s $1.65 billion deal with Google, but they have some unexpected bedfellows — old-line media companies that had been considered YouTube’s biggest legal threat.

Three of the four major music companies — Vivendi’s Universal Music Group, Sony and Bertelsmann’s jointly owned Sony BMG Music Entertainment, and the Warner Music Group — each quietly negotiated to take small stakes in YouTube as part of video- and music-licensing deals they struck shortly before the sale, people involved in the talks said yesterday. The music companies collectively stand to receive as much as $50 million from these arrangements, these people said.

Because a significant portion of the videos posted to YouTube contain copyrighted songs or video material, the Web site had been considered a litigation land mine. Last month, Doug Morris, the chief executive of the Universal Music, called YouTube and MySpace “copyright infringers” and said the sites “owe us tens of millions of dollars.”

Just this week, Universal filed suits against Bolt and Grouper, two smaller video-sharing sites, for allowing users to post hundreds of pirated music videos of its artists, including Mariah Carey, 50 Cent and the Black Eyed Peas.

The deals that the music companies struck for stakes in YouTube should help to shield Google from copyright-infringement lawsuits, an issue that concerned some Google investors when the YouTube deal was first announced. Still, other copyright holders, including the Hollywood and television studios, could pursue legal action if their content appears on YouTube.

The decision to take a stake in YouTube is a sharp departure from the tack that record companies took regarding Napster, the pioneering file-swapping service that transformed the industry in 1999. Back then, after the major companies filed suits against Napster, the two sides discussed various settlements that involved the music companies receiving a big equity stake.

The Napster talks, which were led on the industry side by Edgar Bronfman Jr., then the chief of Universal’s then-parent Seagram — eventually broke down.

The record companies went on to win a series of legal victories that ultimately forced Napster to shut its site, but the labels have been fighting an uphill battle against free peer-to-peer services ever since. The music industry has also filed thousands of lawsuits against individuals, hoping the threat of civil fines will reduce unauthorized sharing of songs.

But the failure to end digital piracy and the continuing slump in CD sales has slowly pressured record executives to rethink their approach to Internet distribution.

These days, music marketers are eagerly pursuing fans by advertising on independent music blogs and on vast online social networks like MySpace. (Universal’s Interscope unit even struck a deal to distribute a label created by MySpace.)

Lately, the music companies have begun trying to wring more revenue from their music videos. Instead of offering music videos at a nominal fee as a way to promote CD sales, the companies have struck deals with services like Yahoo to share in revenue from advertisements that run in front of the music clips.

Indeed, the companies’ deals with YouTube call for them to share revenue from ads that will run alongside their music videos. As part of the deal, YouTube will use new technology to identify copyrighted material that users have uploaded to the site without permission.

It was Mr. Bronfman, now chief executive of Warner Music, who struck the first deal with YouTube. Universal and Sony BMG followed suit.

Details of the stakes that the music companies received as part of those revenue-sharing and content-licensing deals could not be learned last night. Of the four major record companies, only EMI did not strike a deal with YouTube.

Spokesmen for YouTube, Google, Universal, Sony BMG and Warner all declined to comment. EMI did not return a telephone message left late last night.

Other old-line media companies, including CBS and NBC, which also negotiated content licensing deals with YouTube before its sale to Google, did not receive stakes in YouTube, these people said.

The deal with the music companies could result in other content companies seeing similar arrangements as a requirement before agreeing to similar pacts with YouTube.

YouTube’s deals with Universal and Sony BMG came hours before it announced its deal with Google.

Indeed, people involved in the discussions said that the music companies rushed to complete the deal ahead of the YouTube deal, in part so that it could benefit in the jump in YouTube’s value.

Record companies have benefited from investments in online companies before. In 1999, EMI made $40 million literally overnight by selling part of its stake in Musicmaker.com during its first trading day. That sum dwarfed the company’s earnings from American CD sales for the entire first half of that year.

YouTube Purges 30,000 Copyright Files

The popular video-sharing site YouTube deleted nearly 30,000 files after a Japanese entertainment group complained of copyright infringement.

The Japan Society for Rights of Authors, Composers and Publishers, found 29,549 video clips such as television shows, music videos and movies posted on YouTube's site without permission, an official from the group, Fumiyuki Asakura, said Friday.

The San Mateo, Calif.-based company quickly complied with the request to remove the copyright materials, made on behalf of 23 Japanese TV stations and entertainment companies, Asakura said.

Most videos posted on YouTube are homemade, but the site also features scores of copyright material posted by individual users. YouTube's policy is to remove such clips after it receives complaints, though some have suggested the startup eventually could be sued, especially with deep-pocketed Google Inc. about to buy it for $1.65 billion in stock.

Asakura said the entertainment industry group may ask YouTube to introduce a preliminary screening process to prevent copyright clips from being posted.

YouTube has been negotiating with leading copyright holders and reached agreement with several letting the Web site post copyright music videos and other content in exchange for sharing ad revenue.

The company agreed to deploy an audio-signature technology that can spot a low-quality copy of a licensed clip. YouTube would have to substitute an approved version or remove the material automatically.

YouTube has licensing deals with CBS Corp. and three major recording companies - Warner Music Group Corp., Vivendi SA's Universal Music Group and Sony BMG Music Entertainment, which is a joint venture between Sony Corp. and Bertelsmann AG.

Since YouTube started in February 2005, the company has blossomed, now showing more than 100 million video clips per day.

YouTube's worldwide audience was 72.1 million by August, up 2.8 million from a year earlier, according to comScore Media Metrix.

RIAA Drops File Sharing Case
John Oates

The Recording Industry Ass. of America has dropped a case against Paul Wilke who was accused of sharing music files over a peer-to-peer network.

Wilkes denied the charges and said he'd never used a file sharing application. He said The Recording Industry Ass. of America did not have sufficient evidence and that he was not the person named in their complaint.

The two sides jointly applied for dismissal of the case. It is not clear whether any money changed hands.

Wilkes said he did not have any of the songs he was accused of stealing and those that were on his hard drive had been taken legally from CDs he owns, not from file sharing networks. In response, the RIAA asked to search his hard drive.

This was an unusual move for the organisation, which usually uses a list of songs and an IP address, which it connects to an individual, as the basis for its cases.

The RIAA has filed dozens of cases against individuals it accuses of file sharing and all have settled out of court.

There's more on the RecordingIndustryvsthepeople blog (http://recordingindustryvspeople.blogspot.com/).

Music Sales Weaken in First Half
Andrew Edgecliffe-Johnson

The decline in music industry revenues accelerated in the first half of 2006, defying record executives’ hopes of returning to growth this year and raising fresh questions about whether they are winning the fight against piracy and illegal downloads.

Global music sales fell by 4 per cent in the first half to $8.4bn in trade values, or $13.7bn at the retail level, according to the IFPI, the recording industry’s international trade association. In 2005, the industry declined by 3 per cent.

Revenues from physical formats, such as compact discs and music videos, were down 10 per cent worldwide, compared with the 6.7 per cent decline seen in the previous full year.

CD sales and prices have been hard hit by the ready availability of pirated physical copies, illegal peer-to-peer services and the fact that the growing market for digital downloads has allowed many consumers to buy single tracks rather than entire albums.

The legal digital music market continued to accelerate, rising 106 per cent to $945m, or 11 per cent of the total recorded music market - double the share it claimed at the end of 2005. In the US, where digital sales increased by 84 per cent, online and mobile music now accounts for 18 per cent of the total market.

Some industry executives had voiced hopes that this rapid growth in downloads, mobile ringtones and subscription revenues would compensate for the decline in physical formats.

John Kennedy, chairman of the IFPI, said in March: “It is encouraging that the markets with the strongest digital sales are also generally the best performing markets overall. In Japan digital has already made up for the decline in physical sales, and other markets should go this way.”

The pressure on traditional sources of revenue has forced the major music companies to look at new ways of refreshing their physical products and new outlets for their content.

Universal Music has introduced new packaging and a three-tier pricing system across Europe, and many groups have begun to offer CDs and DVDs with bonus material to differentiate physical products from digital offerings at download sites such as Apple’s iTunes.

In an effort to extract more value from their music video libraries, Warner Music, Universal and Sony BMG have signed deals with YouTube, the video sharing site, to supply videos in exchange for a fee and a share of associated advertising revenues.

The industry has won several battles against pirate music sites, but an IFPI report in July estimated that 20bn songs were downloaded illegally in 2005 - or 40 for every track that was downloaded legally.

The IFPI figures were released at the start of the intensely-competitive fourth quarter, when sales are typically boosted around Christmas. Last year, the recording industry made almost 60 per cent of its revenues in the second half.

Creative Zen Players Lose FM Recording
Ed Oswald

Creative has apparently bowed to RIAA pressure, issuing a firmware update for two of its players that removes the FM recording feature. In the past, the music industry has argued that recording from radio broadcasts hurt music sales, and has most recently attempted to stop satellite radio services from implementing similar features.

Specifically, the firmware change affects the company's Zen MicroPhoto and Zen Vision:M players. In the release notes, Creative gives no reasoning for the change other than saying "this firmware removes your player's FM recording feature."

The change overshadows other enhancements, including support for Audible Type 4 tracks, the addition of a volume restriction feature, and enhancements to the user interface and usability. But many customers may be less apt to apply the update in order to save the FM recording functionality.

The RIAA has made moves to prevent recording in other devices, most notably in portable players from the satellite radio providers. The group sued XM in May, with RIAA accusing XM of "massive wholesale infringement" of copyrights by allowing users to save songs heard on the service to the device.

Requests for comment from Creative were not answered as of press time.

Digitaly Restricted Media

Invention: Smart-Card DVDs
Barry Fox

Smart-card discs

CDs and DVDs have been around for a while. Nevertheless, American-Israeli company Aladdin think it can breathe new life into these formats by creating a disc that combines optical storage capacity with an embedded electronic smart card chip.

The irregularly-shaped "XCD" is the thickness of a normal optical disc and can still play in any CD or DVD drive. But it also has a smart card, with its own memory and processing components, embedded in the plastic. The embedded chip is connected to a line of electrodes on the surface of one side of the disc. The outer edge of the disc is cut away so that the electrodes protrude and can plug straight into a USB socket.

But why bother inserting a chip into a DVD or CD in the first place? Aladdin thinks it could provide a clever way to digitally lock content sold on optical discs. Music, video or data can be stored optically and read by computer's CD or DVD player, while encryption keys can be stored on the embedded chip and read by USB. The encryption keys could be used to lock information so that it can only be played having plugged the original disc in to the USB.

Digital Rights in Question as Business Model
Antony Bruno

If the music industry truly wants to loosen Apple's iron grip on digital music sales, it should start allowing music to be sold without digital rights management protection.

That's the theory posited by several music services these days in response to the whipping they're taking from the dominant iTunes Music Store.

The issue, of course, is interoperability. The iPod remains the most popular digital music player on the market, and only music purchased from iTunes or copied from the user's CD collection will work on the device. The exceptions are unprotected MP3-encoded files. As such, many Apple competitors would like to sell music in MP3 format so they can compete with iTunes and still be compatible with the popular iPod device.

Perhaps the most successful example of this is eMusic. Despite a music catalog limited to independent label fare, the service facilitates more music downloads than any other save iTunes. The reason? eMusic's entire catalog is available to consumers as unprotected MP3s.

But the major record labels by and large insist their music must have some sort of DRM protection before they'll license it for digital distribution. Increasingly, the wisdom of this stance is coming under scrutiny.

Debate Heats Up

Traditionally, the loudest anti-DRM voice has been the radical "copy-left" movement, a group of advocates who focus primarily on consumer rights. But executives in the broader digital music ecosystem -- such as Yahoo Music general manager David Goldberg and eMusic CEO David Packman -- are taking labels to task with a more business-oriented argument.

DRM, they say, simply forces consumers to buy hardware with proprietary technology that enriches software companies rather than artists or labels.

The conversation has heated up now that Microsoft is preparing to enter the race with another closed system as part of its Zune strategy. Once Zune is launched, there will be two large, deep-pocketed digital services offering music that is not only incompatible with each other, but also with the many other digital music devices and services already in existence.

"That doesn't sound like a very exciting future to me," Packman said during a recent panel appearance at the Digital Music Forum West conference in Los Angeles. "There's no way you can say with a straight face that that's something consumers want. This has to get solved for the industry to grow."

What's more, opponents insist that DRM, in fact, does nothing to protect music. Virtually every form of DRM has been hacked, including Apple's FairPlay and Microsoft's WMA encryption of tethered subscription files. Not all digital music consumers are aware of these workarounds, but tend to discover them the minute they find they can't play their music on their device of choice.

Protection A Fallacy

"The notion that a track I buy in DRM is protected and one without DRM isn't is a fallacy," Goldberg says. "It's all nonsense. Music is never going to be protected, and anybody who tells you that is not being honest. Yes, you can put up speed bumps, but the people who really want to steal music are going to steal it. So you're just making it hard for people who want to do the right thing to get the music they legitimately purchased on the devices and services that they want."

This difficulty, Goldberg continues, only serves to dissuade consumers from buying music legally and instead keeps unauthorized peer-to-peer services in business. He calls the protected a la carte download model a "failure," noting that legal digital download figures have remained flat all year.

"There's been no growth this year at all," he says. "The market has stalled."

On a month-to-month basis for this year, average monthly downloads are flat, just as they were last year, averaging around 10 million a week. Of late, average weekly downloads have slightly slipped, from 11.5 million in January to 10.7 million at the end of September. That's after an all-time high of almost 20 million downloads the week after Christmas.

According to the most recent SoundScan year-to-year figures, digital album sales through October 1 have grown 115 percent over the same period last year, while downloaded individual tracks have grown 72 percent.

Yet these gains have not yet closed the gap with still-declining physical sales, which are down 8.3 percent from last year. DRM opponents say a la carte sales could do more to close that gap if restrictions were removed, but it is impossible to quantify whether this is in fact the case.

Yahoo Music is attempting to prove this theory by making Jesse McCartney's new album available in both protected and unprotected formats at the same price via a deal with Hollywood Records.

Meanwhile, labels hope Microsoft's Zune or another entity will eventually mount a successful enough challenge to Apple that it will force Steve Jobs to open the iPod to competing services.
http://www.sciam.com/article.cfm?cha...F6B7C E480E9E


Just about everyone in the world has heard about the ongoing Sony BMG debacle where the company tried to secretly plant potentially lethal spyware into the computers of people who'd bought its music CDs.

Not only did Sony BMG try to scam its own customers, the software it used to do so also made it possible for the systems to be hijacked by attackers, as well as opening them to a computer virus.

Now here, once again, is Digital File Check, another entertainment cartel-touted DRM (digital restrictions management) application designed to bring consumers to heel. And this time, the other cartel members are involved.

Warping the minds of our children

Schools used to exist exclusively to educate our children, teaching them how to read and write and add and subtract, and telling them about the importance of truth and honesty and freedom of expression.

But that's no longer the case.

Public and private school systems everywhere are being slowly but emphatically penetrated by the morally bankrupt entertainment and software cartels who are using them to bend the minds of our children to the corporate will, indoctrinating them through phony, blackly cynical 'education' programs.

And what's even more alarming is: well-intentioned staffs and government administrations are actively, and often enthusiastically, helping music, movie and software company employees to walk freely into school classrooms to deliver these self-serving 'lessons'.

Because in the 21st digital century, schools are becoming marketing divisions where sales and propaganda programs dressed up to mimic genuine lessons are just as likely to be 'taught' as the three Rs.

Know IT All For Parents

'IFPI' is short for International Federation of Phonographic Industry. It's owned and operated by Warner Music, EMI, Vivendi Universal and Sony BMG, the Big Four Organized Music family, and it's now leading the way in promoting the Digital File Check, with Hollywood's MPAA (Motion Picture Association of America) in the wings.

The Big Four have numerous similar PR and propaganda units scattered around the world.

"IFPI today hailed the launch in the UK of the new 'Know IT All For Parents" campaign by Childnet International, the leading children's internet safety organisation," says the IFPI in a pseudo press release.

" 'Know IT All For Parents' is aimed at helping adults better support their children's positive and safe use of the internet," it states.

However, far from teaching positive and safe surfing, the 'initiative' is part of a huge, carefully orchestrated world-wide program instituted by the cartels as they try to regain control of what used to be their faithfully compliant consumer bases.

"The campaign will see the distribution of an interactive CD ROM to 100,000 families who, over the next two years, will receive a computer as part of the Government's Computers for Pupils initiative," says the IFPI. "This national programme aims to put computers into the homes of pupils who don't have one, in order to give them the same opportunities as their peers."

In reality, there's not a shred of truth in the statement, and there's absolutely nothing altruistic about the scheme.

DRM means Consumer Control

One of the main purposes of the Know IT All For Parents 'initiative' is to get cartel-controlled systems, loaded with phone-home spyware called the Digital File Check, into the homes of consumers in the UK.

And where first it's the UK, soon it'll be the world.

www.pro-music.org is an industry owned and operated site launched to pimp the Big Four message online and, "The CD ROM provides information and links to the free software 'Digital File Check'," says the IFPI.

It claims the Digital File Check was, "developed by the music sector educational alliance pro-music (www.pro-music.org) to help people ensure that they enjoy music safely and legally on the home computer. and stop illegally file-sharing music and films.

"The internet safety advice which has already been translated into Bengali and Urdu, is presented by themes which relate to family life, such as downloading music, chatting or searching for information. As more and more children are accessing the internet through their mobile phones, there is also a separate section covering safe mobile use."

But it seems Linux and Mac users are safe from from, "the most impressive piece of useless software I've ever seen," as Brian DeMarzo described it on his demarzo.net.

Pledge of Allegiance

The cartels are also attempting another stomach-turning spin on their already well-established course of trying to con parents into watching and then censoring the activities of their own children.

"A key aim of the CD ROM is to encourage parents to have a dialogue with their children about the internet," says the IFPI, which is why, "the CD ROM includes an activity centre with quizzes and games that parents and children can do together".

However, it goes even further, expecting moms and dads to print out a cartel-supplied pledge it calls a "special internet use 'Family Agreement' certificate" which, "the family has agreed in relation to safety and responsible use in the home".

MPAA: Piracy is the Outcome of DRM Complications

Last week at the Digital Home Developers Conference Brad Hunt, the MPAA’s executive vice president and chief technology officer said that piracy is the inevitable outcome of the music and movie industries’ inability to provide a simple, inter-compatible and non-intrusive DRM solution.

In a Q & A session he said, “I understand that if we frustrate the consumer, they will simply pirate the content.” He also acknowledged the fact that many consumers are already frustrated because they’re having to buy multiple copies of an album or movie to play on different devices. For example, a song you buy on the iTunes Store won’t play on your Nokia cellphone. And a song you buy on MSN Music or the Zune Marketplace won’t play on your iPod.

There is clearly a need for inter-compatible DRM and Hunt seems to see it. He went on to say, “content protection is going to be critical to enabling the full potential of the digital home network. If devices don’t support content protection, the limits placed on users will undoubtedly frustrate them.” Notice how he still stands firm behind DRM. However, be agreed that “the consumer, if he or she has already purchased licensed material, should certainly be able to transfer that content to any other new or old device.”

Hunt also mentioned that the MPAA is currently working with 3 content protection standard bodies DLNA, DVB and the Coral Consortium to solve these interoperability problems. They are also trying to develop standardised logos and certificates that will help the consumer identify interoperable products. It is worth noting that all three of the bodies are working independently of each other, so we don’t really know what the outcome’s going to be.

It’s nice to see a slight change in the MPAA’s stance. DRM is a necessary evil. You have to agree that it’s not going anywhere, especially in relation to “mainstream” content. The mere fact that they are trying to build an inter-operable standard is a step forward in the right direction. Apple’s FairPlay is possibly the best example of DRM that doesn’t get in the way. Let’s hope the MPAA follow in Apple’s footsteps and come up with an even better solution, however unlikely it may be.

L.A. Boy Scouts New Activity Patch: 'Respect Copyrights'
Gary Gentile

A Boy Scout is trustworthy, loyal, helpful, etc., etc.

If he's in the Los Angeles area, he also respects copyrights.

Tens of thousands of Boy Scouts here will be able to earn an activity patch for learning about the evils of downloading pirated movies and music.

The patch shows a film reel, a music CD and the international copyright symbol, a "C" enclosed in a circle.

The movie industry developed the curriculum as a way of emphasizing the ills of piracy to a generation that has grown up finding free music and video clips on the Internet.

"We have a real opportunity to educate a new generation about how movies are made, why they are valuable, and hopefully change attitudes about intellectual property theft," Dan Glickman, chairman of the Motion Picture Association of America, said Friday.

Scouts will be instructed in the basics of copyright law and learn how to identify five types of copyrighted works and three ways copyrighted materials may be stolen.

"Part of being a Scout is being trustworthy and part of being trustworthy is being able to follow the rules in our society," said Victor Zuniga, a spokesman for the Los Angeles Area Council.

Scouts also must choose one activity from a list that includes visiting a movie studio to see how many people can be harmed by film piracy. They also can create public service announcements urging others not to steal movies or music.

Many of the Scouts in the Los Angeles area come from families whose members are somehow connected to the region's sprawling entertainment industry, Zuniga said.

The program is being introduced to the 52,000 Scouts in the Los Angeles area, with plans to offer it to other California councils early next year. The program will reach Scouts aged 6 to 21.

Unlike a merit badge, an activity patch is not required to advance in the Scouts. Instead, they are awarded for various recreational and educational activities, such as conservation or volunteering at a food bank.


Three ways copyrighted materials may be stolen:

First there's your basic shoplifting.

Second there's the classic breaking and entering.

The third way is a little tricky. You have to forcibly board a boat and seize their copyrighted materials at swordpoint.

Bonus points for recognizing which one involves piracy.

Google CEO: Techies Must Educate Governments
Anne Broache

Those in the know about technology must spend more time reaching out to governments and helping them understand the Internet's role in society, Google Chief Executive Eric Schmidt said Tuesday.

"The average person in government is not of the age of people who are using all this stuff," Schmidt said at a public symposium here hosted by the National Academies' Computer Science and Telecommunications Board. "There is a generational gap, and it's very, very real."

Of particular importance on the policy front are Net neutrality--the idea that network operators should not generally be allowed to prioritize content that travels over their pipes, or the "revenge of the Bell companies," as Schmidt put it--and digital copyright law. Online-service providers like Google that routinely grapple with complaints about copyrighted content on their properties are adequately protected under the Digital Millennium Copyright Act (DMCA), but any future changes in that area "could significantly change the way the Web works," he said.

Schmidt said he also doesn't expect arguments over the proper balance between individual privacy rights and government intrusion to die down anytime soon. "There's not a single and simple answer," he said.

The Google chief's half-hour talk capped a daylong series of lectures focusing on how aspects of computer science and telecommunications will look in 2016. Standing beside the podium, his right elbow propped casually on its edge, Schmidt wore a dark jacket and slacks and no tie, and he appeared to be speaking largely without a script.

His speech meandered from his memories of the mainframe age to the growing importance of targeted advertising as a business model to his personal belief, which he mentioned more than once, that the so-called convergence of media will not ultimately result in consumers using "one box that has everything."

"It's clear the number of devices and things we're going to use are going to be very different," he said. He would, however, like to see a world in which he can access the same content on each device, via a single log-in name and password, and have everything be "completely seamless."

One topic that scarcely came up, however, was Google's announcement last week of a $1.65 billion deal for online video-sharing dominator YouTube. Asked by CNET News.com after his speech whether the planned acquisition presented any copyright concerns, Schmidt said he had nothing more to say about the transaction--which he noted has not yet closed--saying only that the company operates under the DMCA and "went into this with our eyes open."

Earlier in the afternoon, Microsoft Senior Vice President for Research Rick Rashid spoke of a future fueled by the rise of "human-scale storage." Translation: Since nearly anyone should be able to afford terabytes of disk space by 2016--even today, one can purchase that capacity for less than $500--new possibilities arise for documenting the world around you.

Viewed another way, it's enough to make a privacy hawk's skin crawl--and Rashid acknowledged that those tensions will always exist. "But the reality is, we will be able to do it," he said.

And there are good reasons why people may want to activate what amounts to a "black box" for humans, he said. He pointed to a study by British researchers showing that the use of such devices (in particular, Microsoft Research's SenseCam) by people with memory loss problems has helped them retain information about past events.

"They can keep their life," he said. And more broadly, people "can go back and say, I really want to get that conversation with my father who passed away, I want to get that time back when my 25-year-old first crawled."

Chinese City to Fine Web Satirists

The price of Internet satire in China is going up.

A major Chinese city is threatening to fine Web surfers up to $625 for online defamation amid a surge in short satirical Internet films, an official news report said Monday.

The new rules enacted in Chongqing, an industrial city in China's southwest, against "online defamation" come as Beijing tries to tighten control over the freewheeling Internet.

The rules target Web users "who spread information or remarks defaming others, launch personal attacks or damage others' reputations online," the official Xinhua News Agency said.

Potential violations include posting online video "to satirize others or social phenomena."

Video spoofs have become so popular that Chinese have coined a new slang term, "egao," to describe the act of using real film clips to create mocking send ups.

Star film director Chen Kaige complained this year about a 20-minute short titled "The Bloody Case of the Steamed Bun," made with clips from Chen's "The Promise."

Xinhua didn't say how Chongqing would decide whether Internet users violated the rules or whether it would try to enforce its regulations on Web surfers elsewhere.

China's government encourages Internet use for business and education but tries to block access to material deemed subversive or obscene.

Government film regulators announced new rules in August meant to rein in the "egao" fad by allowing only authorized major Web sites to show short films online.

China Jails 9 in Anti-Piracy Crackdown

Nine people convicted of selling illegally copied DVDs and other goods have been jailed for up to 13 years in China's biggest anti-piracy crackdown to date, a news report said Friday.

The sentences were the longest reported since China stepped up penalties for product piracy in mid-2005, imposing jail time in addition to fines that Washington and other governments had complained were inadequate to stop the thriving underground industry.

The latest crackdown was launched July 25 against producers of unlicensed copies of goods ranging from movies and software to designer clothes and sporting goods.

Four people were sentenced to 13 years in prison for producing and selling pirated publications in separate cases in the cities of Ningbo in the east and Xiamen in the southeast, the official Xinhua News Agency reported.

The defendant in Xiamen, Wang Guimei, was fined 40,000 yuan ($5,000), Xinhua said. It didn't give the identities of those convicted in Ningbo.

"The severe punishment demonstrates the government's determination to battle piracy and protect intellectual property," said a statement by the national anti-piracy agency, quoted by Xinhua.

In the eastern city of Qingdao, a defendant was sentenced to two years in prison for selling pirated DVDs and computer software, according to Xinhua.

Elsewhere, two men received one year in prison for selling pirated CDs and DVDs over the Internet, Xinhua said. Two other defendants received 18- and eight-month sentences and fines of 200,000 yuan ($25,000) and 100,000 yuan ($12,500).

Last month, authorities destroyed nearly 13 million pirated CDs, DVDs and computer software in their campaign, Xinhua said.

EU to Regulate Video Bloggers (?)
Nate Anderson

There's a row brewing in Britain over a new EU television directive which some believe could open the door to increased regulation of the Internet. Because of the proposal's less-than-specific language, it could be interpreted to cover any video clip posted on the Internet, even at a personal site.

Shaun Woodward, the UK's Broadcasting Minister, told The Times, "Supposing you set up a website for your amateur rugby club, uploaded some images and added a link advertising your local sports shop. You would then be a supplier of moving images and need to be licensed and comply with the regulations."

Well, maybe. European television is shaped by the "Television Without Frontiers" (TVWF) directive first passed in 1989, then updated in 1997, and now due for a 2006 overhaul. The process is well underway and a draft of the new proposal (PDF) is available. While much remains unchanged, the new version does regulate both "linear" (the broadcaster controls when something is shown) and "non-linear" (the user controls when something is shown) broadcasts. It covers all "moving images with or without sound... [shown] to the general public by electronic communications networks."

The new definition is designed so that the TVWF can be applied to new types of broadcasting, such as video on mobile phones and IPTV. But it can also be read as applying to any audio or video clip hosted on the Internet, which is why Woodward is so concerned about amateur rugby clubs.

The EU's own interpretation of the new provisions looks far narrower, though. In a chart outlining the various broadcasts to be regulated, there is indeed a section for IP services, but it does not include anything that appears to target individual web sites. It mentions non-linear "films, serials, TV programmes, sport events, music (concerts, clips, tracks), [and] videogames," but none of these seems to threaten video bloggers, personal sites, or the next YouTube.

The worry is that if regulation is in fact extended to cover Internet sites of all kinds, it could have a chilling effect on free speech. That's because the TVWF prohibits video that incites hate or inflames racial tensions or "impair[s] the physical, mental or moral development of minors"—categories broad enough to worry those concerned about censorship from Brussels.

For its part, the EU points out that most member nations already have laws on the books that criminalize such broadcasts, and says that it is simply trying to harmonize them into a consistent framework, not launch an Internet censorship department.

Veils and caps

Iran Bans Fast Internet to Cut West's Influence

• Service providers told to restrict online speeds
• Opponents say move will hamper country's progress

Robert Tait

Iran's Islamic government has opened a new front in its drive to stifle domestic political dissent and combat the influence of western culture - by banning high-speed internet links.

In a blow to the country's estimated 5 million internet users, service providers have been told to restrict online speeds to 128 kilobytes a second and been forbidden from offering fast broadband packages. The move by Iran's telecommunications regulator will make it more difficult to download foreign music, films and television programmes, which the authorities blame for undermining Islamic culture among the younger generation. It will also impede efforts by political opposition groups to organise by uploading information on to the net.

The order follows a purge on illegal satellite dishes, which millions of Iranians use to clandestinely watch western television. Police have seized thousands of dishes in recent months.

The latest step has drawn condemnation from MPs, internet service companies and academics, who say it will hamper Iran's progress. "Every country in the world is moving towards modernisation and a major element of this is high-speed internet access," said Ramazan-ali Sedeghzadeh, chairman of the parliamentary telecommunications committee. "The country needs it for development and access to contemporary science."

Iran has not responded to a western incentive package that includes the offer of state-of-the-art internet technology in return for the suspension of a key part of the country's nuclear programme.

A petition branding the high-speed ban as "backward and unprincipled" bearing more than 1,000 signatures is to be sent to President Mahmoud Ahmadinejad.

Scores of websites and blogs are censored using hi-tech US-made filtering equipment. Iran filters more websites than any other country apart from China. High-speed links can be used with anti-filtering devices to access filtered sites.

The telecoms regulator declined to explain the decision but said it was taken by "a collection of policy-makers". However, Etemad, a pro-reformist newspaper, suggested it was part of an official campaign to stem a western "cultural invasion".

"Unpleasant whispers are saying that the motivations behind the scenes are the same as those involved in the purging of satellite dishes," the paper wrote.

Parastoo Dokoohaki, a prominent Iranian blogger, said the move was designed to foil the government's opponents. "If you want to announce a gathering in advance, you won't see it mentioned on official websites and newspapers would announce it too late. Therefore, you upload it anonymously and put the information out. Banning high-speed links would limit that facility. Despite having the telecoms facilities, fibre-optic technology and internet infrastructure, the authorities want us to be undeveloped."

The crackdown comes in an atmosphere of increasing restrictions on the media. Last week, Mr Ahmadinejad launched a fierce attack on the head of the state broadcasting organisation, IRIB, which he blamed for stoking public fears about inflation. Iran's leading reformist newspaper, Shargh, was also closed last month.

High Court in Britain Loosens Strict Libel Law
Sarah Lyall

Britain’s highest court ruled Wednesday for the first time that journalists have the right to publish allegations about public figures, as long as their reporting is responsible and in the public interest.

The ruling, a unanimous judgment by the Law Lords, is a huge shift in British law and significantly improves journalists’ chances of winning libel cases in a court system that until now has been stacked against them.

English judges have traditionally been so sympathetic to libel plaintiffs that many people from abroad have sued in English courts — even if the publications in question have tiny circulations here — because they have had a much better chance of winning here than at home.

Newspaper editors said the decision, in the case of Jameel v. Wall Street Journal Europe, would free them to pursue stories vigorously without constant fear of lawsuits.

“This will lead to a greater robustness and willingness to tackle serious stories, which is what the judges said they wanted,” said Alan Rusbridger, editor of The Guardian. Until now, he said in an interview, newspapers have had to police themselves to the point where “stories weren’t getting in the paper or were being neutered by clever lawyers who knew how to play the game.”

The case concerned an article published on Feb. 6, 2002, in The Wall Street Journal and in its European edition, The Wall Street Journal Europe, which has a daily circulation of 18,000 in Britain.

The article said that at the request of the United States, Saudi Arabia was monitoring bank accounts of prominent Saudi businesses and individuals to trace whether they were being used, possibly unwittingly, to siphon money to terrorist groups.

One of the businesses mentioned, Abdul Latif Jameel Company Ltd., sued the newspaper, as did Muhammed Abdul Latif Jameel, its general manager and president. Under British libel law, newspapers being sued are required to prove the truth of the allegations they print — the opposite of the situation in the United States, where the burden of proof falls heavily on plaintiffs.

But that was a practical impossibility in this case, a member of the panel that ruled on Wednesday, Lord Hoffmann, wrote in his decision.

“In the nature of things, the existence of surveillance by the highly secretive Saudi authorities would have been impossible to prove by evidence in open court,” he said. The paper argued that the article was in the public interest — that is, important to the debate about terrorism and the authorities’ efforts to combat it.

A court ruling in a case several years ago involving The Times of London first seemed to open the door to such an argument. But that decision set out what some lawyers say was a prohibitively high set of standards for newspapers and other news media to meet, forcing them to defend their reporting practices to satisfy the subjective opinions of individual English judges.

In the Jameel case, a lower court jury rejected The Journal’s public-interest argument, finding that the article was defamatory. The Journal was ordered to pay £40,000 — or about $74,000 — in damages. An appeals court affirmed the ruling.

The Law Lords overturned the decision. In a ringing rebuke to the lower court judge’s conclusion that the article was not in the public interest, in part because it flouted an agreement between the United States and Saudi Arabia to keep the monitoring program secret, Lord Hoffmann declared it to be “a serious contribution in measured tone to a subject of very considerable importance.”

Another member of the panel, Lord Scott of Foscote, defended the right of news organizations to publish material deemed private by the government.

“It is no part of the duty of the press to cooperate with any government, let alone foreign governments, whether friendly or not, in order to keep from the public information of public interest the disclosure of which cannot be said to be damaging to national interests,” he wrote.

A third member, Baroness Hale of Richmond, wrote, “We need more such serious journalism in this country, and our defamation law should encourage rather than discourage it.”

Keith Mathieson, a partner specializing in media law at the firm of Reynolds Porter Chamberlain, said the ruling would make it easier for newspapers to rely on confidential sources, as long as the articles were responsibly reported and in the public interest.

“It should make it easier for newspapers in the U.K. to publish serious stories where they cannot prove that allegations are true,” he said in an interview.

Stuart Karle, The Wall Street Journal’s general counsel, said that the newspaper had spent millions of dollars on the case and that the decision represented an important turning point. “The history of English libel law was that essentially no decision was final in a newsroom until a judge, several years later, agreed with you,” he said in an interview.

“Going forward,” he said, “this decision means that if you’re a quality news organization you can fully and fairly cover the important issues of the day without this nagging problem of having a libel judge in London basically engage in an autopsy of every single thing you did and decide whether he agrees with your editorial judgment.”

Can an American Judge Take a British Company Offline?

The fallout from a legal battle in the US has sparked talk of a constitutional crisis for the net
Charles Arthur

Had a court in Illinois done what the winner of a case there desired, billions of spam emails could have begun landing in the inboxes of 650 million people all over the world - including the European Parliament, US Army, the White House and Microsoft - every day this month.

The reason: Judge Charles Kocoras, of the district court of the northern district of Illinois, was asked to rule that a British company called Spamhaus, which runs a commercial spam-blocking service for 700 million users, should have its website taken away for failing to comply with an earlier court order - which was to stop blocking emails from e360Insight, a Chicago-based bulk emailing company.

Spamhaus has for some time maintained that e360Insight belongs on its list of "known spammers"; in June, David Linhardt - the owner and operator of e360Insight - sued, asking for monetary damages and removal from Spamhaus's list. But the suit was brought in Illinois - even though, as Steve Linford, chief executive and founder of Spamhaus points out: "Spamhaus in fact operates no business in the United States, and has no US office, agents or employees in Illinois or any other US state."

A lawyer representing Spamhaus in the US at first began defending the case, but the company then effectively thumbed its nose at Judge Kocoras, saying that an Illinois court had no jurisdiction over a British company. Because Spamhaus had initially shown up as a defendant, but then did not defend its case, the judge of course ruled in Linhardt's favour, awarding $11.7m (£6.25m) in damages for lost business, and $1.97m in legal costs. Spamhaus has not paid it.

Thus last month a new order - written by e360Insight - was submitted to the court, demanding that Icann, the California-based Internet Corporation for Assigned Names and Numbers, and Tucows, the Canadian domain company through which Spamhaus is registered, should remove www.spamhaus.org from the internet. The ruling did not have the force of law; but it could, should the judge choose to accept it.

That sent a shiver through people who follow the application of the law to the internet. There were murmurs of a "constitutional crisis". Could a judge in America really force a company in another country off the net? If it could, would that be because Icann is based in the US? The idea that Spamhaus might be pitched into a sort of internet limbo by a judge in one country raised important issues. Would it mean that a British judge could rule an American company off the net? And if not, why not? What would make America's courts special in that regard?

Those questions won't arise - at least not for now. Icann put out a statement (tinyurl.com/fwrmv) saying: "Icann cannot comply with any order requiring it to suspend Spamhaus.org or any specific domain name because Icann does not have either the ability or the authority to do so." Even if brought before the judge (which it has not been), Icann's chiefs don't have the power to suspend organisations from the net; its purpose, essentially, is to decide which domain names to hand out, and how.

Tucows, too, disclaimed responsibility. "Nobody's asked us to do anything," said Ken Schafer, its vice president of marketing. "Right now it's just statements flying around." But the implications of the ruling, were Judge Kocoras to implement it, are huge.

If Spamhaus vanished from the net, the volume of spam people received would increase dramatically. But Richard Cox, the company's chief information officer, says that removing www.spamhaus.org would not actually affect its ability to stop spam. The organisation works by maintaining a huge set of "blacklists" of internet addresses known to be used to send spam: client companies query the blacklist to decide whether to accept an email, based on its originating address. Being on Spamhaus's blacklist can mean your email will never reach its destination.

They key point, though, is that none of those blacklists is actually kept on www.spamhaus.org - the address that e360Insight demanded should be taken off the net. So, Cox points out, if Linhardt's complaint is that emails from him are being blocked, removing the Spamhaus website from the net would bring no relief.

Yet the case could have wider implications. Edward Felten, a law professor at Harvard, noted on his Freedom to Tinker blog that "the really sticky case would be a dispute over a valuable .com name. Suppose a US court ordered Icann to yank a prominent .com name belonging to a non-US company. Icann could fight, but being based in the US it would probably have to comply in the end. Such a decision, if seen as unfair outside the US, could trigger a sort of constitutional crisis for the net."

Spamhaus is fighting back. A Chicago-based law firm, Jenner & Block, has taken on its appeal on a pro bono basis, and last week lodged a notice to appeal: "Basically, protecting our right to appeal if we wish," says Cox. That might be important. Matthew Prince, a lawyer based in Illinois but uninvolved in the case, noted that "this judgment will likely follow Spamhaus in perpetuity. Even if it shuts down and later some of the same people reconstitute 'SpecialHamHouse' to publish similar data, the judgment will almost certainly stick to the new entity. In the long run, cute arguments and legal sleight of hand don't work."

Jonathan Ezor, assistant professor of law and technology at the Touro Law Center in Huntington, New York, comments: "Might Spamhaus eventually get acquired by a US company? Possibly - what would a default judgment do to the proposed deal in that case? What if Spamhaus's executives were travelling in the US?" The question carries echoes of the problems that executives of UK-based online gambling companies have faced during US stopovers.

But Cox is not fazed. "The last group of people to sue us in the US was a front for some spammers. They tried to withdraw from the case but that didn't stop them getting investigated by the FBI."

Asked whether he realised that the draft ruling would have no effect on Spamhaus's operation, e360's Linhardt told the Guardian he preferred not to comment on any pending rulings from the court.

Judge Won't Suspend Anti-Spam Group Name

A federal judge presiding over a spam dispute rejected a marketing company's request to suspend the domain name of an anti-spam group that ignored an $11.7 million judgment against it.

U.S. District Court Judge Charles P. Kocoras denied a proposed motion from e360 Insight, which sued the Spamhaus Project over its "black list" of spammers. Wheeling, Ill.-based e360 Insight contends it is improperly on the list because it is a direct marketer that does not send unsolicited e-mail.

The Spamhaus Project did not bother defending itself and refused to recognize Kocoras' $11.7 million judgment against it, saying the court had no jurisdiction over the U.K.-based group. So e360 Insight asked that the judge order the spamhaus.org domain suspended.

But Kocoras said Thursday that the requested action was too broad and would cut off all lawful online activities of Spamhaus, not just those targeted by any court order.

Service providers and others use Spamhaus' list to help identify which messages to block, send to a "junk" folder or accept. Spamhaus claims that more than 650 million Internet users benefit from its list of spammers.

A Student’s Video Résumé Gets Attention (Some of It Unwanted)
Michael J. de la Merced

With his name and image on Web sites and his appearance on the “Today” show, Aleksey Vayner may be the most famous investment-banking job applicant in recent memory.

Mr. Vayner’s curious celebrity came after an 11-page cover letter and résumé as well as an elaborate video that he had submitted to the Swiss bank giant UBS showed up on two blogs, and then quickly spread on the Internet. The clip, staged to look like a job interview, is spliced with shots of Mr. Vayner lifting weights and ballroom dancing and has him spouting Zen-like inspirational messages.

The video clip flooded e-mail inboxes across Wall Street and eventually appeared on the video-sharing site YouTube.

Blogs brimmed with commentary, much of it mocking, about Mr. Vayner and his feats. Television programs and newspapers then picked up the Web’s latest viral sensation.

Now Mr. Vayner, a student at Yale University, is starting to speak out about his 15 minutes of fame, portraying himself as being victimized by the flash flood of Web interest.

“This has been an extremely stressful time,” Mr. Vayner said in an interview.

The job materials that were leaked and posted for public view included detailed information about him that allowed strangers to scrutinize and harass him, he said. His e-mail inbox quickly filled up, with most of the messages deriding him and, in some cases, threatening him.

Mr. Vayner’s experience shows the not-so-friendly side of the social-networking phenomenon. While sites such as YouTube allow aspiring comedians or filmmakers to share their creations with millions of others, they also provide the ideal forum for embarrassing someone on a global scale. Materials can quickly make the rounds on blogs, via e-mail and through online hangouts like MySpace, becoming all but impossible to contain.

Wall Street workers may be especially quick to hit the send button. Last month, a compromising video of a Merrill Lynch banker and his female companion on a Brazilian beach had much of Brazil’s financial-services industry glued to their computer screens. Over the summer, a persnickety birthday party invitation from a Citigroup intern was e-mailed all over London’s financial district.

Mr. Vayner’s seven-minute clip, entitled “Impossible is nothing,” presents images of him bench-pressing what a caption suggests is 495 pounds and firing off what is purported to be a 140-mile-an-hour tennis serve.

The tone of the video seems too serious to be parody, yet too over-the-top to be credible. After sharing the clip, fellow students at Yale, he said, began telling their own tales about Mr. Vayner on the Web, fabricating stories of bare-handed killings and handling nuclear waste. The Internet scrutiny also raised questions about some of Mr. Vayner’s claims in his résumé, including assertions that he ran his own charity and investment firm.

There have also been questions over whether he copied sections of a self-published book, “Women’s Silent Tears: A Unique Gendered Perspective on the Holocaust,” from Web sites.

Mr. Vayner, 23, contends that both the charity and investment firm are legitimate. And the accusations about his book, he said, were based on an earlier draft that has since been changed.

He says he has been interested in finance since he was 12, when he was creating financial data models. So Mr. Vayner, who is a member of the class of 2008 at Yale, decided a few weeks ago to look for a job at a Wall Street firm. He thought that making a video would help him stand out amid the intense competition for investment-banking positions. By emphasizing his various athletic pursuits, which he said included body sculpting, weightlifting and tai chi, Mr. Vayner said he could show that he had achieved success in physical endeavors that could carry over to the financial world.

“I felt demonstrating competency in athletics is a good way to stand out, because the same characteristics are the same in business,” Mr. Vayner said. “The need to set and achieve goals, to have the dedication and competitive drive that’s required in business success.”

Despite the mockery that the video has inspired, he still speaks proudly of his athleticism. Nearly all the feats in the video are his, he said, and they are real. But he says he is not certain that the skiing segment actually shows him.

In the end, though, Mr. Vayner said he was less concerned about the mockery than about what appeared to have been a leak of his application materials from UBS.

Mr. Vayner and his lawyer, Christian P. Stueben, said they were exploring legal options against the investment banks to which he sent the application.

A UBS spokesman said in a statement: “As a firm, UBS obviously respects the privacy of applicants’ correspondences and does not circulate job applications and résumés to the public. To the extent that any policy was breached, it will be dealt with appropriately.”

For now, Mr. Vayner said he was camping out at his mother’s residence in Manhattan, having taken a short leave of absence from Yale when his video hit the Internet. (A Yale spokeswoman declined to comment.)

He said he may have lost his chance to work on Wall Street, and added that he may not succeed in securing a financial job at all.

Real estate development is an option, he said, but for now his future is unclear.

In the meantime, he plans on taking his midterm examinations next week.

McDonalds Ships MP3 Players With a Trojan

Earlier this month, McDonald's Japan shipped 10,000 MP3 players as prizes in a competition they organized with Coca-Cola.

The players, carrying the McDonald's "M" logo, were shipped with 10 preloaded songs.

Unfortunately, the players were also preloaded with a variant of the QQPass password-stealing trojan. We haven't seen these players ourselves, so we can't confirm how exactly you would get hit by this trojan, but some sources report you only had to plug it into your Windows PC.

More information for affected customers is available from McDonald's Japanese web site.

Video iPods Get Sick - and Apple blames Microsoft
Krysten Crawford

The Browser just loves a good round of mud-slinging. Apple has just disclosed that a number of video iPods shipped since mid-September are infected with the RavMonE virus, and is quick to take aim at its arch rival to the north for the problem, reports CNET.

The RavMonE virus affects only the Windows operating system. It turns out, a Windows machine at an unidentified contractor that manufactures iPods might be at fault. Apple says there have been fewer than 25 reports of a problem.

In an apology posted on its web site, Apple takes the blame but drags Microsoft down with it: "As you might imagine, we are upset at Windows for not being more hardy against such viruses, and even more upset with ourselves for not catching it."

The Browser looked but there isn't a nice juicy plug for OS X in that partial mea culpa. But we're pretty sure that Steve Jobs & Co. are going to be eager to make its opinions of Vista, the long-overdue operating system that's due out soon from Microsoft, well known.

Onerous Vista Activation—A Time Bomb?
John C. Dvorak

There has been a lot of chatter recently over some of the newer activation and validation schemes that Microsoft may or may not implement with its new Vista operating system. Nobody at Microsoft is saying much, and a lot of bloggers and pundits are all over these alleged schemes, calling them bad news for users. I personally see these developments as bad news for Microsoft, especially if what I'm about to outline actually happens.

As we all know, Microsoft implemented full-throttle activation in Windows XP and managed to dominate the market, with very few complaints from users. Windows XP was generally liberal in the way it dealt with hardware swaps and upgrades. Even when it delivered an activation error—when you added some major system peripheral or rejiggered the system—you could usually get it back up and running with a simple call to the activation center. I did this a couple of times and although it took a little time, it always seemed to work.

I personally do not see why this wouldn't continue to work with Vista. So what's different? The difference is that Microsoft wants to put yet another layer into the mix, and this layer—Windows Genuine Advantage—could become a problem if the layer itself is ever targeted by a virus or Trojan horse.

In other words, what happens if Windows Genuine Advantage is itself corrupted? Windows Genuine Advantage is the layer we really do not need. There is no reason, as far as I can tell, to add a watchdog program to Windows to make sure users are not running bootleg versions of the OS. There has to be a better way.

Now I can understand how this happened. It happened in a committee inside Microsoft when someone came up with the brilliant idea of essentially creating a virtual policeman to watch over the operating system to make sure it has the right "papers." This is an interesting idea, but who watches and authenticates the policeman?—next: Hacking the Policeman >

I suspect the policeman will actually be hacked before the OS. It might actually be easier for the pirates to create a fake cop that constantly authenticates fake versions of Vista than it will be to create a Vista imitation that can pretend to be a legitimate version. There is some irony to that idea. But that's none of my concern. I'm more worried about some joker creating a virus or exploit that turns the good cop into a bad cop, and I can only imagine the destruction and hassle that will ensue.

First of all, this policeman program is also a traffic cop. Aside from having the potential ability to turn your operating system off so that it cannot work at all, it is the program that allows your OS to be upgraded. There will be no patches for an exploit against the program that turns off upgrades. Once a virus that makes the cop refuse to authenticate Vista hits the Net, then how can the problem be fixed? By definition and the way I see it, this will be an impossibility.

This concept of hacking the policeman is not new. If you recall some of the viruses from a few years back, many of them would first attack antivirus software to render it useless.

I do not even want to think of the consequences of Vista turning itself off in enterprise situations such as airline reservations or a hospital full of patients on life support. A serious collapse of the authentication network that could not be fixed without sending out discs or one-by-one-downloads will end up in the courts, and you can be certain that the shrink-wrap license agreement that holds Microsoft blameless will be tossed out as bogus.

Of course Vista isn't shipping yet, and a lot of final decisions have not been made. But Windows Genuine Advantage has already been test-marketed on Windows XP users. Why anyone running Win XP would ever install it is somewhat mysterious, but let's face it, most people are trusting, gullible, and naïve when it comes to big corporations pushing them around.

All I can say is that Microsoft's strategy could become a tremendous nightmare if the black-hat brigades target the Windows Genuine Advantage scheme with an answer of their own. Stay tuned. It could get ugly.

Microsoft to Release Privacy Guidelines
Allison Linn

Microsoft Corp. is preparing to release privacy guidelines based on its own internal practices in hopes of getting companies to adopt more cohesive standards for safeguarding people's personal information.

Microsoft will issue the hefty document Thursday, urging commonsense practices such as clearly telling customers why a company collects personally identifiable information like e-mail addresses or phone numbers.

Among other things, the document also calls for companies to make a business case for why the information is needed and recommends they delete data no longer needed for that purpose. Microsoft also recommends internal practices that can help keep personal information such as credit card numbers from accidentally getting into the wrong hands.

The company wants to work with other companies to eventually establish some more generally agreed-upon guidelines, although it's unclear how long that will take.

The move comes as more people are entrusting technology companies with their communications, digital photos, business documents and other data, raising concerns about how personal information might be amassed and used. Microsoft and other companies need to make sure consumers trust them, or they risk losing that business.

Analysts credit Microsoft with having a major change of heart about privacy about five years ago, following backlash over Hailstorm, a product that sought to store all sorts of personal information under one logon, so people could more easily access accounts and products online. The product, now called Passport, was scaled back considerably after people balked at leaving all their information in the hands of just one company.

Peter Cullen, Microsoft's chief privacy strategist, said the product was an eye-opener about the importance of giving users control of their own data.

"It's a great example of what on the surface was a solution to a very real problem - how do you manage identity?" Cullen said. "... What I think we didn't understand fully was that not everybody would be comfortable with a Microsoft in between."

Around that time Microsoft also launched a major effort to improve the security of its products, following a barrage of Internet attacks. Cullen said that effort, called Trustworthy Computing, included adding more privacy safeguards, such as what is laid out in the paper being released this week.

"Privacy is one of those areas, from my perspective, where Microsoft's done pretty well. It kind of had to," said Joe Wilcox, an analyst with Jupiter Research.

Wilcox said Microsoft may be able to gain an even greater competitive advantage if, through these guidelines and other measures, it can establish itself as the industry leader and the force behind any industry standards on privacy.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, said Microsoft has spent more time thinking about these types of issues than some of its younger competitors, which may not have yet faced the privacy problems Microsoft has dealt with.

"Microsoft is now a grown-up, and there are a lot of kids running around," Rotenberg said. "I think Microsoft is sort of more willing to think about long-term policies and privacy protection and make that part of their business plan."

But Rotenberg said Microsoft could still do better. The company recently started a new business selling Internet-based advertising, called adCenter. It relies heavily on gearing ads toward people with specific demographic traits, which Rotenberg said could raise privacy concerns.

The company also took heat recently for a program that aimed to check whether copies of its Windows operating system were genuine. Microsoft initially failed to adequately disclose that the program would check in daily with the company. Microsoft has since changed the product and revised its disclosures.

Cullen said Microsoft has built safeguards to separate demographic information it uses in products like adCenter from personally identifiable information, such an e-mail address. But he concedes that the company initially fell short with its anti-piracy effort.

Privacy Under Attack, But Does Anybody Care?

It's vanishing, but there's no consensus on what it is or what should be done
Bob Sullivan

Someday a stranger will read your e-mail, rummage through your instant messages without your permission or scan the Web sites you’ve visited — maybe even find out that you read this story.

You might be spied in a lingerie store by a secret camera or traced using a computer chip in your car, your clothes or your skin.

Perhaps someone will casually glance through your credit card purchases or cell phone bills, or a political consultant might select you for special attention based on personal data purchased from a vendor.

In fact, it’s likely some of these things have already happened to you.

Who would watch you without your permission? It might be a spouse, a girlfriend, a marketing company, a boss, a cop or a criminal. Whoever it is, they will see you in a way you never intended to be seen — the 21st century equivalent of being caught naked.

Psychologists tell us boundaries are healthy, that it’s important to reveal yourself to friends, family and lovers in stages, at appropriate times. But few boundaries remain. The digital bread crumbs you leave everywhere make it easy for strangers to reconstruct who you are, where you are and what you like. In some cases, a simple Google search can reveal what you think. Like it or not, increasingly we live in a world where you simply cannot keep a secret.

The key question is: Does that matter?

For many Americans, the answer apparently is “no.”

When pollsters ask Americans about privacy, most say they are concerned about losing it. An MSNBC.com survey, which will be covered in detail on Tuesday, found an overwhelming pessimism about privacy, with 60 percent of respondents saying they feel their privacy is “slipping away, and that bothers me.”

People do and don't care
But people say one thing and do another.

Only a tiny fraction of Americans – 7 percent, according to a recent survey by The Ponemon Institute – change any behaviors in an effort to preserve their privacy. Few people turn down a discount at toll booths to avoid using the EZ-Pass system that can track automobile movements.

And few turn down supermarket loyalty cards. Carnegie Mellon privacy economist Alessandro Acquisti has run a series of tests that reveal people will surrender personal information like Social Security numbers just to get their hands on a measly 50-cents-off coupon.

But woe to the organization that loses a laptop computer containing personal information.

When the Veterans Administration lost a laptop with 26.5 million Social Security numbers on it, the agency felt the lash of righteous indignation from the public and lawmakers alike. So, too, did ChoicePoint, LexisNexis, Bank of America, and other firms that reported in the preceding months that millions of identities had been placed at risk by the loss or theft of personal data

So privacy does matter – at least sometimes. But it’s like health: When you have it, you don’t notice it. Only when it’s gone do you wish you’d done more to protect it.

But protect what? Privacy is an elusive concept. One person’s privacy is another person’s suppression of free speech and another person’s attack on free enterprise and marketing – distinctions we will explore in detail on Wednesday, when comparing privacy in Europe and the United States.

Still, privacy is much more than an academic free speech debate. The word does not appear in the U.S. Constitution, yet the topic spawns endless constitutional arguments. And it is a wide-ranging subject, as much about terrorism as it is about junk mail. Consider the recent headlines that have dealt with just a few of its many aspects:

• Hewlett Packard executives hiring private investigators to spy on employees and journalists.
• Rep. Mark Foley sending innuendo-laden instant messages – a reminder that digital communication lasts forever and that anonymous sources can be unmasked by clever bloggers from just a few electronic clues.
• The federal government allegedly compiling a database of telephone numbers dialed by Americans, and eavesdropping on U.S. callers dialing international calls without obtaining court orders.

Privacy will remain in the headlines in the months to come, as states implement the federal government’s Real ID Act, which will effectively create a national identification program by requiring new high-tech standards for driver’s licenses and ID cards. We'll examine the implications of this new technological pressure point on privacy on Thursday.

What is privacy?
Most Americans struggle when asked to define privacy. More than 6,500 MSNBC readers tried to do it in our survey. The nearest thing to consensus was this sentiment, appropriately offered by an anonymous reader: “Privacy is to be left alone.”

The phrase echoes a famous line penned in 1890 by soon-to-be Supreme Court Justice William Brandeis, the father of the American privacy movement and author of “The Right to Privacy.” At the time, however, Brandeis’ concern was tabloid journalism rather than Internet cookies, surveillance cameras, no-fly lists and Amazon book suggestions.

As privacy threats multiply, defending this right to be left alone becomes more challenging. How do you know when you are left alone enough? How do you say when it’s been taken? How do you measure what’s lost? What is the real cost to a person whose Social Security number is in a data-storage device left in the back seat of a taxi?

Perhaps a more important question, Acquisti says, is how do consumers measure the consequences of their privacy choices?

In a standard business transaction, consumers trade money for goods or services. The costs and the benefits are clear. But add privacy to the transaction, and there is really no way to perform a cost-benefit analysis.

If a company offers $1 off a gallon of milk in exchange for a name, address, and phone number, how is the privacy equation calculated? The benefit of surrendering the data is clear, but what is the cost? It might be nothing. It might be an increase in junk mail. It might be identity theft if a hacker steals the data. Or it might end up being the turning point in a divorce case. Did you buy milk for your lactose-intolerant child? Perhaps you’re an unfit mother or father.

Unassessable costs
“People can't make intelligent (privacy) choices,” Acquisti said. “People realize there could be future costs, but they decide not to focus on those costs.

The simple act of surrendering a telephone number to a store clerk may seem innocuous — so much so that many consumers do it with no questions asked. Yet that one action can set in motion a cascade of silent events, as that data point is acquired, analyzed, categorized, stored and sold over and over again. Future attacks on your privacy may come from anywhere, from anyone with money to purchase that phone number you surrendered.

If you doubt the multiplier effect, consider your e-mail inbox. If it's loaded with spam, it's undoubtedly because at some point in time you unknowingly surrendered your e-mail to the wrong Web site.

Do you think your telephone number or address are handled differently? A cottage industry of small companies with names you've probably never heard of — like Acxiom or Merlin — buy and sell your personal information the way other commodities like corn or cattle futures are bartered.

You may think your cell phone is unlisted, but if you've ever ordered a pizza, it might not be. Merlin is one of many commercial data brokers that advertises sale of unlisted phone numbers compiled from various sources -- including pizza delivery companies.

These unintended, unpredictable consequences that flow from simple actions make privacy issues difficult to grasp, and grapple with.

Privacy’s nebulous nature is never more evident than when Congress attempts to legislate solutions to various perceived problems.

Marc Rotenberg, who runs the Electronic Privacy Information Center and is called to testify whenever the House or Senate debates privacy legislation, is often cast as a liberal attacking free markets and free marketing and standing opposite data collection capitalists like ChoicePoint or the security experts at the Department of Homeland Security. He once whimsically referred to privacy advocates like himself as a “data huggers.”

Yet the “right to be left alone” is a decidedly conservative -- even Libertarian -- principle. Many Americans would argue their right to be left alone while holding a gun on their doorstep.

In a larger sense, privacy also is often cast as a tale of “Big Brother” -- the government is watching you or a big corporation is watching you. But privacy issues don’t necessarily involve large faceless institutions: A spouse takes a casual glance at her husband’s Blackberry, a co-worker looks at e-mail over your shoulder or a friend glances at a cell phone text message from the next seat on the bus.

‘Nothing to hide’
While very little of this is news to anyone – people are now well aware there are video cameras and Internet cookies everywhere – there is abundant evidence that people live their lives ignorant of the monitoring, assuming a mythical level of privacy. People write e-mails and type instant messages they never expect anyone to see. Just ask Mark Foley or even Bill Gates, whose e-mails were a cornerstone of the Justice Department’s antitrust case against Microsoft.

It took barely a day for a blogger to track down the identity of the congressional page at the center of the Foley controversy. The blogger didn’t just find the page’s name and e-mail address; he found a series of photographs of the page that had been left online.

Nor do college students heed warnings that their MySpace pages laden with fraternity party photos might one day cost them a job. The roster of people who can’t be Googled shrinks every day.

And polls and studies have repeatedly shown that Americans are indifferent to privacy concerns.

The general defense for such indifference is summed up a single phrase: “I have nothing to hide.” If you have nothing to hide, why shouldn’t the government be able to peek at your phone records, your wife see your e-mail or a company send you junk mail? It’s a powerful argument, one that privacy advocates spend considerable time discussing and strategizing over.

It is hard to deny, however, that people behave different when they’re being watched. And it is also impossible to deny that Americans are now being watched more than at any time in history.

That’s not necessarily a bad thing. Without an instant message evidence trail, would anyone believe a congressional page accusing Rep. Foley of making online advances? And perhaps cameras really do cut down on crime.

No place to hide
But cameras accidentally catch innocents, too. Virginia Shelton, 46, her daughter, Shirley, 16; and a friend, Jennifer Starkey, 17, were all arrested and charged with murder in 2003 because of an out-of-synch ATM camera. Their pictures were flashed in front of a national audience and they spent three weeks in a Maryland jail before it was discovered that the camera was set to the wrong time.

“Better 10 guilty persons escape than one innocent person suffer” is a phrase made famous by British jurist William Blackstone, whose work is often cited as the base of U.S. common law, and is invoked by the U.S. Supreme Court when it wants to discuss a legal point that predates the Constitution.

It is not clear how the world of high-tech surveillance squares with Blackstone’s ratio. What would he say about a government that mines databases of telephone calls for evidence that someone might be about to commit a crime? What would an acceptable error rate be?

Rather than having “nothing to hide,” author Robert O’Harrow declared two years ago that Americans have “No Place to Hide” in his book of the same name.

“More than ever before, the details about our lives are no longer our own,” O’Harrow wrote. “They belong to the companies that collect them, and the government agencies that buy or demand them in the name of keeping us safe.”

That may be a trade-off we are willing, even wise, to make. It would be, O’Harrow said, “crazy not to use tech to keep us safer.” The terrorists who flew planes into the World Trade Center were on government watch lists, and their attack was successful only because technology wasn’t used efficiently.

Time to talk about it
But there is another point in the discussion about which there is little disagreement: The debate over how much privacy we are willing to give up never occurred. When did consumers consent to give their entire bill-paying histories to credit bureaus, their address histories to a company like ChoicePoint, or their face, flying habits and telephone records to the federal government? It seems our privacy has been slipping away -- 1s and 0s at a time -- while we were busy doing other things.

Our intent in this week-long series is to invite readers into such a debate.

Some might consider the invitation posthumous, delivered only after our privacy has died. Sun’s founder and CEO Scott McNealy famously said in 1999 that people “have no privacy – get over it.” But privacy is not a currency. It is much more like health or dignity or well-being; a source of anxiety when weak and a source of quiet satisfaction when strong.

Perhaps it’s naïve in these dangerous times to believe you can keep secrets anymore – your travels, your e-mail, your purchasing history us readily available to law enforcement officials and others. But everyone has secrets they don’t want everyone else to know, and it’s never too late to begin a discussion about how Americans’ right to privacy can be protected.

Privacy Options Limited for Net Services
Anick Jesdanun

If you don't like what your favorite Internet search engine or e-commerce site does with information it collects about you, your options are limited to living with it or logging off.

Major search engines, for instance, all keep records of your searches for weeks, months or even years, often tied to your computer's Internet address or more. Retailers, meanwhile, generally presume the right to send marketing e-mails.

Although online companies have become better at disclosing data practices, privacy advocates say the services' stated policies generally don't give consumers real choice.

"None of them have gotten to the point of giving a lot of controls in users' hands," said Ari Schwartz, deputy director of the technology watchdog group Center for Democracy and Technology. Privacy policies "are about notice ... not about control."

Recent developments - from companies losing laptops containing sensitive data to Time Warner Inc.'s AOL releasing customers' search terms - have again turned the spotlight on Internet privacy.

But the push for stronger federal protections is countered by Attorney General Alberto Gonzales' desire to require Internet providers to preserve customer records to help prosecutors fight child pornography. Officials have released few details, though they say any proposal would keep the data in company hands until the government seeks a subpoena or other lawful process.

Federal law already limits how personal financial and health care data may be used, but U.S. privacy laws are generally considered weak compared with Europe and Canada.

Industry groups have stepped in with guidelines that go beyond legal requirements.

One group, Truste, requires member companies such as AOL and Yahoo Inc. to give consumers a way to decline sharing personally identifiable information with outside parties. Companies also must disclose any use of tracking technology and specify personal information collected and how it is used.

"The fact that we don't license every person on the Internet gives consumers (the ability) to shop around," said John Tomaszewski, Truste's vice president for legal, policy and compliance. "We've got folks out there engaging in a higher standard than what is normally required."

Some companies go even further.

E-Loan Inc. customers worried about safeguards when data get outsourced to India can choose to have loan applications processed domestically, though loans in such cases would take two additional days to close.

Mark Lefanowicz, E-Loan's president, said about 80 percent of customers have agreed to outsourcing, and he said choice pre-empted any backlash.

"They have the right to deal with us under their terms," he said. "If we just disclosed we used an overseas provider, for a lot of customers it's irritating to them."

Comcast Corp., meanwhile, gives customers a range of options on how long its servers keep e-mail, while a small search engine called Ixquick promises to purge data within 48 hours.

In other cases, companies have responded to backlash from customers. When Facebook recently allowed easier tracking of changes their friends make to personal profile pages, users threatened boycotts and forced the company to apologize and offer more privacy controls.

But such cases are rare. Consumers generally haven't demanded better privacy options the way they shop around for better prices or ease of use, said Carl Malamud, senior fellow at Center for American Progress, a liberal think tank.

"As a consumer I don't choose based on practices for privacy," he said. "I choose based on functionality, and many consumers do the same."

So Google Inc. remains the leading search engine, even as it won't say how long it keeps data on what people search. Like other companies, Google says such information is helpful in improving services and fighting computer attacks and fraud.

Tom Lenard of the Progress and Freedom Foundation, a technology think tank that shuns government regulation, added that data retention lets credit card companies identify unusual activities and gives car dealers the ability to offer instant loans.

Limiting what companies can do would hurt consumers, Lenard said.

Many companies already restrict data sharing on their own but stop short of a total purge.

"There is such a mantra built around the information economy and how valuable the information is of the user that companies don't want to give that up," the CDT's Schwartz said.

Lauren Gelman, associate director of Stanford Law's Center for Internet and Society, said companies may not need all the data today, but they don't want to limit their future options, either.

She and others worry that keeping data longer than necessary could lead to abuse.

Already, many companies have acknowledged data breaches from Web site hacks or stolen laptops. And this summer, an AOL researcher released three months' of search terms on more than 650,000 subscribers without clearing it with superiors.

Jason Catlett, founder of the privacy group Junkbusters Corp., said individuals ought to have more opportunity to see, edit and delete records companies have on them. In many cases, he said, customers couldn't easily purge credit card numbers or their accounts entirely once they register with personal information, often a requirement just to make a single online purchase.

"There's still a lot of diversity in information practices," he said, "but there has been a convergence to what the average person would consider too low a standard."

Gelman said companies have little incentive to promise more.

"We're stuck where we have privacy policies that are basically written to the lowest common denominator," Gelman said. "Companies learn the only way they can get into trouble is to say they are doing something and then do something different. So they say they are allowed to do anything with the data to cover their butts."

FBI Head Calls for Data Retention Rules
Nate Anderson

Do you hear it? That rhythmic beat is the sound of the data retention drum being thumped by politicians and security figures. On Monday, at a conference of international police chiefs, head of Homeland Security Michael Chertoff told his audience that terrorists were using the Internet to radicalize without having to travel. Yesterday, FBI Director Robert Mueller showed up at the same conference and delivered a similar message. "Terrorists coordinate their plans cloaked in the anonymity of the Internet, as do violent sexual predators prowling chat rooms," he said, according to CNet.

Mueller took a further step, though, arguing that the US needs stricter data retention guidelines. "All too often, we find that before we can catch these offenders, Internet service providers have unwittingly deleted the very records that would help us identify these offenders and protect future victims," Mueller said. The solution? Forcing ISPs to retain data for set periods of time.

Neither of these arguments is anything new. The Internet is regularly trotted out in speeches on terrorism; Mueller himself did it just weeks ago in a speech to Chicago executives. "Instead of training camps, we have seen a rise in websites that promote violent jihad and give step-by-step instructions on how to build suicide vests and explosives," he told them.

Government officials have also pushed repeatedly for retention guidelines that would control what sort of data an ISP must keep and for how long. Attorney General Gonzales, in particular, has lobbied for new retention laws for some time, arguing that they are necessary to help control child pornography and exploitation.

The thing about retention laws is that they require all data to be maintained, not simply the data from child pornographers and terrorists. This means that such laws are usually favored by other, unrelated groups who would like access to such log files. Groups like the music labels. In Europe, where retention rules are already in place, the entertainment industry has already stated its belief that the data should be available for use in the investigation of any crime, even copyright infringement.

This makes some people nervous, including some in government. After the AOL data release scandal broke, Rep. Ed Markey (D-MA) introduced a bill that would put limits on how long ISPs can retain customer information—exactly the opposite approach of that favored by the law enforcement community. Don't expect much action on such proposals with an election so near, though; Markey's bill has been stalled in committee since February.

EFF to Probe FBI's New Monster Database
Thomas C Greene

The Electronic Frontier Foundation (EFF) is suing the US Department of Justice to learn more about the FBI's new monster database, called the Investigative Data Warehouse, or IDW.

The Bureau has been eager to showcase its new counterterrorist gimmick, after expensive and largely humiliating efforts to launch its Trilogy and Virtual Case File gimmicks, which have produced nothing except the squandering of over $170 million in taxpayer money. The IDW system, in contrast, can at least be made to work well enough to dazzle reporters in a series of controlled demonstrations, which the FBI enacted around the fifth anniversary of 9/11, to highlight the Bureau's supposed progress as a counterterrorist outfit, and, of course, its first working computer system.

The FBI had boasted to the media of IDW's capacity to trawl vast reams of data efficiently and productively, and of its current (and no doubt rapidly growing) cache of nearly 600 million records. There are plans to connect the tool to databases maintained by DHS, the NSA, the CIA, and the military within a couple of years, for some extra terror-busting punch.

The EFF reckons that it would behoove us all to know just what sort of data bits are being used, how they are obtained, how they are secured, how personal they might be, how many citizens are affected, and how one might go about getting spurious data relating to oneself removed, or at least corrected. Indeed, it would be good to know whether this scheme is even legal, as we consider the number of patently illegal programs of the Bush administration's so-called war on terror, a number of which have been or are being legitimized by Congress during what is likely to be the final weeks of a Republican majority.

For all its eagerness to tout the IDW to journalists, the FBI has been less than forthcoming about its details, no doubt because if the man in the street had an inkling of the sort of information stored about him in this database, the Bureau would have a PR crisis on its hands. So it has decided, rather predictably, that the details should remain secret for national security reasons.

Hence the lawsuit (http://www.eff.org/news/archives/2006_10.php#004935). It's nice of the EFF to try, but they do have a rather spotty record when it comes to defending the public's interests. A well-meaning outfit perhaps, but ultimately not all that effective. But the IDW and a host of other dubious Bush administration innovations and assaults on privacy and liberty are no doubt going to figure prominently in some very public hearings on Capitol Hill once the Democrats win a majority. There will be a two-year period during which they can embarrass the administration, and possibly get some of the worst of the Bush legacy undone.

The pity is that they will all start defending the leftover mechanisms of executive power-abuse when a Democrat sits in the Oval Office, say around 2008, and even begin adding to them; but that's how the game is played.

Ya think?

Radio Tags Spark Privacy Worries

A perceived threat to privacy posed by radio tags has emerged as the main fear in an EU study of the technology.

Unveiling the study, EU commissioner Viviane Reding said citizens needed re-assuring that radio tags would not lead to large-scale surveillance.

Many of those contributing to the EU study also wanted the radio frequency ID tags to be turned off if needed.

Ms Reding said she was ready to draft new laws to control how the radio frequency tags could be used.

Potential abuse

The Information Society Commissioner made her comments at a conference called to mark the end of a six-month EU consultation exercise in which it sought opinions about the growing use of radio-frequency ID (RFID) tags.

These "smart barcodes" are increasingly used by businesses to monitor goods as they move along supply chains. Governments are also starting to think about putting them in many identity documents such as passports.

A record number of people and organisations contributed to the consultation exercise, which was evidence, said Ms Reding, of the depth of feeling about the technology.

Early reports from the consultation exercise show fears about how RFID tags affect personal privacy was the main worry.

"The large majority are willing to be convinced that RFID can bring benefits but they want to be reassured that it will not compromise their privacy," said Ms Reding. "This is the deal that we have to strike if we want RFID to be accepted and widely taken up."

People wanted to decide how information was updated and used, said Ms Reding.

"The consultation shows that people are mainly afraid of losing control, of not being able to choose when and how they are exposed to risks," she said.

Many also wanted the ability to destroy the tags if need be, said Ms Reding.

Only 15% of the 2,190 organisations and individuals who contributed to a survey the EU ran during the consultation exercise thought had hopes that industry would do a good job of regulating how firms used RFID tags.

More than half, 55%, of those that filled in the survey said laws should be changed to ensure the tags and the information they allow firms and governments to collect, is not abused.

The EU has said that the final conclusions from the consultation process will be announced towards the end of 2006. Ms Reding said if new laws were needed, they would be drafted in 2007.

The consultation process was kicked off at the Cebit trade show that was held in Hanover in March 2006.

Air Passengers 'Could Be Tagged'
Rebecca Morelle

The prototype technology is to be tested at an airport in Hungary, and could, if successful, become a reality "in two years".

The work is being carried out at a new research centre, based at University College London, set up to find technological solutions to crime.

Other projects include scanners for explosives and dirty bomb radiation.

Dr Paul Brennan, an electrical engineer, is leading the tagging project, known as Optag.

He said: "The basic idea is that airports could be fitted with a network of combined panoramic cameras and RFID (radio frequency ID) tag readers, which would monitor the movements of people around the various terminal buildings."

The plan, he said, would be for each passenger to be issued with a tag at check-in.

He said: "In our system, the location can be detected to an accuracy of 1m, and video and tag data could be merged to give a powerful surveillance capability."

Civil liberties

The tags do not store any data, but emit a signal containing a unique ID which could be cross-referenced with passenger identification information. In the future, added Dr Brennan, this could incorporate biometric data.

The project still needs to overcome some hurdles, such as finding a way of ensuring the tags cannot be switched between passengers or removed without notification.

The issue of infringement of civil liberties will also be key.

But potentially, said Dr Brennan, the tags could aid security by allowing airports to track the movement patterns of passengers deemed to be suspicious and prevent them from entering restricted areas.

It could also aid airports by helping evacuation in case of a fire, rapidly locating children, and finding passengers who are late to arrive at the gate.

The "proof of concept" of the system is about to be tested at Debrecen airport in Hungary. If successful, claimed Dr Brennan, it could be available elsewhere within two years.

The new centre will also be investigating a range of other airport security tools.

Professor Robert Speller has been developing scanners to detect explosives and drugs. The devices could be used at airports or other ports of entry.

Scattered photons

The scanners work by firing an x-ray at an item and then detecting how light particles called photons are scattered.

Different materials, he said, produce unique patterns of photon scattering, and this can be used to identify whether an explosive or type of drug is present. The scanners, he said, could be incorporated into the machines being used by airports to scan bags.

He is also developing a prototype "Compton camera".

This portable device, he said, could be used if a suspected dirty bomb had been exploded. It is able to detect if any radiation is present, and if so, its precise location.

He said it would help the emergency services identify dangerous areas, and would aid the possible clear-up operation.

The UCL Centre for Security and Crime Science, which opens on Friday, works across many different areas in science and is investigating a number of security and crime issues.

Professor Gloria Laycock, director of the centre, said: "Security is a major issue in today's society and can take many forms.

"We've got rising crime across the developing world, and that has been linked to rising opportunities for crime. The most effective means of tackling this is by tackling those opportunities. Science and technology can help us to do this."

MTV Will Distribute Videos on Baidu
Joe McDonald

MTV and search engine Baidu.com on Tuesday unveiled a venture to distribute music videos via the Internet in China, boosting the music video channel's exposure in a market where regulation has limited its presence.

The companies said they will begin by offering 15,000 videos and MTV programs such as "Pimp My Ride," charging for some, while others will be free. They also will distribute programs from MTV's sister network Nickelodeon.

The deal lets MTV, a division of Viacom Inc., raise its profile in China's fast-growing media market, while Baidu, China's biggest search engine, expands its sideline in entertainment offerings.

"Expanding the reach of our brands and content through Internet and mobile is integral to our China strategy, and China is critical to our global digital strategy," said Bill Roedy, vice chairman of MTV Networks, speaking at a news conference.

The companies will split advertising and download revenues, said Roedy and Shawn Wang, Baidu's chief financial officer. They declined to give a forecast of revenues, saying it was too early to know how the venture will develop. They said they were still deciding how much to charge per download for videos.

MTV and other foreign broadcasters are eager to expand in China, the world's largest television market, with more than 400 million viewers. But regulators are trying to limit the presence of foreigners in the Chinese media market.

MTV broadcasts in China's mainland are limited to cable TV systems in a portion of the southern province of Guangdong, where the company says it reaches 13 million households. The company also has syndication deals with Chinese broadcasters.

Chinese authorities also are concerned about foreign entertainment content, and have imposed limits on use of foreign cartoons and other programming. Chinese media reported last week that the Culture Ministry canceled a Shanghai concert by American rapper Jay-Z because his lyrics were considered too vulgar.

But Roedy said MTV wasn't worried about running afoul of government censors. He said most of the videos and programming on the Web site will already have been approved by Chinese regulators to be shown on its cable channel.

"We've been doing business here for 10 years and feel very comfortable," he said. "The Internet is less regulated, but we're not looking to take advantage of that."

MTV has 136 similar Web sites in countries around the world, according to Roedy.

Customers who buy MTV videos from Baidu can use a payment system set up earlier by the six-year-old, Beijing-based company for online commerce, said Wang.

"This is one of the very important directions we both are heading," Wang said.

About 70 percent of MTV videos on Baidu will be by Chinese performers, the companies said.

The venture will offer Chinese-language versions of MTV's "Pimp My Ride," an auto makeover show, and "Cribs," about celebrity homes; Nickelodeon's "SpongeBob SquarePants" and "Dora the Explorer" and locally produced programs such as "MTV Music Wire" and Chinese pop concerts.

Meanwhile, Roedy said MTV has expanded its presence in China's mobile phone market by signing a deal with the country's No. 2 provider, China Unicom, to offer ringtones, entertainment news and other services to its 130 million customers.

The company already has a similar deal with China's leading mobile provider, China Mobile, and said that with the new venture, MTV now has access to all of China's more than 400 million phone users.

The company has about 300,000 monthly subscribers among China Mobile customers, who pay 8-15 yuan ($1-$1.90) each per month, depending on which services they buy, said Yifei Li, managing director for MTV Greater China.

Universal Music Finds 'Long Tail' for Old Albums

Older songs no longer sold in stores, including a Greek singer's 2000 Christmas album, have been downloaded 250,000 times since February as part of a broad initiative by Universal Music Group to exhume its archives.

The most popular of the 3,000 tracks made available in digital-only form on online services such as Apple Computer's iTunes was Gun's 1994 U.K. hit "Word Up" and the most popular album was Big Country's "Steeltown," which was released in 1984.

The seven-month sales, disclosed by Universal on Tuesday, represent a fresh example of the "long tail" theory that low sales of many products can collectively create a huge market, particularly in the digital age where costs are lower.

"We are now able to respond to and quantify the appetite for more eclectic, diverse recordings from the past," said Olivier Robert-Murphy, vice president of strategic marketing at Universal Music's international arm.

"It's clear that this is a 'tail' worth chasing."

The company did not disclose specific sales figures, but said Nana Mouskouri's compilation album, "Les Plus Beaux Noels du Monde," was the fifth most popular album and sold in almost every country where the campaign was launched during a stretch of the year that did not include the Christmas holiday.

The albums made available in 20 countries, mostly in Europe, stretched back to the 1960s, including Brigitte Bardot's interpretation of "Je T'Aime...Moi Non Plus", which was also in the top five.

Noir Desir was the most popular of the unearthed acts.

Digital sales to portable music players and mobile phones represent about 11 percent of the $21 billion music industry and are slowly making up for the sharp decrease in CD sales.

iTunes has sold more than 1.5 billion songs, and accounts for roughly two-thirds of the digital download market.

Universal Music, a division of French media and telecoms conglomerate Vivendi, plans to bring back more than 100,000 deleted European recordings, many of which were only produced on vinyl LPs, over the next three to four years and sell them exclusively in digital form.

A second batch of Universal's back catalog will be made available in late November and will include songs from Maurice Chevalier, Peter Kraus, The Orb and Charles Trenet.

Other music companies are also selling backlist songs online, but Universal, the industry's largest player, is making the broadest concerted effort to revive its massive out-of-date library. Back catalog albums account for about 30 percent to 35 percent of the company's CD sales.

Digitizing music, particularly decades-old libraries, can be complicated by cumbersome layers of red tape because older contracts with musicians and publishers did not include digital rights.

eMusic, the world's No. 2 download service behind iTunes, often touts the long tail of older songs it sells from independent labels. It does not carry any music from the world's four majors because they do not make songs available in the MP3 format, which can be played on any portable device.

EMI's Mixed Messages
Louis Hau

Amid EMI Group's otherwise lackluster performance in the first half of its 2007 fiscal year, digital music sales provided a glimmer of light.

For the six months ended Sept. 30, the British recorded music and music publishing company expects to report a decline in total revenue of about 3% from the same period last year on a constant currency basis. Revenue at EMI Music, its record label division, is expected to dip 4% from a year earlier on a constant currency basis.

But the company noted that digital music sales "continue to show strong growth," representing 9% of EMI Music's revenue, compared to 5.6% in the fiscal year ended March 31.

Last week, the International Federation of the Phonographic Industry said worldwide digital music sales climbed 106% during the first six months of calendar 2006, to $945 million. That total accounted for 11% of worldwide recorded music sales, compared to 5.5% at the end of 2005, IFPI said.

The sharp increases in digital music sales come as the recording industry continues to grapple with a continued decline in the sale of prerecorded compact discs. While the industry is investing more in digital music sales, those efforts continue to be hampered by widespread unauthorized music downloads via online peer-to-peer networks.

Wal-Mart to RIAA: We're Not Gonna Take It!

I don't know about you, but I got my ~$12 check from the RIAA last year as part of the massive price fixing settlement between the music industry and the states. As a quick recap, the music industry was running a "minimum advertised pricing" scheme (MAPS), under which they'd withold valuable in-store promotional materials (i.e. giant cardboard cut-outs of Outkast, posters of Britney, and the like) from large retail chains that advertised CDs at low prices as a way of drawing people into the store. Wal-Mart is one of the chains that uses CDs as a loss leader, so when the feds found that MAPS was another just word for "illegal price fixing" Wal-Mart went right back to its loss-leading ways.

Now, the retailer is tired of losing money on CDs, and has told the music industry to lower prices, or else. Wal-Mart is looking to sell CDs for under $10 (still a rip-off in a world of $15 DVDs), and still make a profit. Here's a quote from the Rolling Stone coverage of this that gives you an idea of how much clout Wal-Mart has in the music industry:

Tensions are not as high now as they were last winter, but making sure Wal-Mart is happy remains one of the music industry's major priorities. That's because if Wal-Mart cut back on music, industry sales would suffer severely -- though Wal-Mart's shareholders would barely bat an eye. While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. "If they got out of selling music, it would mean nothing to them," says another label executive. "This keeps me awake at night."

I never thought I'd say this, but good for Wal-Mart. Maybe they can get CD prices lowered across the board. If this happens and CD sales go up, then it'll be yet more proof that the folks who're responsible for the current state of the music industry are myopic fools who should be tarred and feathered, or forced to watch MTV for a few hours, or some other such horrible punishment.

Yahoo's Profit Drops 37%; CEO Vows Changes

Yahoo Inc. said Tuesday that third-quarter profit slid 37 percent as sales growth fell to the slowest pace in four years.

The slowing revenue growth has raised investor doubts about the Internet bellwether's strategy and execution, and the disappointing results were compounded by a dimmed outlook for the current quarter.

But Yahoo Chairman and Chief Executive Terry Semel offered hope for a turnaround next year by acknowledging the company's recent difficulties and vowing to fix them with a "back to basics" approach.

The promise helped lift Yahoo's sagging stock price, which increased by about 3 percent in extended trading after ending the regular session on the Nasdaq stock market down 3 cents, at $24.15. The company's market value has plunged 38 percent this year, wiping out more than $20 billion in shareholder wealth.

Yahoo said net income declined to $158.5 million, or 11 cents a share, from $253.8 million, or 17 cents a share, a year earlier. It cited new rules requiring companies to deduct the cost of employee stock options. The most recent result was line with estimates.

Revenue increased 19 percent, to $1.58 billion, but after subtracting commissions Yahoo paid its advertising partners, revenue was $1.12 billion, missing lowered estimates.

Yahoo faces competition from Google Inc., MySpace.com and YouTube.com for customers. Last week, Google agreed to buy YouTube, stepping up pressure on Yahoo.

"Yahoo definitely has challenges, and they need to address these challenges one by one," said Jefferies & Co. analyst Youssef Squali. "There is very little incentive to own the stock at this point."

In Web search, Yahoo handled 29 percent of U.S. queries in August, down from 30 percent a year ago, while Google's market share rose to 44 percent from 37 percent, according to market researcher ComScore.

"Google remains the better horse to ride at this point," said Barry Randall at MTB Investment Advisors in Baltimore.

Semel punctuated his pledge by announcing that Yahoo had finally started to roll out much-anticipated improvements to its system for selling and distributing ads tied to search terms and other topics displayed on a Web page.

The new platform, which Yahoo abruptly delayed three months ago, is considered the key to the company's comeback efforts. The changes aren't expected to begin boosting Yahoo's profits until next year.

"I am not satisfied with our current financial performance, and we intend to improve it," Semel assured analysts in a conference call. "We are not exploiting our considerable strengths as well as we should be."

Yahoo didn't give investors any reason to feel better about the current quarter, traditionally the company's most lucrative because the holiday shopping season encourages more advertising.

Excluding ad commissions, Yahoo forecast its fourth-quarter revenue will range from $1.15 billion to $1.27 billion. Analysts are expecting $1.3 billion, according to Thomson Financial.

"There are definitely legitimate concerns" about Yahoo, said American Technology Research analyst Rob Sanderson. "It has become a `show-me' stock and [the company] hasn't been showing much."

Apple Net Income Soars 27%

Maker of iPods and Macs reports solid sales, earnings for the fourth quarter; shares rally after hours.
Grace Wong

Apple Computer's profit soared 27 percent in the latest quarter on strong sales of its Macintosh computers and iPod digital music players, the company said Wednesday.

Apple reported net income surged to $546 million, or 62 cents a share, up from $430 million, or 50 cents a share, in the same period last year. Revenue jumped nearly 32 percent to $4.84 billion in the quarter ended Sept. 30.

Apple shares climbed 4.5 percent in extended trade on the results, which were released after the market close.

The results handily beat Wall Street's expectations. Analysts surveyed by Thomson First Call had forecast earnings per share of 51 cents on revenue of $4.67 billion for the company's fiscal fourth quarter.

Looking ahead, Apple said it expects revenue of $6 to $6.2 billion in its fiscal first quarter and earnings per share of 70 to 73 cents a share.

Guidance was slightly below Wall Street's estimates, but Apple tends to be conservative with its forecasts, analysts said. Analysts expect earnings per share of 77 cents on revenue of $6.44 billion for the first quarter.
Solid shipments

Cupertino, Calif.-based Apple said Mac shipments surged, climbing 30 percent to 1.61 million during the quarter. Laptops led sales of Macs, accounting for $1.34 billion in revenue versus $869 million for desktops.

"Apple changed paths tonight from being forever a niche player in the computer business to now being on track to be a legitimate market share player," Piper Jaffray analyst Gene Munster said.

Apple, which recently transitioned its entire line of Macs to include Intel (Charts) processors, trails PC market leaders Dell (Charts) and Hewlett-Packard (Charts) in terms of total shipments but has been rapidly growing its share of the market.

That's largely due to the popularity of iPods, which have exposed more people to the Mac platform, Munster said.

iPod sales remained a solid source of growth for the company. Apple said it shipped 8.73 million iPods during the fourth quarter, up 35 percent from the same period last year.

iPod sales have slowed from the skyrocketing growth of the past, but the quarterly results suggest there's still strength in the market.

"I don't see any end in sight. That market has plenty of juice," said Roger Kay, president of technology consulting firm Endpoint Technologies Associates.

Retail sales also were a bright spot for Apple, which said revenue at its stores climbed to $934 million in the quarter, up 41 percent from the same period last year.
New products

Apple could face stiffer competition in the digital music space this holiday season with Microsoft (Charts) set to debut its so-called iPod killer named Zune next month.

But CEO Steve Jobs provided an upbeat view. "Looking forward, 2007 is likely to be one of the most exciting new product years in Apple's history," he said in a statement.

Apple's recent product rollouts include a movie download service it launched in September and an updated line of its iPods.

The company also said Wednesday its new iTV gadget - which allows movies downloaded from iTunes to be streamed wirelessly from the PC or Mac to a large-screen TV in another room - would ship in the first calendar quarter of 2007.

The company finished an internal review of its stock option practices earlier this month and said grants made on 15 dates between 1997 and 2002 appear to be irregular. The company said it will probably have to restate its past financial results.

Profit Doubles at Google as It Continues to Expand
Saul Hansell

Google just doesn’t stop.

The world’s largest search engine said yesterday that its third-quarter profits nearly doubled from a year ago, as it maintained a torrid growth rate that is highly unusual for a company of its size.

The numbers are all the more significant because Google’s largest rival, Yahoo, has been faltering, as sales have tapered off for both its search and display advertising.

“Forty-eight hours ago we were discussing Yahoo; the contrast is pretty amazing,” said Jordan Rohan, an analyst with RBC Capital Markets. “This is an eye-opening and refreshing quarter for Google investors.”

In after-hours trading, Google’s shares surged 7.5 percent. In regular trading, before the results were reported, the shares rose $6.75, or 1.6 percent, to $426.06.

Eric E. Schmidt, Google’s chief executive, attributed the company’s growth to its unusually high level of investment in research and computing equipment.

“In our model, the capital investments we are making give us differentially better service quality, better scale and better leverage,” Mr. Schmidt said. “And we intend to continue this.”

Google spent $313 million for research and development in the quarter, up 76 percent from a year ago.

It also invested $492 million in capital equipment, mainly for computers and networking systems.

At the same time, Google continued to pack more engineers and ad sales people into its overflowing campus in Mountain View, Calif., and its dozens of other sites around the world. The company added more than 1,400 employees in the quarter, for a total of nearly 9,400 workers on Sept. 30.

The profit margins from Google’s core search advertising business are so high that it can spend liberally on development and still report very strong profits.

Google earned $733 million, or $2.36 a share, up 92 percent from $381 million, or $1.32 a share in the period a year ago.

Excluding charges related to stock-based compensation, it earned $2.62 a share, well above analysts’ estimate of $2.42.

Google had revenue of $2.69 billion, up 70 percent from the quarter a year ago.

For advertising that Google sells that is displayed on other sites, the company passes a majority of the revenue to the site owner. Excluding those payments to Web sites, Google’s revenue was $1.86 billion, slightly more than the $1.82 billion analysts had expected.

Google continued to extend its reach overseas, with 44 percent of its revenue from outside of the United States, compared with 39 percent a year ago.

The company outlined a very aggressive program of expansion yesterday. Over the last quarter it has secured many large new outlets for displaying ads, through deals with Adobe, eBay, the News Corporation (which owns MySpace), Intuit and Viacom.

Last week, Google agreed to pay $1.65 billion for YouTube, the most popular video-sharing site.

Google is quickly expanding from text ads to ads with graphics and videos. Indeed it now sells video ads in 30 countries.

While Google’s plans for YouTube are still unclear, so far its video ads are much less intrusive than most of those on other Web sites because people have to click on them to start the video.

Google is also building systems to place advertising for cellphones, print publications, radio stations and television channels.

“We will use our targeting technology not only to find the right advertisement for the each person, but to find the right medium for each advertiser,” Sergey Brin, a co-founder of Google, said in an interview.

Mr. Schmidt added that in the long run, Google also foresaw very large businesses from lines other than advertising. These include its selling devices for corporations to search their own computer networks and the Google checkout service, which earns fees from processing credit card transactions for merchants.

Recently it introduced new services that will allow companies to run their e-mail, word processing and other functions entirely on Google’s network rather than on their own computers.

As for its core search business, which represents nearly all of the company’s revenue so far, Google continues to gain market share. In September, 50 percent of all Web searches in the United States were conducted on Google, compared with 23 percent on Yahoo.

The company said that while growth in users typically slows in the summer, it benefited from some changes in how its system chooses advertisements to show on a page. Most notably, it started to analyze the Web sites of advertisers to make sure that they were related to what users were looking for.

While this resulted in playing down some ads, Larry Page, the company’s other co-founder, said it actually resulted in higher income for Google.

“Over time, as people notice the ads are higher quality, they are more likely to notice them and click on them, and that does affect revenue,” Mr. Page said in an interview.

Mr. Brin said that he saw no end to other innovations. “You might imagine the lower-hanging fruit has been picked,” he said, “but at the same time we have built ladders and are reaching for larger, higher-hanging fruit.”

Sony Joins Laptop Battery Recall List
Gemma Simpson

Sony is recalling 90,000 of its Vaio laptop batteries across China and Japan following recent battery recalls from other PC makers.

Rumors are also circulating that Toshiba is set to sue Sony, after it was forced to recall 340,000 laptop batteries made by Sony.

Sony said its recall is preemptive, and not a reaction to any particular problem. "There isn't a problem with the Vaio itself but after the problems with the other manufacturers, we decided (the recall was) something we had to do," a Sony spokesman said.
Over the past two months, computer makers including Apple Computer, Dell, Fujitsu, IBM, Lenovo and Hitachi have recalled Sony batteries.

Mark Blowers, an analyst from Butler Group, told Silicon.com that the battery recall has "grown into a huge problem."

"One moment it's one or two overheating batteries, now it's a manufacturing problem," he said.

The Sony battery recall is isolated within Japan and China but the analyst said he "can't believe it's not a global problem." He added: Sony "(doesn't) really know what the problem is so can't restrict recalls to a certain country."

If Toshiba files suit against Sony, it would be the first company affected by the Sony lithium-ion battery recall to seek compensation.

Blowers said Sony offered to cover the cost of replacing the Toshiba batteries, as it did with every other company with battery problems.

"Toshiba is worried about its brand being damaged," he said. "Toshiba may be gesticulating to get a better deal or more recompense with this move."

Reacting to rumors of the suit, Toshiba said in a statement: "We are studying various possibilities but nothing has been decided at this time and we are not commenting on rumors or speculations."

Sony Battery Recall to Hit 9.6 Million

The number of laptop batteries Sony is recalling will total 9.6 million worldwide, the company said Thursday, shedding more light on the scope of a problem that has rattled confidence in the company's image.

The estimate came just hours after Sony Corp. slashed its fiscal year profit forecasts due to the massive battery recalls and price cuts in Japan for the next-generation PlayStation 3 video game console.

Sony said the recalls of lithium-ion batteries will boost its costs by 51 billion yen ($429 million) in the July-September period. Sony spokesman Takashi Uehara said the 51 billion yen figure doesn't include "provisions for possible lawsuits" suggesting costs may actually grow.

Sony's defective battery packs have caused massive recalls, with nearly every major laptop computer maker to ask customers to return their batteries subject to replacement.

The problem stems from batteries that can short-circuit, causing some computers to overheat or even burst into flames. Previously, Sony had not provided a figure of how many batteries would be subject to recall.

Earlier Thursday, the Tokyo-based electronics maker cut its earnings forecast, saying it now expects group net profit of 80 billion yen ($673 million) for the fiscal year through March, down 38 percent from the 130 billion yen it had forecast in July.

Sony-made batteries have been recalled in recent weeks by U.S. makers Dell Inc. and Apple Computer Inc., as well as Japanese makers Toshiba Corp., Hitachi Ltd., Fujitsu and Sharp Corp. whose laptops also use Sony batteries.

Sony is joining the recall with its own Vaio laptops and that will also trim earnings for the current fiscal year, Sony said.

The estimated total of 9.6 million batteries include the latest recalls of 90,000 batteries in Vaio, Sony said.

Wall Street Woos Film Producers, Skirting Studios
Laura M. Holson

Since the birth of Hollywood, movie studio chiefs have been makers and breakers of careers, arbiters of taste and gatekeepers who decide which movies are made.

But as Hollywood power shifts more to Wall Street investors, financiers are starting to bypass studio bosses by dealing directly with successful producers.

Now, instead of deals being cut over lunch at Spago or the Grill, movies are increasingly being greenlighted in conference calls to New York.

The reason is a simple desire for more control. Wall Street financiers want a greater say over what movies they finance and who makes them; producers want more artistic independence and a larger share of the profits.

The studios themselves are nudging the trend along, too, since they are making fewer movies.

A result for moviegoers is that they could begin to see even more thrillers, comedies and horror movies at the multiplex — the types of movies Wall Street favors, because of their more predictable payoff.

Joel Silver, the producer of the “Lethal Weapon” and “The Matrix” movies, is the latest and most important Hollywood figure to cut a big deal with Wall Street.

He has just joined forces with a consortium of financiers who have agreed to provide $220 million to produce 15 films over the next six years. Mr. Silver will not only have creative control, he will own the movies outright.

“I’ve spent 20 years working for studios,” Mr. Silver said in a recent interview beside an L-shaped azure swimming pool at his Brentwood mansion, a home he referred to as the house ‘The Matrix’ built. “It was always their call.”

To his new partners, Mr. Silver seems like a good bet. In more than two decades as a producer on the Warner Brothers lot, he has produced 46 movies, which have generated $5.6 billion in global ticket sales.

Ivan Reitman, the director of “Animal House” and “Ghostbusters,” struck a $200 million deal with Merrill Lynch in August to produce 10 low-cost films. Tom Cruise and his producing partner, Paula Wagner, after splitting with Paramount Pictures over the summer, are in discussions with potential investors, as are several other producers.

“Hedge funds are picking out who they want to be in business with,” said Rob Moore, president for worldwide marketing, distribution and home entertainment at Paramount Pictures, who gets calls weekly from producers lining up money. “They don’t claim to know how to make movies. They are investing in a track record.”

But such investments are not risk-free, as others have learned. At least since the early 1980’s, studios have occasionally distributed and marketed movies financed by outsiders, some of them from overseas. In the late 1980’s, for example, Crédit Lyonnais famously backed a troubled MGM and Carolco Pictures, which went bankrupt.

Indeed, Hollywood is rife with stories of financiers who came to town with a pocketful of cash, only to leave empty-handed, except for a photograph of themselves with a smiling starlet.

But the new investors are hoping that with enough analysis, they can avoid the fate of some of their predecessors.

In deciding whether to invest with Mr. Silver, the investment firm CIT Group examined not only genre films he had produced, but similar films made by competitors, as well as a wide range of other movies. This style of movie financing has been driven by necessity. Studios have been forced to trim their slates because of higher costs, but they still need a steady stream of movies to distribute. In turn, producers need financing, because the studios are backing fewer films. And cash-rich financial institutions are looking for places to invest, hoping to earn double-digit returns while limiting their exposure to the fluctuations of the stock market.

“It’s a confluence of interests between the people with the cash, studios and producers,” Mr. Reitman said. “As Wall Street gets involved in movie financing, hedge funds don’t want to be ‘stupid money’ and want to align themselves with people who have a history of success. They are looking for a guide. They don’t want to be sold a script that’s been around for eight years.”

Studio executives, who earlier would have balked at such deals, are now open-minded. “I wouldn’t say it’s bad timing given where our strategy is going,” said Jeff Robinov, president of production at Warner Brothers, which, like many studios, is making fewer films. With Mr. Silver providing his own movies, Mr. Robinov said, he can focus on bigger films, like the “Harry Potter” and “Batman” movies.

And regardless of who finances the movies, the studios still make money from distributing them.

Two years ago, studio-slate financing was the toast of Hollywood, with hedge funds and other investors linking up with studios to co-produce films. But many of those deals have yet to pay off. In some cases, studios kept lucrative film franchises for themselves. In others, financiers picked the wrong movies to back.

“Here is a huge industry with a lot of capital,” said Wade Layton, managing director of CIT Communications, Media and Entertainment, referring to private investors. “First, they start off with studios as a way to get up to speed. Then you start to look for deals with producers.”

So far, Mr. Silver’s deal, which includes the investors J. P. Morgan and D. E. Shaw, is the most generous a producer has landed. Mr. Silver will produce a mix of horror, comedy and action movies that will cost $15 million to $40 million apiece to make. Mr. Silver’s Dark Castle Entertainment currently has enough money for eight movies and if those are successful, the revenue will be used to finance the remaining films.

The films are to be distributed by Warner Brothers Pictures, which gets a distribution fee. The first film to be released under the deal is “White Out,” an action thriller about a United States marshal who tracks a serial killer across Antarctica. It is to be released in 2008.

“I would never take a big movie to a financier,” said Mr. Silver, who also has a separate producing deal with Warner through 2009. “What do you say if you go over budget by $10 million? What do you say?”

“With these movies, 30 days and you are done,” he said, wiping his hands together.

Mr. Reitman’s Cold Spring Pictures — a venture among Mr. Reitman; his producing partner, Tom Pollock; Merrill Lynch; and two other investors — retains half the copyrights to its movies. Cold Spring must find a studio to distribute the films and put up 50 percent of the budgets. The financing is $50 million in equity and $150 million in debt. “We don’t want them telling us what to make,” Mr. Pollock said. “But we know if we don’t perform, they won’t be happy.”

Mr. Reitman’s group, like Mr. Silver, will share in 100 percent of DVD sales, which are often highly profitable, compared with an industry norm of 20 percent.

In return for giving up potential profits, financiers want to curb Hollywood’s notoriously wild spending. “We are not making investments for them to fund development,” said Michael Blum, a managing director at Merrill Lynch.

But Wall Street financiers are loath to meddle with the movie-making itself. And producers prefer it that way. “When bankers start reading scripts, you know you are in trouble,” Mr. Layton said.

Mr. Silver agreed: “I don’t mind if they come to premieres. If they want to come to the set, that’s fine — but I’m not making movies in L.A.” (Mr. Silver’s movies are filmed around the world.)

Two weeks ago, Mr. Silver invited his new backers to his estate, Casa de Plata, where they celebrated over sushi, roast beef sandwiches and cocktails. The same week, Mr. Reitman and Mr. Pollock took their partners to Cut, Wolfgang Puck’s new steakhouse, where, Mr. Reitman noted, Merrill Lynch, paid the bill.

“I don’t think any of them are in it for the glamour,” Mr. Pollock said. “They kept talking about their next big deal, which was recreational vehicles.”

But Mr. Reitman said his investors wanted the lowdown on John Belushi, Bill Murray and Dan Aykroyd in their younger days.

Did he share any gossip?

“A little,” Mr. Reitman said, smiling.
http://www.nytimes.com/2006/10/14/bu...8&ei=5087%0 A

Chan: Hollywood Rules Impede Stunt Work

HONG KONG - Hong Kong actor Jackie Chan, famous for his daredevil stunts, says he's frustrated by Hollywood's safety rules.

"There are so many safety and insurance rules to follow," Chan said in an interview on his Web site Sunday.

"I know that they want to make sure that I'm safe when I do my stunts, but sometimes they insist that I use protective gear for even simple things, and that is frustrating. It takes so much time," he said.

Chan said he feels less encumbered when making films in Hong Kong.

"In Hong Kong we just go ahead and do what needs to be done. There is no safety captain on the set. I use my own stunt team because they have experience and I trust them to make the action and stunts safe," he said.

Chan also said that when he first broke into Hollywood, he'd had little control over his own moves, even though he'd been choreographing stunts for decades in Hong Kong.

But that that has changed over time.

"When I first started making Hollywood films, the directors wouldn't listen to anything I said when it came to the action," he said.

"It's different now; the directors respect me and listen to me. Over the years I have gotten more involved in the planning of the action and stunts on my American movies and that makes me happy. But mostly it is difficult," Chan said.

Hollywood Film Chain’s Latest Link
David M. Halbfinger

A year ago, the director Sam Mendes collected his “director of the year” prize at a star-studded but still otherwise obscure, untelevised gala called the Hollywood Awards, two weeks before his film “Jarhead” was even released. “I’m very fond of giving awards to movies you’ve never seen,” he joked to a knowing audience of filmmakers, actors and studio executives.

This time around, the estimable Mike Medavoy is being named “Hollywood producer of the year” in connection with what might have been the Oscar campaign for “All the King’s Men” — had the film not turned into one of the biggest disappointments of his storied career. The Oscar winner Eric Roth will be named “Hollywood screenwriter of the year” even though his only film of 2006, “The Good Shepherd,” doesn’t open until mid-December and is still being edited. And the production designer John Myhre, a two-time Oscar winner, is being similarly honored, though his movie “Dreamgirls” won’t come out until Christmas.

All of these dubious honors — not to take anything away from the honorees themselves — will be handed out on Monday night at the Hollywood Awards, in what has become the first mandatory stop on the flashbulb-and-red-carpet-lined moving sidewalk of self-congratulation that is the awards season. Primarily seen as a publicity vehicle for late-year releases, the awards show and its promoters have lately made pretensions to Oscar oracling: Jamie Foxx won the “breakthrough actor of the year” prize for “Ray” in 2004, after all, and Paul Haggis and his ensemble cast were honored for “Crash” four months before it won best picture.

Still, the story behind this peculiar Hollywood extravaganza is emblematic of some aspects of the town itself: dreamt up almost overnight, built on facades more than foundations and, at bottom, a money-making enterprise.

The architect and chief financial beneficiary of it all is Carlos de Abreu, a Portuguese-accented P. T. Barnum who once worked in intelligence on what he called “the wrong side” of the African National Congress for colonial Mozambique, flew jets in its air force and marketed Cartier watches to rich Americans before quitting his job to study film at the University of California, Los Angeles, and marrying Janice Pennington, then a model on “The Price Is Right.”

Together the two set about finding ways to help novices enter the film industry while making a buck themselves. They started a screenplay competition in 1991, hoping to attach themselves to any winners that were produced. In 1996 they founded the Hollywood Film Festival, after learning to their surprise that the name wasn’t yet taken, Mr. de Abreu said.

In a telephone interview Mr. de Abreu said he had been working for more than a decade to “bridge the gap between established Hollywood and emerging talent,” and cited a screenwriting how-to book of which he is a co-author and an Internet bulletin board for screenwriters he set up.

In Mr. de Abreu’s retelling, he had an awards show in mind all along, but was urged by friends to try a film festival. So he created both. Yet while the awards show now looms large on the industry’s fall calendar, and while the Hollywood Film Festival has turned up discoveries like the director Craig Brewer, it is still not a rival to independent film festivals like Sundance, Telluride or the New York Film Festival. Its premieres are also not the cream of the crop: last year’s opening feature was the action-comedy “Kiss Kiss, Bang Bang.” This year’s is the family film “Flicka.”

Moreover, unlike those and many other film festivals — and even the Golden Globes, whose organizers give away millions of dollars to charity — Mr. de Abreu’s business, including both the film festival and the awards show, is anything but a nonprofit enterprise. He declined to reveal its revenues but insisted he was not getting rich: his Mercedes, he said, is 16 years old.

Mr. de Abreu said he did once establish a philanthropy called the Hollywood Film Foundation, but that it was no longer active. Asked why, he said: “I don’t have time for everything.”

No doubt, Mr. de Abreu has been busy raising his game since his first festival in 1997. (The New York Times was a sponsor of the festival in its early years but is no longer involved.) And he has proven a canny marketer. To attract A-listers early on, he staged the awards show in August, when few if any industrywide events compete for celebrities’ time; in 2002, he moved it to October, at the start of the Oscar-campaign preliminaries. Today he packs a ballroom at the Beverly Hilton, honoring not only industry players but also international films, chosen by a jury, and American popcorn movies, chosen by a Web poll.

Mr. de Abreu also hired the publicity powerhouse PMK/HBH, which steered some of its own clients to attend and lent the fledging awards show credibility by association, and signed Paula Wagner, Tom Cruise’s producing partner and a former top talent agent, as his co-chair. While PMK no longer handles Mr. de Abreu’s press, Ms. Wagner continues to urge her industry peers to make appearances at the awards show or contribute films to the festival, several industry executives said. Pat Kingsley, head of PMK/HBH, and Ms. Wagner both declined to comment.

Mr. de Abreu said he viewed his “of-the-year” honors as lauding a body of work; Mr. Medavoy, for one, is turning out five movies this year, not just “All the King’s Men.” Mr. Roth said he had agreed to be honored partly because it put him in good company — Robert Towne once accepted it, too — and partly because he hoped it would help Universal promote “The Good Shepherd.” Robert De Niro, who directed the film, is to present Mr. Roth with his honor.

Mr. de Abreu has honed his own tricks, of course, for enticing top stars and industry people to participate — the starry ensemble of “Bobby,” somewhat predictably, is being honored en masse — and for getting major film companies to help foot the bill. (Tables for 10 run from $10,000 to $25,000, though Mr. de Abreu said his honorees, presenters and all the independent filmmakers are admitted free.)

To no one’s objection, Mr. de Abreu’s awards show spreads the wealth. Every major studio has at least one film represented, from Universal, with six honors, to Warner Brothers, with two.

Executives at three studios, who demanded anonymity lest they be revealed as resentful, cowardly and spendthrift, complained that Mr. de Abreu had proved himself adept at manipulating even reluctant studios into participating, often by signing up their stars and filmmakers before approaching the company — especially those embarking on a sales blitz for a forthcoming movie or a campaign for an Oscar contender. Once the talent is tagged for an honor, studio executives said they felt obligated to get on board.

For his part, Mr. de Abreu said he always plays fair. Films and filmmakers are honored whether their studios buy into the show or not, he said, and his awards-picking process is “transparent” — though he declined to identify anyone involved, other than his wife, Ms. Wagner and himself.

More to the point, he asked that his industry awards not be measured by others’ standards. “They’re not competing,” he said. “There is no contest. Our organization could be you and me. We’re trying to celebrate film.”

A surer sign of Mr. de Abreu’s concern for film over the bottom line may be his reluctance to sell the show’s broadcast rights. He said he has had offers but rejected them rather than drop some of the “below-the-line” categories of awards, like makeup and costume design.

On the other hand, he added, “We may change our mind.”

The Judge and the Auteur: Revisiting the Polanski Case
Charles Lyons

MARINA ZENOVICH’S office here looks as if it should belong to an absent-minded film professor. A cluttered room adjacent to an editing suite on the city’s west side, it is packed with file folders containing hundreds of press clippings and the inevitable stacks of videotape. But a corkboard on the wall betrays a preoccupation that stirs more than academic passions in these parts.

The board is dominated by two photographs. One shows an almost young Roman Polanski, dressed in a dapper suit, hair parted to one side, looking lean, boyish and handsome. The other reveals a man in a black robe, with thinning white hair and a roundish face supported by a stocky frame. The caption under it reads, “Laurence J. Rittenband, Judge.”

“These two men met their match in each other,” said Ms. Zenovich in an interview last month.

Laurence J. Rittenband, who died in 1993, was the California judge who almost 30 years ago presided over the notorious case in which Mr. Polanski pleaded guilty to having unlawful sex with a minor. Even after Mr. Polanski fled to France in advance of his sentencing date, the judge vowed to stay on the bench until he returned to the United States.

Instead, Mr. Polanski, now 73 and a French citizen, remained a fugitive, and prospered as a film director, winning an Oscar in 2003 for “The Pianist.” Judge Rittenband, who left the bench in 1989, died at 88 without completing his quest. But he left behind enough professional and personal drama to have joined Mr. Polanski as a central character in Ms. Zenovich’s forthcoming documentary, which promises to shed new light on one of modern Hollywood’s more perplexing episodes.

The new film, unfinished and untitled, is being produced by Jeffrey Levy-Hinte (“Thirteen”) and Lila Yacoub (“The Anniversary Party”), and has Steven Soderbergh as an executive producer. It was recently acquired for distribution in Britain by the BBC, and when it eventually appears here in theaters or on the festival circuit, it will likely renew the debate over whether Mr. Polanski still has a price to pay if he returns to the United States.

Ms. Zenovich, a 43-year-old former actress who once had a small part in “The Player,” said it is impossible to reach conclusions about Mr. Polanski without drawing Judge Rittenband into the equation.

“I’ve never set out to diminish the seriousness of what Polanski did, but it comes down to crime and punishment,” she explained. “How much do you have to pay for the crime? What I’ve always set out to prove is, despite what Polanski did, which was awful, he was treated unfairly by the judge. That’s the bottom line.”

Convinced that even reasonably well informed people do not completely understand the Polanski case, Ms. Zenovich pursued a doggedly reportorial course, undeterred by Mr. Polanski’s refusal to participate. (A spokesperson for Mr. Polanski confirmed that he has no involvement with the documentary.) She conducted on-camera interviews with nearly 100 people, including Samantha Geimer, the girl, now in her 40’s, with whom Mr. Polanski had sex and who has publicly forgiven him. Other interview subjects included figures connected with the director’s film career, among them Mia Farrow, Nastassja Kinski, Robert Evans and Robert Towne.

But considerable attention is reserved for Judge Rittenband, who was something of a legend in his own right, having overseen murder cases involving the so-called Billionaire Boys Club and Sarai Ribicoff, during his time on the California Superior Court. Ms. Zenovich sees both Mr. Polanski and Judge Rittenband as men who rose by force of will from humble roots. Mr. Polanski survived Nazi persecution and lost his mother in the Holocaust. The judge, from a less dire background, was a poor Brooklyn boy who, upon graduating high school at 15, bypassed undergraduate work for New York University Law School; he later attended Harvard, because he was too young to take the New York bar exam, graduating Phi Beta Kappa.

Ms. Zenovich describes the judge as having lived the kind of vibrant personal life easier to associate with Mr. Polanski. “He was never married, and he loved being kind of a swinging bachelor, juggling a couple of girlfriends at once,” she said. “What’s most interesting about him is that he tried to come across as so moralistic, but eventually I found out that this was a man who had a 20-year-old girlfriend when he was 54.”

In a rough edit of the film, Richard Brenneman, who covered the case for The Santa Monica Evening Outlook, recalls drafting an affidavit immediately after Judge Rittenband’s death, in which he documented his conversations with the judge in chambers: “Most specifically, how he asked me what sentence to impose on Polanski, which was illegal.”

In another clip the producer Hawk Koch recounts that his father, the late Howard W. Koch, recalled overhearing Judge Rittenband at the exclusive Hillcrest Country Club, where the judge was a popular member.

“One of the gentlemen at Hillcrest came up to Rittenband,” Mr. Koch tells Ms. Zenovich, “and said, ‘Are you really going to let that little Polish blah-blah-blah off?’ And Rittenband said: ‘Well, he thinks so, but no way. We’re going to put that little blank-blank away for the rest of his life.’ ”But Judge Rittenband certainly has his devotees, including his nephew, Elliot Rittenband.

“He felt an obligation and a duty to do what he felt was best, and he always stuck to it,” Mr. Rittenband tells Ms. Zenovich. Marsh Goldstein, one of the judge’s calendar deputies, recalls to Ms. Zenovich: “He was one of the most intelligent men I’ve run across — literate, well read, with a wonderful vocabulary, a wonderful way of quoting famous writers and philosophers in the course of your calling calendar.”

A key revelation, Ms. Zenovich said, came from the case’s retired prosecutor, Roger Gunson, who suggests in the film that Judge Rittenband acted improperly before Mr. Polanski decided to skip the country in 1978. At first all sides had agreed that the only sentence he should serve would be a 90-day psychiatric evaluation in prison at Chino, Calif. But when Chino authorities, fearing for Mr. Polanski’s safety, released him after 42 days, an infuriated Judge Rittenband called in both sets of lawyers and announced a new plan. He wanted to put Mr. Polanski back in prison for another 48 days or deport him, Mr. Gunson says in an interview with Ms. Zenovich.

Mr. Gunson also says the judge told the assembled lawyers how he wanted them to argue their sides of the case. Recalling that day in chambers, Larry Silver, one of the lawyers present — he still represents Ms. Geimer — tells Ms. Zenovich how he, Mr. Gunson and Mr. Polanski’s lawyer, Douglas Dalton, had afterward sat together in stunned silence. In all their years in the legal profession, Mr. Silver says, none of them had ever seen anything like that.

(Mr. Polanski’s defense submitted an affidavit charging Judge Rittenband with bias, prejudice and unprofessional conduct, and Judge Rittenband ultimately agreed to allow another judge to handle the case.)

Still, Ms. Zenovich said she was determined to create a balanced film, and her preliminary edit includes views from people who appear less concerned with whether Mr. Rittenband botched the case than with Mr. Polanski’s actions.

“This man committed a rape, committed a bunch of other atrocities and got away essentially with nothing,” says Philip Vannatter, a former Los Angeles police officer. “And I don’t think that’s right.”

Even from the unfinished film, it is apparent that Ms. Zenovich — who made an earlier documentary, “Who Is Bernard Tapie?” without the participation of its subject, the French financier and politician — has become intent, like documentary filmmakers before her, on using the form to delve deeper than the written word or television usually allow.

“A sense of truthfulness is like a drug that hooks you and won’t let you go,” said Barbara Kopple, the documentary filmmaker and two-time Academy Award winner, reached by telephone in her New York office, where, with Cecilia Peck, she is completing “Dixie Chicks: Shut Up and Sing.” “Once you’ve seen it it’s hard to go back. I think that’s why the audience for documentaries keeps growing.”

For her part Ms. Zenovich said her feelings toward Mr. Polanski, as well as those of her mostly female crew, have vacillated in the course of their work.

“You love him one day,” she explained. “You hate him the next. I tell some people I’m doing this and they say: ‘That pedophile! That child molester!’ But all my research leads me to believe he’s misunderstood and endlessly fascinating.”

The Still-Life Mentor to a Filmmaking Generation
Randy Kennedy

For much of a half-century of taking quiet, subtly powerful pictures that demand and reward long looking, Jerome Liebling has been known as a photographer’s photographer. The label is both a high compliment and an acknowledgment that Mr. Liebling, now 82, has not enjoyed the acclaim accorded to many of his contemporaries who first took their cameras to the streets of New York after World War II.

But a more fitting way to describe Mr. Liebling would be as a documentarian’s photographer. And judged by that standard, his work has rarely suffered from a lack of attention. In fact, spend any time watching the films of Ken Burns, or those of the legions of documentary makers he has inspired, and you will see Mr. Liebling’s work, in a sense, even if you have never laid eyes on one of his photographs.

His influence on a generation of nonfiction filmmakers — what Mr. Burns describes as “all of us coming within Jerry’s radiational sphere” — will be the subject of a tribute tonight at the Museum of Television and Radio by several of the students taught by Mr. Liebling, starting in the early 1970’s.

While Mr. Burns is probably the best known of the group, Mr. Liebling also taught Buddy Squires, the cinematographer who has helped to shape many of Mr. Burns’s films, as well as the directors Roger Sherman, Kirk Simon, Karen Goodman and Amy Stechler, who have several Emmys and Academy Award nominations among them. Sometimes called the Hampshire Mafia, they all attended Hampshire, the experimental college in Amherst, Mass., which has produced an unusual number of successful filmmakers and photographers.

Interviewed this week in a Midtown Manhattan studio as he was editing “The War,” an epic soldier’s-eye view of World War II that is to run next year on PBS, Mr. Burns described how he set off for Hampshire College in 1971 with youthful Hollywood dreams of becoming the next John Ford. But under the tutelage first of the photographer Elaine Mayes and then of Mr. Liebling, and no doubt also propelled by Hampshire’s Age of Aquarius idealism — no grades, no departments, no tenure — he fell in love with the power and relative purity of documentary filmmaking.

Mr. Burns recalled how he and his fellow students were terrified of Mr. Liebling. A gravel-voiced Brooklynite who had served with the 82nd Airborne Division in World War II before studying with Paul Strand and joining the Photo League, Mr. Liebling had founded one of the first college-level photography and film programs at the University of Minnesota, where he spent 20 years. The fear was fueled less by Mr. Liebling’s gruffness, he said, than by the fierce honesty of his teaching and by his pictures, which were firmly rooted in the social documentary tradition but seemed to have a resonance that transcended their genre.

“He was so authentic, in a way that a lot of us had never experienced,” Mr. Burns said. “You wanted to be like him. You wanted to tell the truth. You’d go out to take pictures with him, and we all saw the same things he did, and then we’d come back, and he’d put up his prints, and you’d put up yours, and you were devastated.”

He added, still seeming to wince all these years later at the memory: “Sometimes you’d do some work you thought was really great, and you’d show it to him, and he’d stand there for a while and then say, ‘Well ...’ And it was like, ‘Oh God.’ That was all it took. That ‘well.’ You knew you hadn’t done it.”

Mr. Liebling is often mentioned in the company of other photographers with cult followings among their peers, like Frederick Sommer or Dave Heath, whose classic 1965 collection, “A Dialogue with Solitude,” has long been out of print. But Mr. Liebling’s interest in documentary filmmaking — which he has also pursued through the years — has embedded his legacy deeply in the American documentary style that has emerged over the last 30 years.

On the most practical level, Mr. Burns said, Mr. Liebling led him to realize how still photographs could be incorporated powerfully into documentaries. It’s a technique that has become so closely associated with Mr. Burns’s style that Apple’s iPhoto software now offers a feature called the Ken Burns Effect, which incorporates slow, portentous zooms and pans into otherwise ordinary slide shows of family snapshots.

“The essential DNA of all my films issues from still photography,” Mr. Burns said. But Mr. Liebling’s influence on his work, he said, reached much deeper, to a personal and ultimately philosophical level that has guided many of his choices of subject and approach.

“It was this broadly humanistic mantra that he instilled in us,” he said, adding: “Jerry turned me and made me look inward, and it was not always a comfortable thing. I changed as a result of it. It was like molting.” He also taught, Mr. Burns said, that “all meaning accrues in duration — sometimes you have to just slow down and look.”

Mr. Burns smiled and added: “Of course, when you ask Jerry about this, he’s not going to cop to any of it. He’s just going to say, ‘What’s Kenny talking about?’ ”

But in a telephone interview Mr. Liebling actually did cop, at least to some of it. He said that when he was a child of the 1930’s in New York, his photographic impulse from the start was to “go figure out where the pain was, to show things that people wouldn’t see unless I was showing them.”

In doing so, his subject matter was often dark and uncompromisingly noncommercial: the blood-drenched workers at a Minnesota slaughterhouse; mental patients in a state hospital; cadavers used by New York medical students.

In teaching, he said, he tried mostly to impart a deep suspicion of dogma, of piousness and of the compromises that can lie just beneath the surface of American culture. “I wanted them to see that there are no shortcuts,” he said. “It’s too easy if everything is soft, and you can just buy your way and live well.

“I kept asking: ‘Where is your work coming from? Why are you doing it? What is it you see?’ And after a while they started to really look.”

Mr. Liebling, interviewed as he was preparing to drive from Amherst to New York for the tribute, part of the museum’s annual documentary festival, was asked if it bothered him that his work was not better known (though it is in several major collections, including those of the Museum of Modern Art and the Corcoran Gallery in Washington).

“Would I want to sell more?” he said, laughing. “Well, yeah. Who wouldn’t?” But he added: “Basically, I just hope that what I have to say in the photographs has validity and that I did it as well as I could.”

Though age has finally begun to slow him, he said, he is still hard at work with a camera and has in fact just returned to printing a series of pictures he first began in 1979 in an apple orchard near his house.

“I guess that’s a long time to be working on an apple orchard, isn’t it?” he said. “But the apples still keep growing each year.”

Technology 'Can Beat Film Piracy'
Ian Youngs

New technology is the key to beating movie piracy, the UK film minister has told industry executives.

Making films available on demand as soon as they are released at cinemas could help stop fans watching illegal copies, Shaun Woodward said.

"The real answer is in the technology," he told the BBC News website, citing the success of legal music downloads.

"People will take the legal way and I think ultimately that's the solution for film piracy as well," he said.

Film pirates in the UK make an estimated £300m profit a year, according to the Federation Against Copyright Theft (Fact).

Most illegal gain comes from pirate DVD sales, and much is believed to help fund organised crime.

A number of major companies, including Sky, BT and AOL, already offer film downloads in the UK, while giants such as Apple and Amazon offer similar services in the US.

Movies are also available on demand on TV in the UK through services such as cable provider NTL Telewest and broadband broadcaster Homechoice.

But no-one offers films at the same time as they are released at the cinema - whereas pirate copies usually hit the streets or the internet within days, if not hours, of their first screenings.

'More ingenious'

Mr Woodward told film executives at an anti-piracy campaign launch on Thursday: "You're going to have to look at release dates in a slightly different way than you have done before.

"You're going to have to look at slightly more ingenious ways of making electronic copies available so that people may actually pay a different price for something that they can download at home, which is just being released in the cinema.

"If they want to watch it at home, then maybe you should make it available to them.

"But they should pay a premium rate for having it earlier on and it should be encrypted in such a way that it can't be copied."

Some gangs used film piracy to finance "some appalling organised crime around the world, which often reaches into terrorism", he added.

More than 90% of pirate DVDs came from people recording films with camcorders in cinemas, a Fact spokesman said.

Camcorded copies of hits including Pirates of the Caribbean 2, X-Men: The Last Stand and V for Vendetta have been traced back to the UK.

On Thursday, Fact and the Film Distributors' Association launched guidelines to help cinema staff and police catch people making surreptitious recordings.

They also published procedures designed to keep film prints secure at every stage of their release.

Fact chairman and Sony Pictures UK finance director Brian Robertson said Mr Woodward's idea about simultaneous download and cinema releases was an "interesting suggestion".

"At the moment it's probably not technically possible," he said.

"But in a few years, yes, I'm sure it will be possible and it's part of the whole economic model of film-making that will have to be looked at.

"It is a radical thought and the film-makers themselves may have an issue with it because they want people to experience something on the big screen, not on the small screen.

"It will certainly be an interesting debate."

Hollywood’s Democrats Watch and Wait, Cautiously
Allison Hope Weiner

At last week’s fund-raiser celebrating the 25th anniversary of People for the American Way, one of the core liberal groups in Hollywood, the comedian and master of ceremonies George Lopez left no room for doubt about his expectations for next month’s Congressional elections. “We’re in! We’re in!” Mr. Lopez shouted from the stage, to loud applause from a crowd of 600 at the Beverly Hilton.

In their more sober moments, however, the film industry’s Democrats and Democratic sympathizers remain pointedly reluctant to declare this election cycle a hit, even while the conventional wisdom points toward coming Republican losses in the House and Senate.

“Two years ago we thought we understood the country and we thought there would be change and we got smashed,” said Irina Medavoy, a major fund-raiser for the Democrats who is married to the producer Mike Medavoy, in a telephone interview. “After the last time, there will be no strutting or Bruce Springsteen playing. We have learned.”

With three weeks remaining before the vote, liberal Hollywood has been watching the Congressional midterm elections with the kind of attention usually reserved for presidential races and Oscar night. Potential donors are fielding invitations to as many as three fund-raisers for a single Democratic candidate. “So many people are doing events that you just can’t go to them all,” said Lawrence Bender, a producer of the global-warming documentary “An Inconvenient Truth.” “There tend to be at least two events every night.”

Still, the dominant note, at least among more than a dozen prominent Hollywood Democrats interviewed in the last several days, stops noticeably short of confidence. Several players, like Ms. Medavoy, pointed toward bitter disappointments in the past, when a politically energized film community found itself flummoxed by the perceived maneuvering of Republican strategists and the tendencies of a complex electorate.

“I’ve learned not to be too optimistic,” said Alan Horn, president of Warner Brothers, though he was quick to add, “I believe the tide has turned.”

Along with natural reluctance to declare victory in advance, Hollywood Democrats may feel a certain reserve born of the fact that Congressional politics is something that mostly occurs elsewhere. Few of the House seats in California are likely to change hands, thanks to a redistricting arrangement that rendered most of them “safe” for whichever party has them in hand.

All of this points toward a stay-at-home election night for many on Hollywood’s glamour circuit. The filmmaker Rob Reiner, for instance, said that he planned to watch the returns on television with his friend the philanthropist and film producer Steve Bing, and that he remained distinctly cautious. “You don’t want to spike the ball at the 10-yard line,” Mr. Reiner said.

In the last several weeks many of the industry’s Democratic regulars, including Haim Saban, a Democratic fund-raiser and movie producer, and the former Paramount Pictures chairwoman Sherry Lansing, got a bit closer to the action by throwing support behind Arnold Schwarzenegger, the state’s Republican governor, in his so-far-flourishing re-election bid.

But there is also an abiding sense here that Democrats have in the past defeated themselves by underestimating the skill and motivation of their foes. “There are still a lot of things they could pull with three weeks to go,” Mr. Bender cautioned, notwithstanding polls that favor his team and a recent Time magazine cover that looked for “the end of the Republican revolution.”

On the other side of the aisle, at least one member of Hollywood’s somewhat truncated Republican establishment also saw an up side in the current mood. “I’m a much more popular lunch guest of late,” said Lionel Chetwynd, a conservative-leaning writer and producer, who finds Democratic friends more than usually interested in his views.

Mr. Chetwynd, who predicted that the Republicans would hold one and perhaps both sides of Congress, added that his feelings were not all that different from those of his opponents. “The truth is, we share a cautious optimism,” he said. “I hope there’s enough to go around.”

Video Game Sales Soar in September

September's video game sales jumped by a whopping 38 percent compared with the year-ago period, according to data from the NPD Group, a market research company.

Year-to-date, the industry is up 11 percent and there are no signs of slowing down, according to video game analyst Anita Frazier, who added that a record year for the industry "is a given."

Total video game sales were $777 million for the month, up from $563 million in September of last year.

Hardware sales rose 71 percent to $244 million from last year's $143 million, led by the Nintendo DS, which sold more than 400,000 units, bringing its U.S. total to 6.3 million.

Software sales climbed 29 percent to $446 million from $347 million in the year-ago period, and sales of accessories jumped 21 percent to $88 million from $73 million.

In terms of dollar sales, this was the best September in the industry's history, Frazier said.

Sony and Nintendo are both set to release much-awaited next-generation consoles in November. Frazier said she expects the available inventory for both PlayStation 3 and the Wii to sell out.

Maker Defends School 'Bully' Video Game
Matt Slagle

The creators of the popular, but oft-criticized "Grand Theft Auto" games are set to release a new title in which players assume the role of a 15-year-old wannabe tough guy, a premise that drew outcry almost as soon as it was announced last year.

But amid a rash of recent school violence, lawsuits and an ongoing discussion about the influence of video games on children, the developers at Rockstar Games defend "Bully" and say the issues are out of their hands: All they can do is try to make good video games.

"Some people like our games; some don't," company spokesman Rodney Walker said. "We can't try to beat these arguments. Our whole process we believe with 'Bully' is we have to let the game speak for itself. We just want them to know that this is just entertainment."

Actual game players certainly have enjoyed Rockstar's previous titles. Its games, ranging from the "Grand Theft Auto" series to this summer's "Rockstar Games Presents Table Tennis," have received favorable reviews. "Grand Theft Auto: San Andreas" was the top-selling game in 2004, beating out perennial hits like "Madden NFL" that year.

The $39.99 "Bully," out Tuesday for Sony Corp.'s PlayStation 2, uses the same freeform design of "Grand Theft Auto" but is rated "T" for teenagers age 13 and older instead of "M" for mature players 17 and older. In it, players assume the role of Jimmy Hopkins, who thinks he's the big fish in the pond - until he enters Bullworth Academy.

Players in the living, breathing world of "GTA" could drive cars, perform missions - and shoot pedestrians and police officers with reckless abandon.

With "Bully," there are plenty of fisticuffs but no guns, no blood and no dying. The most powerful weapons include a slingshot and a baseball bat.

More importantly, actions have consequences: Stay out past curfew, and the screen blurs as you become sleepy and eventually pass out. If you're skipping class, you'll have a swarm of adults around you voicing their disapproval.

There's even some incentive for attending the twice-a-day classes: Your character gets an enhanced ability to flirt with girls or recipes to make stink bombs and other prank devices.

Ultimately, Hopkins faces bullies instead of becoming one as he negotiates a complex social hierarchy dominated by various cliques like greasers, jocks, nerds and preps.

Rockstar's success and explanations have done nothing to appease Jack Thompson, a Florida attorney long critical of violence in video games and other popular media.

Without ever having seen or played the game himself, Thompson has called "Bully" a "Columbine simulator" and sought a ban.

Earlier this week, he persuaded a circuit court judge in Miami-Dade County to play "Bully" himself and determine if it should be sold to minors.

"The premise of Bully is that it is sometimes acceptable to deal with bullying by becoming the ultimate bully," Thompson wrote in his complaint. "This was the dynamic at Columbine. It has been the dynamic in other tragic instances of school violence."

The judge ultimately saw no reason to restrict sales and dismissed the complaint on Friday.

Rockstar was embroiled in a different ratings controversy last year after a hacker uncovered a hidden sex scene in "Grand Theft Auto: San Andreas."

Meanwhile, several pending lawsuits blame Rockstar and parent company Take Two Interactive Software Inc. for real acts of violence.

Last month, relatives of three people slain by a 14-year-old on newsman Sam Donaldson's New Mexico ranch sued Rockstar for $600 million, claiming the crimes would not have occurred had the teenager never played the violent game.

Another $600 million case in Alabama against Rockstar, Take-Two and Sony blames "Grand Theft Auto" for the 2003 murders of two police officers and a dispatcher at a rural police department.

In both cases, Thompson is the attorney for the plaintiffs.

Joan Bertin, executive director of the National Coalition Against Censorship in New York, said newer forms of media have always been targeted for society's problems - because they're new.

Comic books were blamed for juvenile delinquency in the 1950s, and similar arguments have been raised over the years against rock and rap music, she said.

"It presents the perfect irony about censorship," she said. "People who want to censor things don't really think about them. They just want the subject off limits. They're into creating taboos."

The game's producer, Jeronimo Barrera, said "Bully" influences came from Hollywood movies such as "Sixteen Candles" and novels like J.D. Salinger's "The Catcher in the Rye" - a coming-of-age book that has been one of the most banned since it was first published more than 50 years ago.

"We want to be on the same equal footing with other media because then we wouldn't be having all these problems that we have with our critics," Barrera said.

Controversy won't end with "Bully." Coming up in a few weeks is "Grand Theft Auto: Vice City Stories" for Sony's PlayStation Portable system. And sometime late next year, Rockstar plans to release "Grand Theft Auto IV" for the new generation of consoles from Sony and Microsoft Corp.

A visit to the Manhattan headquarters of Rockstar Games reveals a playful, laid-back workplace that typifies many other video-game offices.

Employees in jeans, sneakers and T-shirts ride their bicycles on the hardwood floors or bounce a basketball, maneuvering between stacks of cardboard boxes. Vintage arcade machines line one wall, while in the distance employees in cubicles hover over their computers.

The developers at Rockstar may be the ones feeling bullied, but they vow to continue making the games on their own terms.

"We usually pick things that are really difficult to do," Barrera said. "In this case, it was the experience of your school days in this living breathing world. We're not the types that do market research. It's more from the heart. We have a passion for what we do."

YouTube Confusion Shuts Down Utube Site
John Seewer

YouTube's enormous popularity has created a big headache for another "utube" - a company that sells used machines that make tubes.

Universal Tube & Rollform Equipment Corp.'s Web site, utube.com, was inaccessible for most of the week, overwhelmed by millions of people looking for the popular online video site.

The confusion took off a couple of months ago, said Ralph Girkins, Universal Tube's president.

The company with just 17 employees got 68 million hits on its site in August, making it one of the most popular manufacturing Web sites.

The site shut down last weekend just before Google Inc. announced plans Monday to buy YouTube for $1.65 billion. A move to a new server didn't help, but by late Thursday Universal Tube's site was back up after the company added more capacity.

"We couldn't work on it, couldn't do anything," Girkins said Friday. At least 50 customers called during the week to point out the problem, he said.

He hasn't figured out yet how much it has cost to get the site running.

"Just get me going. I don't care." Girkins said. "If I miss a $300,000 sale because of a Web site problem, it doesn't make any sense to not to fix it."

Universal Tube, based in suburban Perrysburg and founded in 1985, has about $12 million in annual sales.

The company is looking to sell the Web address and find a new home for its Web site even though the company uses the utube.com name to advertise to customers overseas, Girkins said.

"We know we can't keep it," he said. "It's going to be a never-ending problem."

The Google of Drug Discovery?

New Tool Aims to Link Diseases with Treatments

In September, researchers in Boston launched what they hope will become the Google of drug discovery, a free, genetic search engine they call the “Connectivity Map.” One goal is to match diseases with potential treatments, another is to suggest how drugs can be applied in new ways to treat diseases like cancer.

To build a searchable bridge between drugs and disease, researchers had to find a common language, says Justin Lamb, a lead researcher for the project and a senior scientist at the Broad Institute of MIT and Harvard. “Our decision then was to represent disease and drugs using the language of gene expression,” Mr. Lamb says.

To create the Connectivity Map, the team measured the genomic signatures of 164 drugs, then designed a computer program to compare the signatures of the drugs with each other, and with the signatures seen in diseases.

Using signatures as one would use keywords with Google, users can explore how a compound might impact a disease. And so far the map has yielded some interesting finds.

Mr. Lamb cites, for example, the discovery of a drug that can help therapy-resistant patients fight a fast-moving form of leukemia called acute lymphoblastick leukemia. The drug was sirolimus, an immunosuppressant, Mr. Lamb says. Made by Wyeth Pharmaceuticals, sirolimus is normally used to help prevent the body from rejecting organ transplants.

Researchers at the Dana-Farber and Children’s Hospital in Boston are now planning to trial the drug.

But their map is still some ways off from acquiring Google-like status. The database is hardly encyclopedic at this point. Although researchers plan to pump it up with the signatures of every FDA-approved drug, about 1,400, Mr. Lamb says more work will be needed to determine how useful the Connectivity Map will be.

The map is not the first searchable database in this area. Mountain View, California-based Iconix Biosciences, for instance, uses similar technology to help big pharma garner a better understating of a potential compound’s toxicity. And as odd as it may sound, Iconix salutes the arrival of the Connectivity Map. “I think it’s a great validation for the approach,” says Don Halbert, Iconix’ vice president of R&D.

That said, there are big differences between the two search engines. The Iconix engine harnesses the ability to search and understand compound toxicity in rats. The Connectivity Map looks at gene expression using human cells. As such, Mr. Halbert says the map doesn’t pinpoint how an entire organism’s system might react to a drug.

Planet Google Wants You
Alex Williams

AS Dan Firger, a law student at New York University, strolls from class to class during the course of his day or pauses for a breather in Washington Square Park, his cellphone is routinely buzzing inside his messenger bag. He can often guess who it is: Google.

Six to eight times a day text messages pop up, courtesy of Google Calendar, a free daily organizer introduced this year. The program can scan appointments and send reminders of coming events.

Google is everywhere in Mr. Firger’s life. He scours the Web with its search engine; he chats with friends in Bolivia using Google Talk; and he receives e-mail messages on a Google Gmail account.

“I find myself getting sucked down the Google wormhole,” Mr. Firger said with equal parts resentment and admiration. “It’s all part of Google’s benign dictatorship of your life.”

It seems almost quaint to recall how people used to think Google was everywhere, back around 2003, when its search engine became a cultural phenomenon and a verb. Since then, in a push for global ubiquity, Google has introduced more than two dozen applications and tools. And last week it bought YouTube, the 18-month-old video-sharing site, one of the most habit-forming services on the Web.

While the company says it will keep the YouTube name and Web address, the acquisition gives Google’s regular users — 41 percent of those who search the Internet, according to Nielsen/NetRatings — one more reason to feel they are living on Planet Google.

Since the dawn of personal computing, software makers have sought to be not just providers of products, but universes unto themselves, into which users merge a piece of their identity. Consumers label themselves Macintosh people or derive a psychic sense of belonging from an e-mail address that places them at aol.com or yahoo.com.

Marketing experts consider a Web site an experience — different from using a product like a soft drink — because it’s someplace you go, an arena in which you live out your life. And in this way many people develop a sense of intimacy within it, even trust.

People may think they use Google because they like it, but really, “it’s the reverse,” said Rashi Glazer, a business professor at the University of California, Berkeley, and a director of its Center for Marketing and Technology. “You use something and in seeing yourself using it, you say to yourself, ‘Hey, I’m using it all the time, must be because I’m loyal to it.’ It becomes a virtuous circle.”

Donna L. Hoffman, a founder of eLab 2.0, a research center at the University of California, Riverside, that studies online consumer behavior, said that Google has in the minds of many users “become one with the Internet,” achieving a meta-status because as the most-used search engine, “it literally augments your brain. I don’t have to remember quite a few things now because Google can remember them for me. Google is an additional memory chip.”

Some people give their brains over to Google willingly, in part because they accept the anticorporate credo of the company’s founders, Larry E. Page and Sergey Brin: do no evil.

“I really think of them as the good guys’ response to the evil empire,” said Donald C. Hubin, a philosophy professor at Ohio State University, referring to Microsoft. Professor Hubin said he uses one Google program or another hundreds of times a day: Gmail, Google Calendar, Google Earth, Picasa or Google Scholar, which allows academics to troll for books and peer-reviewed papers.

“Microsoft always seems to be trying to force you to do things their way, like when they released the version of Windows with Internet Explorer embedded, forcing you to use it,” Professor Hubin said, explaining how he could develop a sense of intimacy with one Internet behemoth yet view another with distrust.

Like Apple, Google has lured the young and the early adopters by making the utilitarian — say, Gmail — seem hip. Part of the allure stems from the clean Euro-minimalist design of its applications. Part of it stems from the company’s reputation for innovation.

Google is “very leading edge, very young and very appealing to 20- and 30-year-olds,” said Russell S. Winer, a professor of marketing at the Stern School of Business at N.Y.U. “If you walked around with a Google T-shirt, people would think that’s a hip thing to wear.”

Some Google disciples, mainly younger ones, are in denial that Google is a huge corporation, out to make money from them, said John Perry Barlow, a founder of the Electronic Frontier Foundation in San Francisco and a fellow at the Berkman Center for Internet and Society of Harvard Law School.

“They see a couple of basically O.K. young guys — and they still are, in my opinion — join forces with a truly decent older guy and resolve not to be ‘evil.’ ” Mr. Barlow wrote by e-mail, referring to Mr. Brin, Mr. Page and Eric E. Schmidt, Google’s chief executive. “How cool is that? What they don’t understand is that once a company sells its soul to the stockholders — which it must at that point — good versus evil is no longer a practical consideration. Google has already crossed that Rubicon.”

It has had its share of controversies. In January it rankled free-speech advocates by agreeing to censor its search service in China to gain a greater foothold there. While Google may seem ubiquitous thanks to its dominance of Internet searches — Yahoo is in second place — the company lags far behind in areas like e-mail and chat, partly because it is a recent entrant.

Still, few in Silicon Valley would discount Google’s potential to become a larger part of more people’s daily lives. While Yahoo was, according to the September figures of comScore Media Metrix, the American market leader in users, with 129.7 million, the company grew only 5 percent in users over the previous year. But Google, now at 107.4 million, grew by 23 percent.

The expansion of Google’s reach into so many areas of people’s lives has some worried. Other than the National Security Agency, said Kevin Bankston, a lawyer at the Electronic Frontier Foundation, “I don’t think any entity has ever been in a position to collect so much private data about people.

“This kind of profile-building, if it was being done by authorities in a Communist regime, people would immediately object.”

For its part, the company takes “the responsibility of holding our users’ data very seriously,” said an e-mail message from Courtney Hohne, a spokeswoman for Google, which is based in Mountain View, Calif. “We’re thinking about user privacy constantly, literally from the earliest stages of product design.”

In its fight for mind share — of the overall market and of the consciousness of users — Google seems poised to extend itself even further.

Many users seem committed to the company, even when they are skeptical of its reach. Mr. Firger, the law student, acknowledged feeling a “weird tension” about his love of Google’s products and his fear about its omnipresence in his life.

“I don’t know if I want all my personal information saved on this massive server in Mountain View, but it is so much of an improvement on how life was before, I can’t help it,” he said.

Toni Carreiro, a Web designer in San Rafael, Calif., and a self-described Google addict, said that the elegant simplicity of Google’s design is a blank slate upon which she can impose her own personality: It’s not there to sell you on anything, just to help you, while other sites, she said, are full of blinking ads and clutter.

“They have all this animation going,” she said. “I just want my stuff. That’s what Google gives you — ‘me.’ ”

It Pays to Have Pals in Silicon Valley
Miguel Helft

Every now and then, a group of former PayPal employees get together to catch up on life and work. It might be at a backyard barbecue, a birthday celebration at a classy San Francisco restaurant or a simple late-night reunion at someone’s house.

Almost inevitably, the conversation turns to business, and soon enough, a new start-up is born or has found a financial backer.

This is what happened last year with YouTube, the Web video company that Google has agreed to acquire for $1.65 billion. It also happened the year before with Yelp, whose Web site lets users review doctors, dry cleaners and other local services.

Since 2002, when dozens of employees left PayPal after it was bought by eBay for $1.5 billion, those workers have gone on to start or join a new generation of Internet companies and other ventures. They have remained a tight-knit group, attending each other’s parties, helping to shape each other’s business plans, backing each other’s companies and recruiting each other for new projects.

Silicon Valley was largely built by networks of people and companies whose interlocking relationships help to spawn new start-ups. But the PayPal alumni have been unusually prolific, especially given the company’s modest size compared to Internet giants like Netscape, eBay and Yahoo.

“PayPal may have the highest ratio of individuals going off to start or finance new start-ups in the Valley,” said Scott Dettmer, a founding partner of Gunderson Dettmer, who has been providing legal advice to venture capitalists, start-ups and entrepreneurs since the 1980’s.

None of the PayPal network’s other offspring is anywhere near to matching the success of YouTube. But the PayPal alumni have started a number of promising ventures, mostly revolving around the Internet.

Among them is LinkedIn, the largest business-oriented social networking site, which was started by Reid Hoffman, a former PayPal executive vice president. It received funding from, among others, Peter Thiel, PayPal’s co-founder and former chief executive. Mr. Thiel himself started a hedge fund, Clarium Capital, which he said has grown from $11 million in assets to more than $2.3 billion in four years. He also runs a small venture firm with other PayPal alumni.

Another new Internet venture is Slide, a company started by Max Levchin, a PayPal co-founder, that makes it easy to publish, find and view slide shows on the Web. A handful of other start-ups are in earlier stages of development.

David O. Sacks, the former chief operating officer of PayPal, started a movie production company called Room 9 Entertainment. Its first film, “Thank You for Smoking,” a satire about the tobacco industry, has grossed more than $24 million at the box office. Mr. Thiel, Mr. Levchin and Elon Musk, another PayPal founder, all helped finance Room 9. Mr. Sacks said he had other film projects in the works, but he is also in the process of starting a new Internet company, for which Mr. Thiel provided some funding.
Mr. Musk started a company called Space Explorations Technology, or SpaceX, that is developing relatively low-cost rockets and is backed with $100 million of his own money.

YouTube was hatched by Chad Hurley, Steven Chen and Jawed Karim, all PayPal alumni, early last year. At a backyard barbecue last summer, Mr. Karim showed the site to a friend, Keith Rabois, a former PayPal executive who now works at LinkedIn. Mr. Rabois later told PayPal’s former chief financial officer, Roelof Botha, who is a partner at Sequoia Capital, the venture firm that has backed Apple, Google and Yahoo, among other big names. After meeting with YouTube’s founders, Mr. Botha got Sequoia to invest in it.

“What happened at PayPal is pretty unusual in that the PayPal alumni have ended up founding some pretty impressive teams and companies,” said Ron Conway, an “angel” or early-stage investor who has backed more than 400 start-ups.

Mr. Thiel added: “We had an incredible team at PayPal. Four years after the fact, I think it is far more incredible than we realized at the time.” He said only 200 of PayPal’s 900 employees at the time of the sale were engineers or managers.

The story of engineers and executives leaving a company to start new ones is as old as Silicon Valley itself. AnnaLee Saxenian, dean of the School of Information at the University of California, Berkeley, and an expert on the region’s professional networks, traces the phenomenon back to the late 1950’s, when eight engineers left Shockley Semiconductor to start a competitor, Fairchild Semiconductor. A decade later, two of those engineers, Robert Noyce and Gordon Moore, left Fairchild to start Intel, one of Silicon Valley’s earliest companies.

But the network of PayPal alumni is unusual in that it operates a bit like a microcosm of Silicon Valley itself, and its achievements help to explain one of the enduring paradoxes of the Internet age. Even as the global network, in theory, makes it easier for innovation to happen anywhere, most blockbuster Internet successes continue to be born and bred in Silicon Valley.

The effectiveness of the PayPal network stems, in part, from the fact that it includes all the elements needed to put together a start-up: Talented engineers and entrepreneurs with innovative ideas and a love of the start-up life; experienced managers who can turn ideas into businesses; and financiers, most notably Mr. Thiel and Mr. Botha, but also Mr. Hoffman, Mr. Levchin and others, who have used their PayPal money to become angel investors. The fact that most key PayPal employees were in their 20’s and 30’s, and not ready for retirement, helped too.

The long hours, sleepless nights and intense pressure of life inside a start-up often create strong bonds among its employees. In its early years, PayPal was all about pressure and the struggle for survival. The company was losing millions each month. It was besieged by hackers who used technological trickery to siphon off huge sums from the company’s coffers. And it faced blistering competition from, among others, eBay, which eventually admitted defeat when it shut down its own online payment service and bought PayPal.

Mr. Levchin said the pace at PayPal was so intense that employees had little time for much else. “We all became each other’s social life,” he said. “Because of that, we formed really deep connections.”

Many of those bonds were already in place, and life at PayPal merely strengthened them. From the beginning, PayPal hired people whom its founders or other early employees already knew.

Mr. Thiel tapped his network of friends from Stanford, many of whom had worked at the Stanford Review, a libertarian magazine that Mr. Thiel co-founded in 1987. They populated PayPal’s business ranks. Mr. Levchin, for his part, hired engineers in large part from his alma mater, the University of Illinois at Urbana-Champaign, which had earlier been home to the team that developed the software that would be the basis for Netscape’s Web browser.

One of the first engineers Mr. Levchin hired at PayPal, for example, was Russel Simmons, who went on to become a co-founder of Yelp. Mr. Simmons, in turn, helped convince another engineer, Yu Pan, to join PayPal. Mr. Pan went on to become one of the first people hired at YouTube. Other University of Illinois recruits included Mr. Chen and Mr. Karim, two-thirds of YouTube’s founding troika. “YouTube is like a PayPal reunion,” Mr. Levchin said. A YouTube spokeswoman declined to make Mr. Hurley and Mr. Chen available for this story.

The long-standing bonds created an atmosphere of openness and trust, which not only helped PayPal succeed, but also made it easier for members of the network to embrace each other’s post-PayPal projects.

The founding of Yelp in the summer of 2004 is a prime example. It happened after a lunch celebrating Mr. Levchin’s 29th birthday at the Slanted Door, an upscale Vietnamese restaurant in San Francisco’s Ferry Building. There were about 16 people at the lunch, a majority of them ex-PayPal employees, Mr. Levchin said. At one point, the conversation turned to how hard it was to find, say, a good dentist. That got Mr. Simmons and Jeremy Stoppelman, PayPal’s former vice president of engineering, talking about a Web site where people could review local services.

On the walk back from the restaurant to their offices — an incubator for start-up companies run by Mr. Levchin — Mr. Stoppelman and Mr. Simmons discussed the idea further. “We were bubbling with excitement,” Mr. Stoppelman said. “As soon as we got back to the office, we pulled Max aside and pitched him the idea.” Mr. Levchin liked it, and the next day he agreed to back the project with $1 million.

When Mr. Stoppelman and Mr. Simmons were ready to look for venture capital, Mr. Rabois helped them put together a presentation. Mr. Hoffman has frequently offered guidance to the company. And Mr. Thiel also gives Mr. Stoppelman business advice, sometimes when the two jog together along the San Francisco waterfront.

The support that members of the network give each other can happen in more informal ways. Mr. Hurley, the chief executive of YouTube who was once a Web designer at PayPal, for instance, sketched the logo for Room 9 Entertainment, according to Mr. Sacks. And when YouTube was starting out, Mr. Rabois and Mr. Hoffman made space for their former colleagues at the Palo Alto offices of LinkedIn. Those offices were once home to PayPal.

Of course, not everything that members of the PayPal network touch is guaranteed to be a hit. The financial success of Yelp, Slide and even LinkedIn remains far from assured. And although it is not strictly a product of the PayPal network, Epoch Innovations, a company that offered a product designed to improve the reading skills of those who suffer from dyslexia, has already folded. Mr. Rabois worked at Epoch and Mr. Thiel invested millions in it.

Still, former PayPal employees say the intense struggles that defined PayPal’s short life as an independent company proved to be good preparation for a new generation of serial entrepreneurs. “Nothing focuses your attention quite like losing money and the sense that you are going to die soon.” Mr. Hoffman said.

Mr. Thiel added: “It was a successful company, but the success didn’t come too easily. People learned not to be too pessimistic and they learned that you have to do a lot of things right.”

Wallflower at the Web Party
Gary Rivlin

JONATHAN ABRAMS was in a spot. He could take the safe bet and accept the $30 million that Google was offering him for Friendster, the social networking Web start-up he began only a year earlier, in 2002. Saying yes to Google would provide a quick and stunning payout for relatively little work and instantly place the Friendster Web site in front of hundreds of millions of users across the globe.

But at the same time, some of the biggest names in Silicon Valley were lobbying Mr. Abrams, a computer programmer, to reject Google’s offer. America Online had offered the two founders of Yahoo a few million dollars each in the mid-90’s for their Web site — and both became billionaires because they said no. Sell us a stake in your company for $13 million, the advisers told Mr. Abrams, and we will help build Friendster into an online powerhouse worth hundreds of millions — if not billions — of dollars.

“It really didn’t take much persuading,” said Russell L. Siegelman, a partner at the venture capital firm Kleiner Perkins Caufield & Byers, which has poured around $10 million into Friendster since November 2003. “Jonathan clearly wanted to go for it.”

Go for it, he did. Mr. Abrams spurned Google’s advances and charted his own course. In retrospect, he should have taken the $30 million. If Google had paid him in stock, Mr. Abrams would easily be worth $1 billion today, according to one person close to Google. And with Google’s ample resources, Friendster might have solidified its position as the pioneering front-runner in social networking. Instead, Mr. Abrams has the distinction of founding a company that is shorthand for potential unmet.

Roughly once a week, David L. Sze, a venture capitalist at Greylock Partners, hears from entrepreneurs who say they have the next MySpace, the copycat social networking site that has trounced Friendster. “The counter to that is, ‘Tell me why you aren’t going to be the next Friendster,’ ” Mr. Sze said. “It’s become the iconic case of failure.”

Reality must smack even harder just after the blockbuster deal in which Google agreed to pay $1.65 billion for YouTube, the video-sharing Web site that has yet to celebrate its first anniversary or its first profits. Friendster essentially created the social networking sector three years ago by offering users a site where they could browse profiles posted by friends and the friends of friends in search of dates and playmates. But so badly did Friendster fumble its early lead that, as of last month, it ranked 14th among all social networking sites tracked by comScore Media Metrix, trailing even myYearbook.com, a site started last year by a 16-year-old high school student.

It is not too late for Mr. Abrams and his investors to see a handsome payout from Friendster, a well-known brand in a nascent business sector. But why and how Friendster missed the mark is a salutary Silicon Valley tale so instructive that Mikolaj Jan Piskorski, an assistant professor at the Harvard Business School, uses the company’s inglorious fall as a case study in his strategy classes.

Friendster’s fate is “a real puzzle,” Professor Piskorski said. “This was a company that had the talent and had the connections.” he said. “They had this great idea that people really took to.”

There is no single reason that explains Friendster’s failures, Professor Piskorski added, which is what makes it academic fodder. “It’s a power story,” he said. “It’s a status story. It’s an ego story.” But largely, he said, Friendster is a “very Silicon Valley story that tells us a lot about how the Valley operates.”

EVERY good Silicon Valley start-up story needs an engaging tale about its founding. The YouTube boys — Chad Hurley, Steve Chen and Jawed Karim — supposedly conjured up the idea of a video-sharing product almost by accident, after a late-night dinner party. (That, at least, is the way two of the three founders tell it.) Earlier, Larry Page and Sergey Brin decided to start Google after Yahoo declined to buy their search technology — for a paltry $1.6 million. Mr. Abrams drew his inspiration to create Friendster from a broken heart brought on by a failed relationship and the eternal lures of the mating dance.

“Basically, Jonathan wanted to meet girls,” said Mark J. Pincus, a Silicon Valley entrepreneur who provided Mr. Abrams with some of the seed money to finance his project at the end of 2002. “He told me himself, he started Friendster as a way to surf through his friends’ address books for good-looking girls.”

The second half of the 1990’s had seen any number of failed social networking sites, including forgotten enterprises like Six Degrees and SocialNet. “We all basically hit the market several years before the market was ready for social networking,” said Reid G. Hoffman, the founding chief executive of SocialNet and an early investor in Friendster.

Mr. Abrams, though, had perfect timing. Friendster made its Web debut in March 2003, and though it was then a speck of a start-up that spent no money on marketing, it signed up three million registered users by the fall. Publications including Time, Esquire, Vanity Fair, Entertainment Weekly, US Weekly and Spin were writing about Friendster before anyone had heard of MySpace. So popular was Friendster in those early days that Mr. Abrams appeared on “Jimmy Kimmel Live” — and then boasted that the Yahoo founders had never been guests on a late-night television talk show.

“Jonathan is very much an acquired taste,” said Larissa Le, a former Friendster employee and longtime friend of Mr. Abrams. “He’s your typical engineer from the Valley who can come off as very arrogant.” For a time Mr. Abrams, then in his early 30’s, cut a high profile in the Valley, showing up regularly at parties with a strikingly attractive woman on each arm and his head in the stars.

His fellow entrepreneurs might have shaken their heads over the size of Mr. Abrams’s ballooning ego, but they also could not deny that he had invented something significant at an opportune moment, when the area was still struggling to shake off its post-bubble doldrums.

The list of venture capitalists enticing him to say no to Google and to go it alone included John Doerr, the legendary venture capitalist at Kleiner Perkins whose list of greatest hits includes Google, Netscape and Amazon.com, and Bob Kagle, the Benchmark Capital partner who first spotted eBay.

Andrew L. Anker, a former venture capitalist who is now a top executive at Six Apart, a popular blogging company that considered buying Friendster last year, said he recalled Mr. Abrams’s quandary. “Jonathan had the Google offer,” he said, “but he also had these very-well-regarded V.C.’s saying, ‘Let’s make this thing huge.’ ”

It did not take much to convince him. Mr. Abrams, a former engineer at Netscape, is a byproduct of the Valley, an environment finely calibrated to create monster-sized companies. “There aren’t thousands of V.C.’s running around Silicon Valley to fund a company just to flip it for a quick payout,” Mr. Anker said. “The Valley is all about making things huge.”

Mr. Doerr and Mr. Kagle took seats on Friendster’s board, as did another investor, Timothy A. Koogle, who had been the chief executive of Yahoo through the second half of the 1990’s. Other investors included Peter A. Thiel, a co-founder of PayPal, which eBay bought for $1.5 billion in 2002, and K. Ram Shriram, one of the first investors in Google and perhaps the most-sought-after angel investor in Silicon Valley. In turn, this gold-plated group helped to recruit to Friendster an equally impressive cadre of top executives and computer programmers.

Back in late 2003, Mr. Abrams spoke of the all-star cast that had joined him at Friendster the way a Yankee fan might boast about the Murderer’s Row that George Steinbrenner assembles each year in pursuit of another World Series ring. Now, however, Mr. Abrams casts that same board — then composed primarily of men in their 50’s who were far older than the site’s target demographic — and the recruits they drafted as the main cause of Friendster’s great stumble.

Through a colleague from a previous tech start-up, Melissa Gilbert, Mr. Abrams declined to comment for this article, saying he was too busy working on a new start-up to talk about the past. Ms. Gilbert, though, who described herself as the first investor in Friendster, echoed the comments of others close to Mr. Abrams, who has loudly proclaimed that he will never again accept a dime in venture capital. Mr. Abrams believed that he had developed a sound business plan for building Friendster into an Internet powerhouse — and that the plan foundered when his well-known investors shoved him aside and proceeded to mess everything up, Ms. Gilbert wrote in an e-mail message.

“Friendster ended up with three levels of V.P.’s, C.E.O.’s and board members who, although they had great résumés, they were not connected to the social networking concept and didn’t really use Friendster,” she wrote.

Mr. Doerr, at Kleiner Perkins, disputed this. He said that he visited the Friendster site at least once a day. “It’s certainly not fair to say we were out of touch when we were willing to commit millions of dollars to this market,” he said. “We understood the opportunity. The company didn’t seize that opportunity.”

But Mr. Siegelman, one of Mr. Doerr’s partners at Kleiner Perkins, said Mr. Abrams had a point. The original board had little feel for the product, said Mr. Siegelman, who attended most meetings and eventually replaced Mr. Doerr. But Mr. Siegelman also described Mr. Abrams as a founder in way over his head, which is why, in April 2004, only a few months after investing in the company, the board replaced him as chief executive.

“All of a sudden Jonathan had all these high-powered investors to please,” Mr. Siegelman said. “He had all this money in the bank, so there was all this pressure to hire people and get things done. Open up new territories: China, Japan, Germany. Add all these new features. Meantime, he took his eye off the ball.”

But the board also lost sight of the task at hand, according to Kent Lindstrom, an early investor in Friendster and one of its first employees. As Friendster became more popular, its overwhelmed Web site became slower. Things would become so bad that a Friendster Web page took as long as 40 seconds to download. Yet, from where Mr. Lindstrom sat, technical difficulties proved too pedestrian for a board of this pedigree. The performance problems would come up, but the board devoted most of its time to talking about potential competitors and new features, such as the possibility of adding Internet phone services, or so-called voice over Internet protocol, or VoIP, to the site.

THE stars would never sit back and say, ‘We really have to make this thing work,’ ” recalled Mr. Lindstrom, who is now president of Friendster. “They were talking about the next thing. Voice over Internet. Making Friendster work in different languages. Potential big advertising deals. Yet we didn’t solve the first basic problem: our site didn’t work.”

In retrospect, Mr. Lindstrom said, the company needed to devote all of its resources to fixing its technological problems. But such are the appetites of companies fixated on growing into multibillion-dollar behemoths. They seek to run even before they can walk.

“Friendster was so focused on becoming the next Google,” Professor Piskorski said, “that they weren’t focused on fixing the more mundane problems standing in the way of them becoming the next Google.”

The board replaced Mr. Abrams with one of its own, Mr. Koogle, the former chief executive of Yahoo. But Mr. Koogle served only three months, a temporary caretaker who showed up at the office only sporadically, former Friendster employees said. The board next chose a television industry executive, Scott M. Sassa, to replace Mr. Koogle. That selection might have made sense if the company had been in position to start cutting big advertising deals. But it was not, given that its Web site was not up to speed. Mr. Sassa left after less than a year, which was nearly twice the tenure of his successor, Taek Kwan, who left at the end of 2005, six months after he started.

“After a while all the changes really wear on you,” said Jeff Winner, who served under three chief executives in just 12 months as the head of the company’s troubled engineering team. “Every C.E.O. represented a change of direction, and when a company changes direction, the engineers really get jerked around.”

Mr. Winner left at the end of 2004, he said, “because like a lot of people I no longer believed Friendster was on a course for massive success.”

People inside the company recognized that they needed to add new features to the site if it was to compete with the new crop of copycat sites trying to cash in on Friendster’s early success.

“There really wasn’t much to do once you set up your network and found your old friends,” said Ms. Le, one of several people who could describe themselves as a former product manager at Friendster. Other social networking sites, including MySpace, were adding features like blogs and tools that people could use to jazz up their profiles. But adding new features to Friendster would only slow down the site further.

“People had great ideas all the time,” Mr. Lindstrom said, “but it always boiled down to, ‘O.K., but first let’s get the basic thing working.’ ”

ONE of the good ideas, Mr. Doerr said, was to encourage users to organize around favorite bands — the very idea that proved so crucial to MySpace’s success.

“We completely failed to execute,” Mr. Doerr said. “Everything boiled down to our inability to improve performance.”

People inside Friendster were closely monitoring MySpace, which was founded by a pair of Los Angeles music aficionados in the fall of 2003, inspired by Friendster’s early success. MySpace would have been hard to ignore, given its phenomenal traffic growth starting in early 2004.

“I was giving people regular updates on MySpace,” said Jim Scheinman, who served as Friendster’s head of business development from October 2003 until leaving in May 2005 to work at a social networking rival, Bebo.com. “But a lot of people refused to take them seriously.”

Many people working at Friendster sneered at MySpace. The holy grail at Friendster — and the cause of most of its technical problems — was its closed system: users at Friendster could view only the profiles of those on a relatively short chain of acquaintances. By contrast, MySpace was open, and therefore much simpler from a technological standpoint; anybody could look at anyone else’s profile.

The two companies also mirrored their founders: where Friendster reflected the ordered vision of its engineer-founder — early on, the company famously removed the profiles of people who put up joke pictures, like photographs of their dogs in place of themselves — MySpace was more L.A.-laid back. At MySpace, they rode the wave instead of fighting it, and encouraged users to do pretty much as they pleased.

Besides, those behind Friendster were so convinced that they were destined to be the next big thing that they instead fixated on the actions of their presumed peers — at least that is Mr. Siegelman’s recollection. “I remember going to these board meetings and feeling disgusted,” he said. “Half of every board meeting was taken up by a discussion of what Google’s going to do, or Yahoo.”

Today, MySpace has more than 50 times the number of monthly domestic visitors as Friendster, according to comScore Media Metrix. The social networking offerings of Yahoo and Google are also tiny when their American audiences are compared with that of the market leader: MySpace’s audience is 10 times as big as Yahoo 360, and 200 times that of Orkut, Google’s answer to Friendster.

Last fall, Friendster hired an investment banker to shop the company around. In part, the board was inspired by the $580 million that Rupert Murdoch’s News Corporation agreed in July 2005 to pay for Intermix Media and its primary asset, MySpace. In the end, though, the investors failed to find a suitor willing to pay even $20 million for the company.

Friendster was nearly out of cash by the end of last year. It had halved its payroll, to 25 employees, and advertising was hard to come by on a site that, three years after its debut, still did not work right. The venture capitalists considered shutting down the company. But a sense of obligation (“It was my feeling that the investors and the board had done something of a disservice to Friendster,” Mr. Siegelman said) and economics (Friendster still had a well-known brand and millions of registered users, even if most had not visited the site in some time) prompted Kleiner Perkins, Benchmark and some of the private investors to sink an additional $3 million into the company at the start of 2006.

THE venture capitalists reconstructed the board — “I took all the 50-year-old white guys off,” said Mr. Siegelman, who is white and 44 — and put Mr. Lindstrom, who had been with the company since mid-2003, in charge. The company hired yet another chief of engineering, who laid down the law: at least 80 percent of his people would work on performance and stability issues until the Web site worked as well as it should.

“In the past, we had often chosen the more exotic solution over the more simple solution,” Mr. Lindstrom said. Trailblazing a new field like social networking was enough of a challenge. “But we were also trying to innovate on the tech side as well,” he said. The company finally licked its performance problems this last summer, Mr. Lindstrom said.

The team now running Friendster valiantly soldiers on, hoping that it can position the company as a site for an older demographic group — people 25 to 40 — who do not have the time or inclination to spend hours each day on MySpace.

Now the challenge, Mr. Lindstrom said, is “to focus on a market for more than two months.” A second challenge is figuring out ways to cash in on its popularity overseas. Three quarters of Friendster’s users live outside the United States, mainly in the Philippines, Malaysia and other, smaller southeast Asian countries.

“In the past we’ve seen that as a problem,” Mr. Lindstrom said, “but now we see this as a huge opportunity.”

The investors apparently are satisfied with this new, less ambitious version of Friendster. In the summer, they sank another $10 million into the company.

“Friendster missed the chance to become a multibillion-dollar company,” said Mr. Thiel, the PayPal co-founder who has continued to invest in Friendster. “But I still see a lot of opportunity here.”

Mr. Doerr added: “There are plenty of second acts in American business.”

New Ways to Strike it Rich on the Web

Clever entrepreneurs are using the Internet to build a healthy customer base - before they even have the ability to deliver what they're selling.
Paul Sloan

One of the many remarkable aspects of the Internet is how easily people can use it to pretend to be something they aren't. There are, of course, terrifying results, such as when crooks pose as your bank.

But David Carter has taken that capacity for misdirection and made it into a legitimate way to make money.

For instance, Carter didn't know a thing about asbestos when he launched AsbestosSurveys.com - yet it sure looked as if he did. He wrote about regulatory changes in his native England by culling data from a government website. He explained what property owners needed to do to comply. He even posted local phone numbers for his "business" in London, Manchester, and Birmingham, each of which was forwarded to an answering service.

When inquiries flooded in, Carter steered them to an acquaintance who really was an asbestos surveyor. The requests were far more than one surveyor could handle, but Carter continued to book new customers.

"I told them there was a big backlog," recalls Carter, who is 47 and lives in Birmingham. "Then I said, 'Oh, God. What do I do now?'"
For Google search, generic is good

To Carter, there was really only one answer: Become a surveyor himself.

So with eager customers, Carter turned his site and follow-on properties into an actual business, called AsbestosServices.com. He took a half-week course, got certified, and teamed up with his friend. Today, once or twice a week -essentially whenever he feels like getting out of the house - Carter surveys a property, armed with a digital camera and notepad. The effort, he says, will net the pair about $350,000 this year.

Carter set up the site three years ago as an experiment to see what would happen if he dressed up a website to reflect a more serious and professional operation than it actually was. In doing so he stumbled across what turned out to be a clever way to cash in on the power of Internet search and marketing. The basic strategy: Build the customer base first, and then figure out how to sell to it.

In many cases, Carter simply becomes the middleman, using the Web to attract willing buyers that he hands off to others for a fee.

He identifies a business niche or a hot growth area like commercial real estate. Then he buys domain names around the topic, saving money by shunning pricey domains for names with hyphens, such as http://www.commercial-property.co.uk/.

He builds the sites, adds content, and waits for customers. Search the phrase "commercial property" in MSN, for instance, and Carter's site pops up on the first page, advertising that it has people eager to sell and buy commercial property. In truth, Carter has only a few contacts.
Different shades of gray

Yet calls are coming in.

One guy wants to buy an industrial park; another wants to rent a warehouse. Carter takes the information and then starts calling around to find a referral. "I don't have any inside information, but I know how to ring up a landlord," he says.

Carter argues that local businesses have created a great opportunity because they often make the mistake of advertising on the Web using their company's name, even though people generally search by product or topic. That's why Carter's general-sounding names usually pop up before something like SmithAsbestos.com. If you're not going to provide the service yourself, Carter recommends that you work with local businesses looking for customers.

The whole strategy might sound slightly deceptive, and in a sense it is. But so long as the customer ultimately gets what he wants, Carter doesn't see a problem.

"The Internet's just a big bluff," he says. "If you can make a site look pretty and sound credible, you can pull inquiries in for just about anything and turn the Internet into one great sales-generation machine."

THE ANGLE: Line up your customers first, then create a business around them.

1. Identify an overlooked need for services kicked up by, for instance, relatively obscure regulatory changes.

2. Construct a first-rate website with a generic domain name that will draw in prospective customers.

3. With clients in hand, create the business, providing the service yourself or subcontracting to established players.

Idiosyncratic and Personal, PC Edges TV
David Carr

Last Wednesday, I was working late but left the office in time to watch the second episode of ABC’s “Lost.” But when I got home and booted the computer to check messages before hitting the couch, I happened to notice one of my twin daughters at a far-flung Big 10 campus was live on Yahoo! Messenger.

I clicked on “View my Webcam,” as did Erin, a freshman at the University of Wisconsin, and suddenly I had the chance to inspect the disturbingly large ring she recently had implanted in her lip. Live video may seem straight out of the Jetsons, but I have the computing skills of Fred Flintstone. Still, between my PC and my daughter’s Mac, we managed to get a serviceable video chat going, assisted by speakerphones on cells.

My 9-year-old wandered over and, once she saw a live image of her now distant sister, acted as if I had invented electricity. We made Erin drag her new friend Sam into the picture so we could give him the once over. “He’s kind of cute,” my wife whispered sotto voce as she craned over my shoulder. (I’m reserving judgment until I can menace him in person.) Then we pinged Meagan, Erin’s twin sister up the road at University of Michigan. As soon as she accepted my invitation to view the Webcam, she exclaimed, “You’re here!”

One thing led to another and we ended up watching the strangely compelling treadmill dance from the music group OK Go on YouTube, which clicked through to a parody, which led to, well, you get the idea. It was “television” with an audience that could be counted on a single hand but compelling enough that “Lost,” my one piece of appointment viewing for the night, was quickly forgotten. Madonna might be scheduled to mud-wrestle Britney Spears on premium cable and I’d still probably pick video-chatting with my children.

Computers, which were designed to save time, have become machines that make it disappear and threaten to take traditional models of wasting hours (i.e., television) with them. About 20 percent of the audience of “Lost” has gone missing since last year, even though the show has suffered no discernible decline in quality. It is less likely that its audience fled to NBC’s “The Biggest Loser” in the same time slot than that it found other diversions.

In the past week, Google and YouTube put a price tag of $1.65 billion on ubiquitous digital video and CBS, perhaps noticing that 100 million streams were being up- and downloaded a day, announced a revenue-sharing partnership with YouTube as well.

The specter of YouTube dominated a panel discussion held at NextFest, a futuristic conference put on by Wired magazine, late last month. Chris Anderson, the editor of Wired, pointed out that much of the content on YouTube might seem marginal — “Grandma getting hit with a brick” was the phrase he used — but that there was lots of mainstream content there as well, with everyone from Jon Stewart to Jessica Simpson benefiting from gigantic viral promotion.

One of the panelists, Jeff Zucker, chief executive of NBC, was asked what he would do if he found out that YouTube had run a piece of copyrighted NBC material. “We will claim outrage, demand that it be taken down and then check back in a week to make sure it has been done,” he said. His sly-devil acquiescence is informed by YouTube’s ability to take a Saturday Night Live skit called “Lazy Sunday” last year and market it to more young people than have sampled S.N.L. in years.

Jennifer Feikin, the director of Google Video and the only panelist not invested in the old model, did her level best to let sleeping dogs lie, calling online video “definitely not a substitute in any way” for television. She has some facts on her side: according to Nielsen Media Research, last year, the average household watched television 8 hours and 14 minutes a day, a 3-minute increase from the 2004-5 season and a record high.

But Howard Shimmel, a senior vice president at Nielsen, said research had shown something else: “Internet homes, including broadband and dial-up, watch 9 percent less television over all than the general population. The impact by network differs, with some experiencing 25 percent lower ratings and others substantially unaffected.” (He added that wired homes were generally well-off, a population that watches television less as a matter of course.)

Anecdotally, I can say that our family ends up finding the remote less often. Tally up all the bereft fathers video-chatting with college-age daughters, bored teenagers making videos for other bored teenagers and geeks mashing up existing content to hilarious effect, and there is ferocious, idiosyncratic competition for consumers’ attention.

The threat isn’t new media displacing old media as much as personalization. Media has become something people make, forward, link and program. When we took the 2,000-mile road trip to drop the girls off at their respective campuses, we switched between my iPod and theirs rather than flip fruitlessly through radio channels that had been aggregated and formatted into musical sameness.

Newspapers felt the pain of technological disruption first, when people had dial-up modems capable of transmitting modest, largely text-based data. As fatter pipes developed, music performed a jailbreak, leaving behind a maimed industry. And now, with the number of ever-faster connections spreading and the advent of the Flash player, television seems positioned as roadkill, with great big movie files soon to fall after that.

The question remaining is how these industries will choose to react. Television, it seems, may have learned some of the hard lessons endured by the music industry and taken an attitude of cautious engagement with downloaders rather than randomly slapping them with lawsuits.

I still caught Wednesday’s episode of “Lost,” downloading it to my iPod to view on my commute and sending $1.99 to ABC and Steve Jobs to split. Through the magic of that time-and-platform shift (and my willingness to pay for free content), I remained a part of the “Lost” tribe, although not the kind that shows up on Nielsen.

Selling programming that way is a smaller business for the networks, but not a bad one. Maybe this time, Grandma saw the brick coming.

Study: Does Television Cause Autism?
Michael Waldman, Sean Nicholson, Nodir Adilov, Neff Hall

Autism is currently estimated to affect approximately one in every 166 children, yet the cause or causes of the condition are not well understood. One of the current theories concerning the condition is that among a set of children vulnerable to developing the condition because of their underlying genetics, the condition manifests itself when such a child is exposed to a (currently unknown) environmental trigger.

In this paper we empirically investigate the hypothesis that early childhood television viewing serves as such a trigger. Using the Bureau of Labor Statistics’ American Time Use Survey, we first establish that the amount of television a young child watches is positively related to the amount of precipitation in the child’s community. This suggests that, if television is a trigger for autism, then autism should be more prevalent in communities that receive substantial precipitation.

We then look at county-level autism data for three states – California, Oregon, and Washington – characterized by high precipitation variability. Employing a variety of tests, we show that in each of the three states (and across all three states when pooled) there is substantial evidence that county autism rates are indeed positively related to county-wide levels of precipitation.

In our final set of tests we use California and Pennsylvania data on children born between 1972 and 1989 to show, again consistent with the television as trigger hypothesis, that county autism rates are also positively related to the percentage of households that subscribe to cable television. Our precipitation tests indicate that just under forty percent of autism diagnoses in the three states studied is the result of television watching due to precipitation, while our cable tests indicate that approximately seventeen percent of the growth in autism in California and Pennsylvania during the 1970s and 1980s is due to the growth of cable television.

These findings are consistent with early childhood television viewing being an important trigger for autism. We also discuss further tests that can be conducted to explore the hypothesis more directly.

The Paper

Laser TV Predicted to be Death of Plasma

It's being hailed by its developers as the next revolution in visual technology - a laser television that will make plasma screens obsolete.

Soon-to-be-listed Australian company Arasor International and its US partner Novalux unveiled what they claimed to be the world's first laser television in Sydney, with a pitch that it will be half the price, twice as good, and use a quarter of the electricity of conventional plasma and LCD TVs.

Manufacturing company Arasor produces the unique optoelectronic chip central to the laser projection device being developed by Silicon Valley-based Novalux, which is being used by a number of television manufacturers.

And displayed beside a conventional 50 inch plasma TV, the Mitsubishi-built prototype does appear brighter and clearer than its "older" rival.

With a worldwide launch date scheduled for Christmas 2007, under recognisable brands like Mitsubishi and Samsung, Novalux chief executive Jean-Michel Pelaprat is so bold as to predict the death of plasma.

"If you look at any screen today, the colour content is roughly about 30-35 per cent of what the eye can see," he said.

"But for the very first time with a laser TV we'll be able to see 90 per cent of what the eye can see.

"All of a sudden what you see is a lifelike image on display."

Combine that with energy efficiency, price advantage and the fact that the laser TVs will be half the weight and depth of plasma TVS, and Mr Pelaprat says "plasma is now something of the past".

Mr Pelaprat predicted LCD TVs would come to dominate the market below 40 inches, and laser television the market above that screen size, displacing plasma.

The optoelectronic chip-laser technology won't be confined to TVs.

The technology is also being trialled in mobile phones, where it will be used to project images onto any surface, and in home theatres and cinemas.

The unveiling of the laser TV prototype was held on the eve of Arasor's public float on the Australian Stock Exchange next week.

Cyberface: New Technology That Captures the Soul
Sharon Waxman

THERE’S nothing particularly remarkable about the near-empty offices of Image Metrics in downtown Santa Monica, loft-style cubicles with a dartboard at the end of the hallway. A few polite British executives tiptoe about, quietly demonstrating the company’s new technology.

What’s up on-screen in the conference room, however, immediately focuses the mind. In one corner of the monitor, an actress is projecting a series of emotions — ecstasy, confusion, relief, boredom, sadness — while in the center of the screen, a computer-drawn woman is mirroring those same emotions.

It’s not just that the virtual woman looks happy when the actress looks happy or relieved when the actress looks relieved. It’s that the virtual woman actually seems to have adopted the actress’s personality, resembling her in ways that go beyond pursed lips or knitted brow. The avatar seems to possess something more subtle, more ineffable, something that seems to go beneath the skin. And it’s more than a little bit creepy.

“I like to call it soul transference,” said Andy Wood, the chairman of Image Metrics, who is not shy about proclaiming his company’s potential. “The model has the actress’s soul. It shows through.”

You look and you wonder: Is it the eyes? Is it the wrinkles around the eyes? Or is it the tiny movements around the mouth? Something. Whatever it is, it could usher in radical change in the making of entertainment. A tool to reinvigorate the movies. Or the path to a Franken-movie monster.

The Image Metrics software lets a computer map an actor’s performance onto any character virtual or human, living or dead.

Its creators say it goes way beyond standard hand-drawn computer graphics, which require staggering amounts of time and money. It even goes beyond “motion capture,” the technique that animated Tom Hanks’s 2004 film “The Polar Express,” which is strong on body movement but not on eyes, the inner part of the lips and the tongue, some of the most important messengers of human emotion.

“One of our principal tenets is to capture all the movements of the face,” Mr. Wood said. “You can’t put markers on eyes, and you can’t replicate the human eye accurately through hand-drawn animation. That’s pretty important.”

Ultimately, though, Image Metrics could even go beyond the need for Tom Hanks — or any other actor — altogether.

“We can reanimate footage from the past,” said Mr. Wood, a stolid man with a salesman’s smile. He was hired to introduce Hollywood to the technology, which the computer scientists who founded the company sometimes have difficulty articulating.

“We could put Marilyn Monroe alongside Jack Nicholson, or Jack Black, or Jack White,” he continued, seated in the conference room where the emoting actress and her avatar shared the screen. “If we want John Wayne to act alongside Angelina Jolie, we can do that. We can directly mimic the performance of a human being on a model. We can create new scenes for old films, or old scenes for new films. We can have one human being drive another human character.”

To prove the point Mr. Wood brought up on-screen an animated character that he showed at the Directors Guild of America this past summer. The character, a simple figure comprising just a few lines drawn in the computer, made the “I coulda been a contender” speech from “On the Waterfront,” in Marlon Brando’s voice. (Because Brando didn’t gesture much, the stick figure’s movements were based on those of a hired actor.) Then he pulled up a video of the musician Peter Gabriel singing a scat beat alongside a half-dozen animated figures who, one by one, joined him in precise concert. Finally he brought up a scene from a Marilyn Monroe movie in which animators replaced the original Marilyn with a computer-drawn version of her. The image isn’t perfect — or rather, it’s a bit too perfect for credulity — but it clearly shows the path that lies ahead.

The breakneck pace of technology combined with the epic ambitions of directors has, up to now, taken movies to places undreamed of in the past: the resinking of the “Titanic”; war in space between armies of droids; a love story between a dinosaur-sized ape and a human-sized woman. (Whoops, we had that one before.)

But if Image Metrics can do what it claims, the door may open wider still, to vast, uncharted territories. To some who make the movies, the possibilities may seem disturbing; to others, exciting: Why not bring back Sean Connery, circa 1971, as James Bond? Or let George Clooney star in a movie with his aunt, Rosemary; say, a repurposed “White Christmas” of 1954? Maybe we can have the actual Truman Capote on-screen, performed by an unseen actor, in the next movie version of his life.

Projects are already circulating around Hollywood that seek to revive dead actors, including one that envisions Bruce Lee starring in a new Bruce Lee picture.

Asked what he might do with the new technology, Taylor Hackford, the director of “Ray” and a dozen other movies, was at first dismissive. “It’s phenomenal, but its uses are in the area of commercials,” he said. (Image Metrics made a commercial last winter that revived Fred and Ethel Mertz of “I Love Lucy” discussing the merits of a Medicare package.) But after a moment’s reflection, he shifted his view. “If you’re working on ‘The Misfits,’ and Clark Gable died before the end of the film, you could have used it in that instance,” he reflected.

Or what if Warren Beatty, or Robert Redford, wanted to play a younger version of himself? “If you had Warren or Redford in a great role, and there was a flashback to a young character” — he mused — yes, that would be a reason to use it. Perhaps in “The Notebook,” he went on, in which Ryan Gosling played the young version of James Garner’s character? Mr. Garner could have played both versions himself.

Still, one thought was holding Mr. Hackford back. “If you want Ethel Barrymore to give you an incredible, heartfelt and painful performance, that comes from the soul of the actor,” he said. “It’s not something you can get by animation.”

IMAGE Metrics began in the living room of Gareth Edwards, a shy, baby-faced, 34-year-old biophysicist from Manchester, England. He, Alan Brett and Kevin Walker, all postdoctoral students from the University of Manchester, were conducting research into image analysis, a technique first developed to help computers analyze spinal X-rays. “We were very much scientists looking for the big problem,” he said. “Big in terms of the problem, and big in terms of the benefit.”

They decided to start a company, of which Mr. Edwards is the chief technical officer. He doesn’t work out of his living room anymore; now he works in the Santa Monica offices. (His colleagues remain in England along with a half-dozen other computer and physics Ph.D.’s.) But some things remain the same. “Image analysis is a difficult scientific problem,” he said. “You’re trying to analyze complex objects: the human spine, or the mapping of the human face. How do you teach a computer to understand the context of an image when that image is complex?”

Many surveillance devices rely on facial recognition software, but it produces a lot of false positives. Mr. Edwards and his colleagues took a different approach, one that starts with the generic model of a human head and layers onto that a mathematical distillation of an individual’s expressions. He compared his approach to describing a new bicycle. The person who’s listening is likely to picture the new bicycle based on other bicycles she has already seen.

“It’s model-based computer vision,” Mr. Edwards said. “The idea is, if you know an object, you can picture it. The key for animation was that realization: that we needed to build a computer system with the prior concept. The mathematical structure describes the basic concept of the face and maps the subtle variations.”

The first step has been using Image Metrics to allow live actors to animate virtual characters. Thus Kiefer Sutherland himself has been able to drive the performance of the animated version of his television character, Jack Bauer, in the computer game “24,” based on the hit show. Warner Brothers is using Image Metrics, along with several other companies, to animate a new character in the forthcoming “Harry Potter and the Order of the Phoenix,” a monstrous relation of Hagrid, animated by an actor.

Larry Kasanoff is the producer and director of “Foodfight!,” which will be the first full-length movie to use Image Metrics technology. Sitting in his Santa Monica production office, surrounded by plush toys of characters (who will be played by Charlie Sheen, Hilary Duff and Eva Longoria), he talked about the difference between image analysis and standard computer-generated imagery, or C.G.I.

In a C.G.I. film, he said, “every time someone would say something, banks of people would have to figure out how the lips move, how the eyes move — and it’s not even that good.”

“Now we don’t have to spend three years having people meticulously hand-animate Charlie Sheen’s lines,” he added. “He says, ‘Food fight!’ in real time, live action, and it’s applied, via Image Metrics technology, to the character.”

So whereas a film like “Cars” cost $120 million and took dozens of animators five years to make, Mr. Kasanoff says that “Foodfight!,” which has not yet begun production, will be finished by February.

And movies are just the beginning. “For creating characters that don’t exist, this is unparalleled at the moment,” said Alex Horton, the animation director for Rockstar Games, which has been using Image Metrics for two years in top-selling titles like “Grand Theft Auto: San Andreas” and “The Warriors.” Games, he explained, don’t require the level of detail that movies do, but they demand far more screen time than the average film.

“There’s no taking away the fact that a team of animators can sit and make some very convincing animation if they want to,” he said. “But I challenge anyone to do the volumes that I need in the time that I need, at this level of quality, and to capture the nuance of the voice actor.”

IT sometimes seems that every six months or so another technology comes along that promises to revolutionize Hollywood and supplant what came before. “Toy Story” gave C.G.I. characters an early sense of humanity. Great excitement accompanied Stuart Little and his remarkable fur. Another fanfare erupted over Gollum, the gnomelike hobbit played by Andy Serkis through computer magic in the “Lord of the Rings” movies. In recent years the focus has been on motion capture, for which actors are wired with tiny digital sensors. Lately yet another system has emerged, called Contour, that tracks actors’ facial and body movements by coating them with phosphorescent powder.

But Hollywood producers seem to agree that this is something truly different.

“It’s a giant leap from the motion capture technology used today,” said Sam Falconello, the chief operating officer of Cinergi Productions, which made the “Terminator” series and is considering using Image Metrics to make “Terminator 4.” “I really believe in this technology. It is scaleable. It makes our effects budgets go further.”

It’s also far easier on the actors. Instead of being painted with a chemical or covered in sensors, they need only do what they would ordinarily do: act.

Mr. Kasanoff said that for comedy especially convenience was a central issue. “Try to get an actor to be funny and relaxed with 900 dots on his face,” he observed. “Now, when we direct the actors, they don’t even know the camera is there. They just act.”
Debbie Denise, a senior vice president at Sony Imageworks who tracks new technology developed both in house and elsewhere for the movie studio, said that her company’s motion capture technique has advanced to where it can credibly track subtle facial expressions. It is being used in the current production of “Beowulf,” a computer-generated version of the ancient tale directed by Robert Zemeckis, who directed “Polar Express.”

But she agreed that the Image Metrics approach was “very promising.”

“It’s been a challenge for everyone in this field to get away from markers,” she said. “How can you just videotape somebody? The way they’re doing it is very interesting.”

As for reanimating former movie stars? “That sounds terrific,” said Chris deFaria, head of visual effects for Warner Brothers. “I’d love to see it.” But, he added, “There are real complexities involved with that.”

Undoubtedly so. But at least one former movie star thinks the ideas holds some promise. Arnold Schwarzenegger, now the governor of California, has conducted tests with Image Metrics to use his Conan the Barbarian character in political ads.
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You Can’t Use That Tax Idea. It’s Patented.
Floyd Norris

As the American tax law gets more and more complicated, lawyers have come up with one more way to make life difficult for taxpayers: Now you may face a patent infringement suit if you use a tax strategy someone else thought of first.

“I can’t even imagine what it will be like in 5 or 10 years,” said Dennis B. Drapkin, a tax lawyer with Jones Day in Dallas, “if anytime a lawyer or accountant gives tax advice, they have to find out if there is a patent on this.” He notes that researching patents, and then licensing them, would just make tax compliance more costly.

Mr. Drapkin is chairman of a task force of the American Bar Association’s tax section that will discuss the issue today in Denver. He said that after one conference where tax strategies were discussed, participants got a letter warning that using one idea mentioned would be in violation of a patent.

Why would Congress pass a law allowing such a thing? The answer is that it did not. But a federal appeals court ruled in 1998 that business methods can be patented, and since then the Patent Office has issued 49 tax-strategy patents, with many more pending.

There is even one case pending in federal court in Connecticut, in which an organization called Tax Strategies Group complains that John W. Rowe, the former chief executive of Aetna, infringed on its patent by using a certain type of trust to minimize taxes on profits from stock options. The group wants Mr. Rowe to be barred from using that strategy unless he buys a license from them.

To patent lawyers, all this makes some sense. Others might see it as an example of judicial absurdity.

But if it is legal, the mind boggles at the possibilities. Could I get a patent on taking a deduction for dependents, so that every parent in America would have to pay a royalty to me to take advantage of the tax law passed by Congress?

I presume the patent office would find that obvious, and thus not patentable, but there are plenty of slightly more complicated strategies that might be patentable, particularly considering the fact that patent examiners may not be tax experts.

Indeed, Cheryl E. Hader, a partner at Ropes & Gray who represents Mr. Rowe, argues that the strategy he used was clearly authorized by the tax law and that no patent should have been granted.

One can imagine lawyers and accountants rushing to the patent office as soon as a new tax law is passed, seeking to claim credit for dreaming up ideas that were made possible by the new law. Lobbyists who get tax breaks inserted into such bills would be in a preferred position to win the race to patent them.

In an article in Legal Times this week, Paul Devinsky, John R. Fuisz and Thomas D. Sykes, three lawyers from McDermott, Will & Emery, suggested that a company might figure out a tax strategy that would save it a lot of money, and then patent it. Then the company could refuse to license the patent to its competitors, thus raising its rivals’ cost of doing business.

Tax patents, the lawyers wrote, amount to “government-issued barbed wire” to keep some taxpayers from getting equal treatment under the tax code.

In an ideal world, Congress might pass tax laws so simple that clever strategies would be impossible and tax lawyers would need to find other employment. But until that happens, it would seem obvious that Congress would want to assure that all taxpayers are treated equally.

After all, as Mr. Devinsky and his colleagues wrote, “The successful patenting of tax strategies now limits Congress’ ability to shape economic policy through legislation, and places that power in the hands of individual patent holders.”

But in Washington, such things are seldom simple. Asked what he thought Congress would do, Mr. Fuisz said action was possible, recalling that six years ago doctors got Congress to protect them from patent infringement suits over surgical techniques.

But, he added, it will be a battle of interests. “You will see the people making money off these patents lining up against those who dispense tax strategy advice,” he said.

So now we can have lobbying over whether all can benefit from what the lobbyists accomplished earlier.

Ain’t democracy great?

Symbian Forecasts the Death of the PC
David Meyer

The PC will be on its last legs within five years, if executives from the mobile platform company Symbian are to be believed.

In his keynote speech at the Symbian Smartphone Show in London, the company's chief executive, Nigel Clifford, told delegates that the dawning era of the smart phone represents a shift "as profound as the Internet and PC were in the 1990s."

"Desktops PCs are effectively a flatlining commodity," Clifford said on Tuesday, while conceding that laptops were eliciting "perhaps a bit more" excitement.

Clifford suggested that the popularity of smart phones in the developed world and the "leapfrog economies" phenomenon in developing countries--in which expensive wired infrastructures are bypassed in favor of wireless--would create a situation where there was a "smart phone in every pocket."

Clifford cited the rates of technology adoption in India to back up his point. In India, the PC market is growing at 5 million units a year, while mobile phones were enjoying the same growth per month.

Symbian's head of propositions, John Forsyth, later argued that "in five years' time you'll wonder why you need a PC at all."

Speaking to ZDNet UK at the show, Forsyth said that "phones are beginning to eat into the space" that laptops were designed for.

"It will be a great relief to be liberated from the laptop," he added, citing poor laptop battery performance as a key reason.

Forsyth claimed the PC had stagnated and denied recent suggestions that phones would run out of new features over the next few years.

While conceding that there would be something of a shift from new hardware technology to new services, he pointed to "increased richness of both input and display technology" as an indicator of mobile technology's evolution.

"We see loads of keypad experimentation across vendors. That's a trend of innovation that will increase until people find solutions. It's clear that the numeric keypad has started to creak with the introduction of mobile e-mail," Forsyth said, describing the competition between various new input technologies--such as handwriting recognition and foldable keyboards--as "Darwinian."

In terms of screen capabilities, Forsyth noted that mobile phone screens were "going beyond just being personal" and were now considered by users to be suitable for sharing photos and content.

"The idea of sitting at a desk to view a Web page is inherently annoying. (Phone screens) are small but the size of the display relative to the phone size is growing and the resolution of screens is growing very rapidly," he added.

Another speaker at the event, Sony Ericsson's chief technology officer, Mats Lindoff, also predicted exciting advances in screen technology, and suggested that foldable or bendable displays would be available by 2012.

Lindoff pointed out that emerging devices contained memory equivalent to that of laptops of seven years ago, and suggested that phones would in the future contain as much as 64GB of memory.

However, he acknowledged that, while Moore's Law would bring greater processing power for handheld devices, battery power would struggle to keep up. The solution, said Lindoff, would be to develop applications that are less power-hungry.

Microsoft Plans to Give Away Software for Multiple Systems
Kevin J. O'Brien

BRUSSELS Microsoft accelerated its efforts to persuade European lawmakers that it was changing how it does business by announcing Tuesday that it would give away software to enable computers to run multiple operating systems at the same time.

The company, the largest software maker in the world, chose to make the global announcement at its new conference center not far from the European Commission headquarters as it continued to fight an eight-year-old antitrust lawsuit over its business methods.

Its announcement came only five days after Microsoft bowed to pressure from the European Commission and redesigned the upcoming Vista version of its Windows operating system to let it work smoothly with competitors' security, document and search programs.
"This is not only about working together with our friends but also about working together with our competitors," said Jason Matusow, a senior director of Microsoft's intellectual property licensing.

Georg Greve, president of the Free Software Foundation Europe, said he had not seen the details of Microsoft's giveaway but cautioned against assuming it was motivated only by pragmatism or a new spirit of cooperation.

"If Microsoft were doing this for altruistic reasons, it would be a first," Greve said. "I think they are probably trying to get more machines on the Windows platform, and they may also be trying to improve relations in Brussels."

Microsoft said it was relinquishing all license claims on its Virtual Hard Disk Image Format - new software that will allow computers running on rival products like Apple's OS X or Linux, its chief competitors in operating systems, to simultaneously run Windows.

Matusow said the decision was part of a Microsoft initiative begun in June to make more software available through so-called open source licenses, which enables independent designers to incorporate Microsoft products in their own software that they can then distribute for free.

As part of this effort, Microsoft plans to convene an advisory panel of 35 chief information officers from global companies to recommend how Microsoft can make more software compatible with rivals. The software released Tuesday would chiefly be used by businesses, which increasingly are constructing corporate computer networks using software that employs a range of standards and operating systems.

Matusow estimated that less than a quarter of all servers currently run multiple operating systems. But he said dual-system computer servers are becoming the rule as businesses look to save money on hardware costs.

According to the research firm International Data, there will be about 500,000 computers, mostly servers, running dual operating systems by the end of this year. That number is expected to explode to 1.5 billion by the end of 2009. Three Microsoft competitors - International Business Machines, Sun Microsystems and Apple - already sell similar software.

More Microsoft research

Microsoft will spend about $7.5 billion on research and development in its 2007 financial year, $1.3 billion more than previously committed, its chief executive, Steve Ballmer, said, Reuters reported from Madrid.

"I estimate off the top of my head that approximately half a billion of that will be spent in Europe," Ballmer said. In May, Ballmer had announced research spending of $6.2 billion, a figure that surprised the market.

Is Windows Near End of Its Run?
Steve Lohr

Steven A. Ballmer, the chief executive of Microsoft, has his hands full. The next version of the Windows operating system, Vista, is finally about to arrive — years late and clouded by doubts that it might violate antitrust rules in Europe.

Mr. Ballmer, 50, has been deeply involved in the discussions with the European competition authorities.

Windows Vista and Office 2007, according to industry analysts, may be the last time Microsoft can really cash in on these lucrative personal computer products, as software is increasingly distributed, developed and used on the Internet.

Yesterday, Microsoft announced that Vista would be shipped in late January and expressed confidence that it would pass regulatory scrutiny. [Page C3.]

In fast-growing consumer markets, Microsoft is playing catch-up. It trails well behind Google in Internet search. Next month, Microsoft will introduce its Zune music player, in an uphill effort to take on the Apple iPod.

At Microsoft, Mr. Ballmer must adjust to being alone at the top, as his friend and longtime partner, Bill Gates, eases out of his company duties to work full time on philanthropy.

In a meeting this week with editors and reporters of The New York Times, Mr. Ballmer answered questions about Microsoft, his job and the future of software. Following are excerpts:

Q. What was the lesson learned in Windows Vista? After all, it wasn’t supposed to ship more than five years after Windows XP.

A. No. No, it wasn’t. We tried to re-engineer every piece of Windows in one big bang. That was the original post-Windows XP design philosophy. And it wasn’t misshapen. It wasn’t executed, but it wasn’t misshapen. We said, let’s try to give them a new file system and a new presentation system and a new user interface all at the same time. It’s not like we had them and were just trying to integrate them. We were trying to develop and integrate at the same time. And that was beyond the state of the art.

Q. In the future, will the software model change? Will the Internet, for example, be the way most software is distributed?

A. That will happen. It’ll happen from us. It’ll happen from everybody.

Q. Doesn’t that mean that software product cycles are going to be much shorter, months instead of years?

A. Things will change at different paces. There are aspects of our Office Live service, for example, that change every three months, four months, six months. And there are aspects that are still not going to change but every couple of years. The truth of the matter is that some big innovations — and it’s a little like having a baby — can’t happen in under a certain amount of time. And, you know, Google doesn’t change their core search algorithms every month. It’s just not done.

Q. Is Vista the last operating system of this era? That is, the last operating system in the traditional sense of being this monolithic software product? Don’t these Internet changes open the door to Windows à la carte? After all, you have different versions of Windows now for personal computers, cellphones and hand-helds.

A. Windows is a little different because Windows manages the hardware. It’s got to come with the hardware and manage the hardware. For the thing called the PC — the thing we think of as having a big screen and a keyboard — there really is one infrastructure for supporting hardware, for supporting application development. It’s not 100 percent monolithic. But it’s almost 100 percent monolithic.

Q. Can we talk about Europe?

A. Beautiful place. I lived in Brussels for three years as a kid. I do love Brussels.

Q. I was thinking of what seems to be the continuing conflict — the disputes, penalties and fines — over how Microsoft designs Windows and what features you put in the operating system. Is there a way around that problem?

A. First of all, I wouldn’t call it conflict. We really have — no, I mean this genuinely — have been having a constructive dialogue. Now, no regulator, not in this country nor in Europe, is going to give you a gold star that says, I will attest that everything in Vista is OK. The Department of Justice is not going to do that, and the European Union is not going to do that. At the end of the day, we can get a lot of guidance. And then we have to make the call and we have to take the risk. We really just have to decide whether we think the thing is compliant. It’s not really their issue. It’s kind of our issue in an odd way.

A. With Bill Gates making the transition out of day-to-day involvement at Microsoft, what is the biggest challenge you have to overcome?

Q. Well, there are sort of two. First, it’s not like Bill’s written every line of code or designed every product or done anything like that for many, many years. But Bill’s been an incredible contributor. If Office 2007 is a great product, give Bill 3 or 5 or 10 percent of the credit. We have to make sure that — whether it’s 5 or 7 or 10 percent — we get those values someplace else. And second, with Bill people have understood that we’re committed to long-term innovation. Bill’s been emblematic of that. We’ve shared that vision all along the way. But I think I have to pick that up. Because people want to know that the buck-stops-here person is committed to continuing to invest and do things.

Q. Several of the areas Microsoft is betting on for future growth — Xbox, Zune and ad-supported Web software and services — are consumer markets. How do you think the consumer perceives Microsoft?

A. All our surveys will tell you consumers think the world of Microsoft. At the same time, you have to go win the consumer in each area. I’ll give you an example. When it came time to name Xbox, there was certainly a class of people who wanted to have Microsoft and/or Windows more prominent. They all lost. And it was a wise choice. Not because Microsoft is bad. But it wouldn’t have meant what it needed to mean to that audience. And Zune could have been Microsoft music system or Microsoft entertainment system or Xpod, I guess. But again, we thought the experience was different and it was worth giving its own identity. So I think we have a good seat with the consumer, but we have to prove ourselves every time as our competitors have to do, too, by the way. Google has a good brand. It didn’t help them a lick in video.

Q. What do you see as the most significant changes in how people use software?

A. I think one pervasive change is the increasing importance of community. That will come in different forms, with different age groups of people and it will change as the technology evolves. But the notion of multiple people interacting on things — that will forever continue. That’s different today, and we’re going to see those differences build. You see it in a variety of ways now, in social networking sites, in the way people collaborate at work, and in ad hoc collaboration over the Internet. You see it in things like Xbox Live, the way we let people come together and have community entertainment experiences. And you’ll see that in TV and video. It’s not like the future of entertainment has been determined. But it’s a big deal.

Vista on Track; Changes Per EU Guidance
Raf Casert

Microsoft Corp. is making several key changes to its forthcoming Windows Vista operating system in an attempt to soothe European antitrust worries, while keeping its worldwide distribution plans on schedule.

Brad Smith, Microsoft's general counsel, said Friday the company agreed to change how people can set their preferred search service if they upgrade to Microsoft's new Internet Explorer browser. The Redmond, Wash., company also has tweaked Vista's security system to address concerns that the system was favoring Microsoft's products over competing security offerings.

In addition, the company plans to have an international standards organization review a controversial new file format that will be included in Windows and the company's Office business suite. He said that was a step toward making the format available for other companies to license.

Even with the changes, which will be included in all versions the company ships worldwide, Microsoft said it still plans deliver the long-delayed Vista to large businesses in November and consumers and small businesses in January.

The announcement follows many testy exchanges between Microsoft and European regulators, who are still embroiled in a long-running antitrust dispute over the current version of Windows.

But Smith told The Associated Press the changes announced Friday were the result of conversation, rather than litigation, between the two parties. EU antitrust chief Neelie Kroes and Steve Ballmer, Microsoft's chief executive, spoke by phone Thursday.

"When you have a constructive dialogue with people, you can actually figure out how to solve problems in a way that really wins for everybody," Smith said.

Still, he cautioned that the changes didn't guarantee the company would be free of antitrust concerns in Europe or elsewhere.

The EU antitrust office, which warned this spring it had concerns about the new Windows software, refused to back Microsoft's optimism that European concerns had been met.

"The jury is out," EU spokesman Jonathan Todd said. "It is up to Microsoft to shoulder its own responsibility to ensure full compliance with competition rules."

He said the Commission "will closely monitor the effects on the market and in particular examine any complaints."

Antitrust complaints often come up long after a product has been released, rather than in advance.

Microsoft also is hoping changes announced Friday will resolve trade worries with South Korea, where the Korea Fair Trade Commission said Microsoft abused its dominant market position by tying certain software to Windows.

The company said it will ship a version in Korea without the company's digital media player or instant messaging software, along with a full version that also will have links to competing products made by Korean vendors.

Microsoft also will ship a version of Windows in Europe without the media player.

Vista will be the first major upgrade to Microsoft's flagship operating system since Windows XP was released in 2001. It touts a sleeker look, improved security features, better protection against spyware and viruses and more intuitive search tools to help users find saved files.

The EU and Microsoft have fought for years over Windows XP, and the 25-nation bloc in 2004 levied a record $613 million fine and ordered Microsoft to hand over technical information to rivals, saying it had deliberately tried to cripple them as it won control of the market.

Over the summer, the EU fined Microsoft $357 million and threatened more penalties, saying the company failed to give rivals enough. Microsoft plans to appeal the fine.

The EU's executive Commission had already warned Microsoft it had to take care to avoid antitrust problems with Vista.

One potential area of strife is a Web search bar in Microsoft's new Internet Explorer browser; some feared it would favor Microsoft's own search engine over rivals such as Google Inc. or Yahoo Inc. In response, Smith said Microsoft had added an easier way for people upgrading from the previous version of Internet Explorer to choose what search engine they prefer. The choice applies to Windows XP machines, as Vista will already ship with Internet Explorer 7.

Another concern involved Microsoft's plan to release a format for saving documents that cannot be easily modified. Called XPS, the format would compete directly with Adobe Systems Inc.'s PDF. Smith argued that submitting XPS to a standards body and allowing other companies to license it for little or no cost would reduce Microsoft's own competitive benefit from the format.

Security vendors Symantec Corp. and McAfee Inc. have accused Microsoft of abusing its monopoly in deciding which security products can run on Vista, arguing that Microsoft is deliberately withholding information needed to develop products that work on the new system.

Symantec said Friday it was heartened by the development but had not yet been contacted by Microsoft engineers with technical information the company was seeking.

"It's guarded optimism," Symantec spokesman Cris Paden said. "It looks like they're taking steps to allow customers to use whatever solutions they want, but the security industry now asks, 'When?'"

Microsoft said it had made commitments to give competing security firms a way to access more of the internal workings of Vista. The company also promised to ensure that a computer user will not have to deal with double security alerts if an alternative competing security console is installed on the computer.

Smith insisted Microsoft had specifically worked on security, the document reader and the search system to make it compatible with European law.

Todd left open whether Microsoft's Vista changes would help end years of acrimonious debate. "Quite honestly? Time will tell."

Microsoft shares rose 15 cents to close at $28.37 Friday on the Nasdaq Stock Market.


AP Business Writers Allison Linn in Seattle and Jordan Robertson in San Jose contributed to this report.

Microsoft to Release New IE Web Browser
Allison Linn

Microsoft Corp. is giving its Web browser software its first major upgrade in years, amid signs that Internet Explorer's market share is eroding.

The release late Wednesday brings Microsoft's browser more in line with competing products such as Opera Software ASA's Opera and Mozilla Corp.'s Firefox. Internet Explorer 7, or IE7, adds features such as tabbed browsing, which lets people open several Web pages without cluttering their desktop with multiple open browser windows.

Microsoft has been heavily testing the new browser, releasing five beta versions over 14 months, and has periodically offered security updates for IE6, first released in 2001.

Still, a lag of more than five years between official releases has cost the company. Web analysis company WebSideStory estimates that Internet Explorer's U.S. market share is about 86 percent, while Firefox commands about 11 percent of the market and smaller offerings account for the rest. Two years ago, IE had about a 93 percent share.

Dean Hachamovitch, Microsoft's general manager for Internet Explorer, acknowledged the company could have done more sooner, but he said the new version should address users' concerns.

"We did have active development," he said. "The question is whether it was enough."

Matt Rosoff, analyst with independent researchers Directions on Microsoft, said Internet Explorer is important to Microsoft's business because most people believe an operating system should include a way to immediately access the Web.

Still, he said, Microsoft may not have seen much reason to spend a lot of money upgrading sooner since most people continued to use the older version.

Rosoff said the new product includes enough improvements to lure back some users.

But Colin Teubner, an analyst with Forrester Research, said people already using Firefox and rival products might not immediately come back. That's partly because those users have soured on Microsoft, he said, and partly because IE7 doesn't break much new ground.

"A year ago Firefox was head and shoulders above Microsoft's current offering, and I think even with IE7 it's mostly playing catch up," Teubner said.

But he does recommend that IE6 users upgrade, and he believes Microsoft may surpass competitors with future improvements.

Besides tabbed browsing, Microsoft has improved security to help keep users from falling victim to things like malicious software attacks and phishing scams. Microsoft products are a near-constant target of Internet attackers, and some people have recommended switching browsers because a less high-profile product might be more secure.

The Redmond software maker also has added a box in the browser that lets people search the Internet without going to a separate Web page, much like competitors.

In a last-minute change, people who are upgrading from the previous version of the browser will now have a clearer way to choose whether they want to use Microsoft's search engine or a competing one from companies like Google Inc. or Yahoo Inc. The change announced Friday was one of several aimed at soothing antitrust worries in Europe, where Microsoft faces a longrunning regulatory battle.

IE7 will be available as a free download beginning Wednesday evening. Next month, the company also will begin delivering it to Windows XP users who have signed up to automatically receive security fixes. Hachamovitch said that's because the product makes major security improvements.

Such distribution also will provide a powerful tool in countering competition from rival browsers.

Security updates typically download with little or no user intervention, but with IE7 people will get an extra opportunity to elect not to upgrade. Also, even people using automatic updates will have to agree to let Microsoft check whether their copy of Windows is pirated before they can get IE7.

Microsoft expects that it will take months to gradually release IE7 automatically. The browser also will be an integral part of Microsoft's new operating system, Windows Vista, due out for big businesses in November and for consumers in January.

IE7 Vulnerability Discovered

"Not 24 hours after the release of IE7, Secunia reports Internet Explorer Arbitrary Content Disclosure Vulnerability. So much for the "you wanted it easier and more secure" slogan found on Microsoft's IE Website."

Businesses Embracing Firefox As The Other Browser

JupiterResearch has recorded a large jump in the number of businesses allowing Firefox and is predicting that the latest IE7 release might drive even more acceptance.
Antone Gonsalves

The number of businesses allowing employees to download the Firefox Web browser soared this year, and at least one analyst believes the recently released Internet Explorer 7 could boost use of Firefox in companies.

Fully, 44 percent of businesses with 250 employees or more allow workers to download Mozilla Corp.'s open-source browser at the office, according to a survey conducted this year by JupiterResearch. Last year, only 26 percent of such businesses were willing to do the same.

"That's a huge jump," Joe Wilcox, analyst for JupiterResearch said Friday. "It's an enormous embrace of Firefox in a very short period of time."

The increase is likely driven by employee demand for Firefox, which can be deployed without disruption to other desktop applications, Wilcox said. Workers apparently have found the browser's features, which include the popular tabbed browsing, more useful than the older Internet Explorer 6 from Microsoft Corp.

The feature gap, however, has vanished with the release out of beta this week of Internet Explorer 7. But few businesses are expected to deploy the browser upgrade until they install Vista, Microsoft's major Windows upgrade that's set for release to businesses in November.

The reason for the delay is IE's tight integration with the operating system. Installing IE 7 on a Windows XP machine in an office would require a lot of testing first to determine the impact on business applications. Rather than test twice, companies are more likely to stick with IE6 until Vista, Wilcox said.

For many businesses, the move to Vista could take a year and a half or more, analysts say.

As a result, many people who get IE 7 at home through Microsoft's automatic update service will likely find IE6 lacking. Without the option of installing IE 7 at work, they are likely to turn to Firefox, Wilcox said.

"If you can't have one, then you'll use the other," the analyst said.

While Firefox is expected to get an up tick in business use, the browser is not expected to overtake IE, which dominates the corporate market. Numbers from Web metrics firms vary, but in October IE had from 82 percent to 86 percent of the market, while Firefox had 11.5 percent to 12.5 percent.

Opera Says It Can Still Compete In Browser Battle

The company's CTO says Opera actually pioneered the tabbed-browser features later included in Firefox and Internet Explorer.
Gregg Keizer

Even as Microsoft Corp.'s Internet Explorer 7 rolls out to users and Mozilla Corp.'s Firefox 2.0 nears completion, rival Opera Software remains convinced it can compete, a company executive said Thursday.

Oslo, Norway-based Opera, which develops the same-named browser for Windows, Linux, Mac OS X, and other desktop platforms, as well as miniature browsers for mobile phones and devices, owns less than one percent of the global browser market, according to Web metrics vendors. But its low numbers doesn't faze the company's chief technology officer, Hakon Wium Lie.

"We want to increase our user base," said Lie, "and we think we can do it. We just need to educate people about Opera, and show them how Opera compares with the others, especially in security."

That security-centric approach has done wonders for rival Firefox, which has increased its market share from zero to 12.4 percent in two years. But Opera's share has struggled to climb much above the half-a-percentage-point figure in that same period.

It doesn't make sense to Lie. "IE 7 comes out and adds tabbed browsing, but Opera has had that for 10 years." He agreed that ideas should be shared -- in fact, said Lie, Opera cooperates with both Mozilla and Apple, which develops its own Safari browser -- but he'd like his company to get credit where credit is due.

"Credit is due Opera, and we'd like to see that reflected in market share," Lie said.

Lie was particularly critical of Microsoft's IE 7, which he said was "disappointing." The IE development team, said Lie, had been given the short end of the stick by Microsoft. "They haven't taken things seriously, and haven't given the necessary resources to IE 7. They could have built a new rendering engine, but instead they used [the engine that debuted with] IE 4.

"That's like taking an old car and giving it a new paint job," said Lie. Microsoft launched IE 7 for Windows XP late Wednesday.

The reality, however, is that Opera is a minor player in the desktop browser business. Lie acknowledged this as he emphasized the company's progress on the mobile front. "Usage numbers are very different on the mobile side. We're now on 40 to 50 handsets, as well as other devices, such as set-top boxes. Nintendo's new Wii [video game console] will have our browser in it.

"Mobile is a very important part of our business."

Although Lie kept future Opera development plans close to his vest, he did say that the company would explore areas that played to its strengths in cross-platform and cross-device support. "One thing in the future that we'll work on is the ability to take content with you across the range of devices. If you browse an article on the Web on your desktop, you want that article to follow you when you leave the house with your phone to take the bus," said Lie.

"All I can say is that we're passionate about browsers."

Earlier this week, Opera announced an addition that will keep it in step with its rivals. Johan Borg, a developer working on the browser, said Tuesday in a blog that the next edition, Opera 9.1, will include beefed up anti-phishing and anti-fraud features. Rather than simply indicate that a site is secure with a notation in the address bar, Opera 9.1 will also query Opera-owned servers for information on any site visited. Those that Opera has identifies as fraudulent will be automatically blocked by the browser.

The current edition of Opera is 9.02, which can be downloaded from here.

Officer Suspended Over Graphic Web Site

A police officer whose Web page on MySpace.com included images of dismembered women has been indefinitely suspended, authorities said.

Jeremiah Love's page on the social-networking site contained images and statements that could undermine public confidence in the police department, an internal affairs report said. Love, 26, was suspended Tuesday.

Julia Vasquez, an assistant city attorney, said Love espoused a fondness for violence on the Web page that would hurt his testimony in criminal cases.

"These are comments that would make it difficult if he was trying to defend himself against a complaint regarding excessive force as an officer," Vasquez said. "There may be no evidence of excessive force, but when someone looks at his site, the comments could be used against him in court."

She said Love had not faced disciplinary action in the past.

Love's attorney, Richard Carter, of the Combined Law Enforcement Association of Texas, said the officer would appeal the suspension on the grounds that the punishment is excessive. Carter said the appeal would be heard by an arbitrator.

The Web page, which has been removed from MySpace.com, was listed under the name Leatherface. Graphic images on the page included a woman with the word "loath" carved into her flesh. Love listed his occupation as "super hero/serial killer."

According to the internal affairs report, Love designed his site in the genre of horror movies. He told investigators the site was meant to be humorous, according to the report.

Bruce Martin, a defense lawyer, said he discovered Love's MySpace page shortly after Love arrested one of his clients last month. Martin, who said he alerted prosecutors to the Web site, said he has evidence Love used excessive force on his client.

"I think all of the arrests, all of the searches and all of the seizures he's made have come into question," Martin said. "In any case of abuse or alleged abuse perpetrated by Officer Love, this Web site can be used to test his credibility."

Police Chief Dennis Bachman wouldn't comment on Love's case but said the public "always tends to hold their officers and firemen to a higher standard whether right or wrong."

People Find News in New Places
Eric Conrad

I pity Katie Couric. I pity her as much as one can considering she earns $15 million a year.

Still, I do, because she is destined to fail, to fall short of the massive hype that CBS built around its decision to hire her to replace Bob Schieffer, who replaced Dan Rather, as the lead anchor at CBS Evening News.

You see, network news is in such a steady and precipitous decline that no one person and no amount of format change can bring it back. If Walter Cronkite found the fountain of youth and became 40 again, he couldn't make a dent either.

And the worst may be yet to come.

Here are three facts you might find surprising:

Ratings for the big three network news shows -- ABC, CBS and NBC -- peaked in 1969. That's the same year the United States put the first man on the moon; that's 37 long years ago.

Since then, network TV ratings and total viewership have dropped consistently and annually. In 1980, 53 million Americans watched TV network news. Today, 28 million do (and the country's population is much greater).

By contrast, daily newspaper circulation nationally peaked much later, around 1991. While newspaper circulation also is dropping, it has a long way to go to reach the 59.6 percent ratings decline that network news shows have seen since 1969.

There are two key reasons behind what's happened to network news. The first is that longer work hours and tougher commutes mean many Americans aren't home and on the couch by anywhere near 6 p.m. If they are home, many "younger" adults are scrambling to fix dinner for their children or take their kids to all kinds of after-school events.

The bigger reason is that 24-hour cable television networks -- CNN and Fox, to name two leaders -- have surpassed network news broadcasts as the primary sources sought by Americans for breaking news. Why wait until 6 p.m. or 10 or 11 p.m. to follow the news when you can turn on Fox and practically watch a major event live (even if the reporters and anchors don't exactly know what's going on)?

There's an irony in all of this for newspaper journalists, seeing that during the 1960s network newscasts -- national and local -- replaced print journalism as the places Americans went first for their news.

But even CNN and Fox have a problem, and that's the onset of 24-hour, text-audio-and-video news available on the Internet -- including at local sites such as NewsTimesLive.com.

Every year, an organization called Journalism.org assesses "The State of the News Media." In last year's report, it stated the 2005 tsunami disaster in southeast Asia marked the first time more Americans went to Web sites and blogs for their up-to-the-minute news than went to cable TV.

"In the new millennium, a broadband-enabled, always-on Internet threatens to usurp cable news networks," the group's report said.

In another sweet irony, newspapers do quite well in this realm. USA Today, The New York Times and Wall Street Journal are pre-eminent news brands that draw huge numbers of Internet news consumers. Here in northern Fairfield County, NewsTimesLive.com and The News-Times are tops for local news stories, photos and breaking-news updates (we do up to 20 a day now).

All of which leads me back to Katie Couric. CBS over-hyped her arrival, but also took an intelligent gamble in hoping the experienced, likeable, conversational Couric could draw viewers away from ABC and NBC. She's third in the ratings now but that could change in a year or two.

Just keep in mind that all three networks are vying for an increasingly small sliver of the pie.

Rise of Online Communication Means Decline of Mailbox
Richard Clough

Like the phone booth before it, the blue street-corner mailbox is rapidly becoming a casualty of the digital age.

As more people send e-mails and pay bills online, the decline in first-class mail is forcing the U.S. Postal Service to remove tens of thousands of underused mailboxes from city streets.

"People just don't write letters as often anymore," said Yvonne Yoerger, a spokeswoman for the Postal Service. "It's not a part of our culture anymore."

The removal of mailboxes, though, represents more than just a transition to the Internet age. To many, it means the decline of an American icon.

Seen and used by hundreds of millions of Americans for more than a century, the corner mailbox is one of the most recognized pieces of Americana, said Nancy Pope, a historian at the National Postal Museum in Washington.

"You recognize them in Chicago, you recognize them in D.C., you recognize them in Florida, you recognize them in Montana," Pope said. "It's a piece of American iconography that has a wonderful history behind it."

Initially small, green and attached to lampposts, mailboxes, which first appeared in America in the middle of the 19th century, were periodically redesigned until one model stuck. The rounded-top blue design has been the standard for mailboxes since 1971, when the Postal Reorganization Act took effect and overhauled the country's mail delivery sector. Over the past 35 years, that design has become "imprinted in our brains," Pope said.

The Postal Service owns a copyright on the box design.

Pope said producers of plays, television programs and films have solicited her help because when you want to create an outdoor scene that is distinctly American, "you put in a mailman, you put in a mailbox."

The National Postal Museum has two of the modern blue mailboxes in its collection; one is on display as part of a contemporary scene, which might become a scene of the past as the corner boxes become scarce.

Since 1999, the Postal Service has removed more than 42,000 collection boxes. As of last year, about 295,000 mailboxes remained in use.

Along with mailboxes, the Postal Service is facing a drop in jobs. In the past five years, it has reduced staff through attrition by more than 80,000 employees. The current postal work force stands at about 700,000.

The Postal Service's 2007 budget accounts for an expected reduction of about 3 billion pieces of first-class mail from 2006 levels. Last year, about 98 billion pieces of first-class mail were delivered.

The decline in mailboxes is not just because of decreases in first-class mail. After the terrorist attacks of Sept. 11, 2001, the Postal Service, working with the Homeland Security Department, removed about 7,000 mailboxes around the country for security reasons. Among the cities that cut back were New York, which took out about 100 boxes near churches and mosques, and Chicago, which removed almost 200 boxes, mostly around the Sears Tower.

But disuse is the primary reason for box removal. Local post office branches conduct quarterly surveys of mailbox use, removing those that collect fewer than 25 pieces of mail per day. Citizens in communities across the country have circulated petitions to save mailboxes, and postal officials say they take such campaigns seriously.

Before any box is uprooted, officials will post a 30-day public notice on the mailbox, informing users of the nearest alternative drop points. And once a box is removed, some post offices will consider returning it if there is significant public outcry.

The post office tries to leave at least one mailbox per square mile in residential areas.

But while the post office is facing declines in several major areas, the news is not all bad.

"At the same time the Internet has led to a decline in first-class mail, it has also led to an increase in package services mail because of the trend of people using the Internet to do shopping and ordering products," Yoerger, the Postal Service spokeswoman, said.

In a speech last month, Postmaster General John Potter addressed recent post office cutbacks, but cited Internet retailer eBay and online DVD rental service Netflix as boons to the mail industry.

Potter said "we are only beginning to fully comprehend the power" of the Internet for the Postal Service.


US Internet Addicts 'As Ill As Alcoholics'

The US could be rife with "internet addicts" who are as clinically ill as alcoholics, according to psychiatrists involved in a nationwide study.

The study, carried out by researchers at Stanford University School of Medicine in California, US, indicates that more than one in eight US residents show signs of "problematic internet use".

The Stanford researchers interviewed 2513 adults in a nationwide survey. Because internet addiction is not a clinically defined medical condition, the questions used were based on analysis of other addiction disorders.

Most disturbing, according to the study's lead author Elias Aboujaoude, is the discovery that some people hide their internet surfing, or go online to cure foul moods – behaviour that mirrors the way alcoholics behave.

"In a sense, they're using the internet to self-medicate," Aboujaoude says. "And, obviously, something is wrong when people go out of their way to hide their internet activity."
Non-essential use

Nearly 14% of respondents said they found it difficult to stay away from the internet for several days and 12% admitted that they often remain online longer than expected.

More than 8% of those surveyed said they hid internet use from family, friends and employers, and the same percentage confessed to going online to flee from real-world problems. Approximately 6% also said their personal relationships had suffered as a result of excessive internet usage.

"Potential markers of problematic internet use are present in a sizeable portion of the population," the researchers note.
Compulsive drive

Aboujaoude, a psychiatry professor at Stanford's Impulse Control Disorders Clinic, says an increasing number of people are seeking help from doctors because of unhealthy internet use.

He compares the compulsive drive to check email, make blog entries or visit websites to substance abuse – an irresistible urge to perform a temporarily pleasurable act.

"The issue is starting to be recognised as a legitimate object of clinical attention, as well as an economic problem, given that a great deal of non-essential internet use takes place at work," Aboujaoude says.

He adds that the problem is not confined to specific types of internet use. "Online pornography and, to some degree, online gambling, have received the most attention," he says, "but users are as likely to use other sites, including chat rooms, shopping venues and special-interest websites."

Previous research suggests that the majority of "internet addicts" are single, college-educated, white males in their 30s, who spend approximately 30 hours a week on non-essential computer use.

Sprint Hikes Pay-As-You-Go Texting Rate
Bruce Meyerson

Sprint Nextel Corp. will now charge 15 cents per message - a 5 cent increase - for using text messaging without a monthly package.

There was no change in prices for subscription texting plans - $5 for a monthly allowance of 300 messages, $10 for 1,000 and $15 for unlimited usage. Going over those limits in any month will still cost 10 cents a message sent or received.

Cingular Wireless, Verizon Wireless and T-Mobile USA each charge 10 cents per message sent or received without a texting plan.

Text messages, hugely popular overseas and rapidly catching on in the United States, are similar to e-mail except that they're sent to and from cell phone numbers rather than e-mail addresses. Most users type out messages by multi-tapping on a phone's number pad to choose letters, though many mobile devices such as the BlackBerry and Treo feature a full-blown mini-keyboard.

Sprint Nextel doesn't disclose how many of its 41.5 million subscribers use text messaging without a monthly plan, so it was unclear how many would be affected by the rate increase.

Cingular Wireless LLC is jointly owned by AT&T Inc. and BellSouth Corp. Verizon Wireless is a joint venture between Verizon Communications Inc. and Vodafone Group PLC. T-Mobile is the U.S. subsidiary of Germany's Deutsche Telekom AG.

Joining the Party, Eager to Make Friends
Saul Hansell

To big-name marketers, the teeming mosh pits of social networking sites look like dangerous places for their precious brands. MySpace: Isn’t that full of dirty old men picking up teenage girls? Facebook: That’s where college students post pictures of bawdy frat parties. And YouTube: Pirated videos — and people making fun of our commercials.

But now these sites and dozens of smaller ones have something those marketers want: the attention of tens of millions of young people who increasingly avoid television commercials. So companies from Procter & Gamble to J. P. Morgan Chase, like so many lonely teenagers, are tricking out their online profiles and trying to make friends on the Web.

The sites are trying to move beyond banner ads and develop ways to integrate marketers into the fabric of their online communities. For example, marketers encourage the sites’ users to become “friends” with characters from their ads, and are experimenting with more elaborate campaigns that take advantage of the word-of-mouth effects of networking sites.

Big Internet companies are getting into the game, eager to profit from selling ads on these sites. Google agreed to pay the News Corporation $900 million over three and half years for the right to sell advertising on MySpace, the largest social networking site, where people create profile pages and receive messages from friends. And last week it agreed to buy YouTube, the fast-growing video-sharing site, for $1.65 billion.

Microsoft sells ads for Facebook, the second-largest networking site, and for Windows Live Spaces, its own blogging service.

“When blogs and Spaces first came out, people said no one would be willing to advertise on them,” said Joanne K. Bradford, Microsoft’s corporate vice president for advertising sales. “Consumers have voted. They said this is where I’m spending my time, and if you want to find me here, you have to get used to the fact that everything is not pretty and rosy here.”

In some ways, marketers on these sites are treated just like any other member. On MySpace they can have a profile page and a group of friends. Facebook allows marketers to use a feature that lets any member create a group that other members can join.

Advertisers can add features to their MySpace profiles and Facebook group pages like video clips, quizzes, downloadable goodies like ring tones, and, of course, links to their own Web sites.

These approaches run the risk of generating a sour reaction from the online community if site members feel marketers are going too far in trying to fit in.

But Danah Boyd, a sociologist who has studied MySpace, said its users did not reject commercialization out of hand.

“Teens have grown up with being barraged with advertising,” Ms. Boyd said. “They just want it to be relevant, but they expect it.”

The first companies to make the leap and advertise on these sites were movie studios, carmakers and others selling things of inherent interest to young people. Companies with more mundane products to pitch have had to work to create something that will get people talking online.

Unilever, for example, has turned its Axe deodorant into the No. 1 brand in less than four years by promising to help men attract more women. This spring it created a promotion around a group it called Gamekillers — people who get in the way of a seduction, like a guy with a British accent who gets all the attention. The pitch is that Axe helps men stay cool in the face of the Gamekillers.

The campaign included an hourlong program on MTV and a page on MySpace devoted to the topic, with message boards where people could trade complaints and tips about Gamekillers. Its online host was Christine Dolce, a busty model who was already a celebrity thanks to MySpace, where she has accumulated more than a million friends.

The campaign has lured more than 250,000 people to take the Gamekillers quiz on the MySpace page, and 74,000 people chose to designate the Gamekillers page as one of their “friends.”

“You have to be willing to let go,” said Kevin George, the vice president for deodorants at Unilever North America. “It worked for us.”

Companies have found that it is not easy to keep up with the online crowd. One of the first promotional tactics on MySpace was for marketers to create profile pages for people or fictional characters from their advertising campaigns. They then invited users to add those pages to their lists of friends.

Volkswagen created a profile page for Helga, the German character in some of its commercials, where users could see and comment on the commercials and download Helga ring tones, buddy icons and life-size images.

That approach is now looking a little tired, said Jeff Benjamin, interactive creative director for Crispin Porter & Bogusky, Volkswagen’s agency. “A year ago, everyone wanted to be Helga’s friend,” he said. “Today the reaction would be different. So many advertisers are doing it.”

As they start to build up advertising sales operations, the social networking sites are starting to develop offerings that let marketers take advantage of some of their features.

For example, Chase has a promotion on Facebook that implicitly uses a person’s friends to endorse its credit cards. When people join the Chase “+1” group on Facebook, they see a list of their other friends who have joined the group. The program gives members points when they do things like apply for a card and get others to sign up. Those points can be redeemed for prizes, donated to charity or given to other friends on Facebook.

“To be credible on Facebook, you can’t slap the Chase logo all over the site,” said Manning Field, the senior vice president for branding at Chase’s credit card unit. “We wanted a brand cue that said, ‘Wink, we get it. Facebook is about connectedness and social activity.’ ”

On Facebook, American Eagle created a group for its Aerie line of underwear with photos, discussion boards, a contest and clips of the television shows it sponsors.

Facebook also sees marketing opportunities in its new Newsfeed feature, which lets users see all the new information and photos added by their friends in one place. The feed tells your friends when you have joined a group, even one sponsored by an advertiser — another way Facebook is trying to use its network to amplify word-of-mouth advertising.

MySpace is even willing to change some of its standard features to help advertisers. For example, it normally lets members display photos of their top eight friends on their main profile pages. But people who added the movie “X-Men: The Last Stand” to their friends list were given the right to show 16 top friends.

Procter & Gamble is now trying to tap into a trend on Facebook where people try to see how many others they can get to join a group. It is running a contest for Crest Whitestrips that involves 20 different colleges and universities. The four schools that have the most students join the “Smile State” group will earn a free on-campus concert by an up-and-coming artist (only for members of the group, of course).

This same approach was used earlier, in a sneakier fashion. Last month a Facebook member using the name Brody Ruckus, who said he was a Virginia Tech student, created a group on Facebook and said that if 100,000 people joined it, his girlfriend would agree to have sex with him and another woman at the same time. The group soon attracted 430,000 members.

Some members became suspicious, however, and discovered that there was no Brody Ruckus registered at Virginia Tech. They traced the group to Ruckus Network, a college-oriented music service. Facebook shut down the group, citing its policy against commercial activities by members (unless, of course, they are paying advertisers).

Michael Bebel, the chief executive of Ruckus Networks in Herndon, Va., said the promotion was an experiment in guerrilla marketing that grew bigger than the company expected.

“The subject matter is a little polarizing,” Mr. Bebel said. “But,” he said, “the content isn’t any more extreme than what Charlie Sheen does in ‘Two and a Half Men,’ ” a sitcom involving a hip bachelor.

One of the biggest challenges for marketers is how to weave advertising into popular sites like YouTube that offer homemade videos.

YouTube has been experimenting with what are essentially on-demand commercials — ads on its home page with links to videos from sponsors. And it is allowing advertisers to create custom “channels,” collections of videos in any combination of soft or hard sell. A new one for Burger King features Diddy, the rap star, ordering a Whopper. It has also sold more elaborate promotions like the Cingular Underground, a music contest for the cellphone company.

Sometimes marketers find that in the end, the unplanned is what works best. Crispin Porter placed a new crop of Volkswagen commercials on YouTube and a handful of people watched them. Then a user uploaded a grainy version of one of the same commercials. It has been viewed more than 1.7 million times.

“You can’t explain this,” said Mr. Benjamin of Crispin Porter. “Someone passed it on to a friend, who passed it to others, until eventually it gets in the right people’s hands. You just can’t predict what will happen.”

Tamago Launches Peer-to-Peer eCommerce System
Press Release

Tamago launched peer-to-peer commerce system allowing people to sell every type of digital media directly from their computers to customers all over the world. People who publish music, videos, photos, e-books, etc. earn royalties, while buyers earn commissions for distributing media to others.

"We believe everyone should make money," said Joel Floyd, CEO of Tamago. When someone buys a song, a picture, or other digital media, Tamago pays the members, whose computers deliver the data, directly to the buyer. This eliminates the need for central server farms. "In Tamago's new world, customers are not just consumers, but distributors also," said Gary Feierbach, COO of Tamago.

Tamago was built for both publisher and customer ease of use. When someone publishes their work they set the royalty amount they want to receive for each sale. In turn, buyers automatically become distributors and receive a commission on any media their own computer delivers. Tamago also protects an artists' name and copyright by preventing it from being re-published and stolen, while giving customers freedom to use the material for any personal use.

"This system will bring out the artist in everyone," Joel enthuses. "We charge nothing to publish and it takes less than 5 minutes. All the barriers are gone so everything from the popular to the very esoteric can find an audience."

Tamago requires a PC running Windows 2000 or XP or an Intel based Apple Computer running Parallels Desktop or Boot Camp from Apple Computer.

I’ll Trade You My ‘Titanic’ for Your ‘Spider-Man’
Bob Tedeschi

One of the world’s oldest forms of commerce has finally gotten a foothold in the newest commercial medium.

Online bartering, an idea with many proponents but few successes, is emerging as an e-commerce model, bolstered by a spate of new Web sites run by veterans of the e-commerce industry. And although these sites won’t soon challenge Amazon.com or eBay, they are carving out a significant niche in what could be a highly profitable business.

It sounds unlikely, but it’s true, according to Billy McNair, chief executive of Peerflix, a DVD trading service based in Palo Alto, Calif. The company’s 250,000 members post titles of DVD’s they are willing to trade on the Web site (peerflix.com), which then facilitates the swaps by giving members printable forms that include postage and the recipient’s address.

Trades are not directly between two people. For every DVD shipped from one’s library, the sender receives credit toward the acquisition of other titles available in the network. Peerflix also determines the relative value of a DVD, to prevent people from trading, say, “Halloween 5” for a restored version of “Citizen Kane.”

In exchange for this service, Peerflix charges users $1.50 for each title they receive. Of that, 51 cents goes to cover the company’s shipping and handling costs.

“The rest comes to us,” Mr. McNair said. “This is an extremely high-margin business.”

Mr. McNair, who introduced the company in 2004, said the Web site had made significant progress in the last year, with membership growing fivefold and the number of available DVD’s growing at nearly the same rate. The site offers roughly 37,000 DVD titles, and has a total inventory of 225,000 copies. By comparison, the DVD rental service Netflix offers about 65,000 titles. Users trade DVD’s about five times each month.

Even though digital distribution is presumed to be the future for media businesses, Mr. McNair says he believes that physical media will remain the bedrock of the industry and of his business for the foreseeable future. About 1.5 billion DVD’s are purchased annually in the United States, he said, or about 20 a household. “And our members say they purchase more DVD’s now because they know that after they watch the movie it’ll still have value,” he said.

Investors are apparently attracted by his logic. Mr. McNair said the company in late 2004 raised about $2 million from the venture firms 3I and BV Capital, a firm founded by former executives from AOL Germany. That cash would have been more than enough to last until mid-2006, Mr. McNair said, but Peerflix raised another $8 million in October 2005, primarily from Battery Ventures, the firm behind the early search engine Infoseek. More money is on the way.

“One of the key differentiators in this space will be who is best capitalized,” Mr. McNair said. “We have some announcements coming up that’ll be well reflective of that.”

As Peerflix ventures beyond movies and into other forms of media, as Mr. McNair says he hopes to do, it will face upstarts and established businesses at every turn. Bartering networks have sprung up, for example, around CD’s (LaLa.com), video games (www.GameSwap.com) and books (PaperBackSwap.com).

La La Media, which operates LaLa.com and is also based in Palo Alto, is another recent darling of the Silicon Valley venture capital community, having raised $9 million since the business formed in June 2005. According to Bill Nguyen, one of the company’s founders, the site has built an inventory of two million titles since its debut in March, and every day members add 30,000 copies to the collection.

“People are starting to realize this is a really great way of finding new music,” Mr. Nguyen said.

La La charges $1 a trade — about 75 cents for postage and handling costs. The company sets aside about 20 cents for musicians who perform on the disc. “We’re a little bit commie, a little bit co-op,” Mr. Nguyen said.

Like Peerflix, La La spends little on marketing, relying instead on its members to spread the word. The company, which has 23 employees, also spends little on customer service; members typically rely on the site’s online forums to guide each other through problems, and the site has a liberal credit policy for damaged discs. (Members merely send an e-mail to the site, reporting that the disc is damaged, and they are sent another.)

As promising as these businesses are, they represent no threat to big online companies like Netflix and Amazon, analysts said. “The mainstream audience, in my view, is not interested in barter, given how simple renting and purchasing have become,” said Safa Rashtchy, an Internet analyst with the investment firm Piper Jaffray. “Barter will be a small fraction of e-commerce activity.”

Run as they are by tiny teams of entrepreneurs, though, these companies embody the kind of asymmetric economic threat that has forced established businesses to at least take notice, if not entirely alter their business plans. Take books, for instance. PaperBackSwap’s members trade 30,000 books weekly for $1.59 apiece, according to Richard Pickering, one of the site’s founders. The company is now exploring ways to help members trade nonmedia items, possibly within distinct geographical areas.

“You’re going to see a lot more from online bartering in the future,” Mr. Pickering said. “This is just in its infancy.”

End of a Punk-Rock Institution Whose Attitude Won't Die

Jon Pareles

Just after 1 a.m. on Monday morning, the last notes of live music rang from the stage of CBGB & OMFUG, the Bowery club where punk-rock invented itself. Patti Smith finished the club's final concert with her ballad "Elegie," growing teary-eyed as she read a list of dead punk-rock musicians and advocates. But just before it, she had worked up a galvanizing crescendo -- from poetry recitation to rock song to guitar-charged incantation -- in a medley of "Horses" and "Gloria," proclaiming with a triumphant rasp, "Jesus died for somebody's sins/But not for CBGB's."

The songs came from her debut album, "Horses," which was released in 1975, when Ms. Smith and CBGB were making each other famous. She was a poet turned rocker, tapping and then redoubling the energy she found in basic three-chord songs. The club -- its initials mean Country Bluegrass Blues and Other Music for Uplifting Gormandizers -- was a hangout in a dire location. But its owner, Hilly Kristal, agreed to book artistically ambitious, high-concept, generally primitivist bands that defied the commercial imperatives of early-1970's rock. It was a neighborhood place in a low-rent neighborhood that happened to house artists and derelicts side by side, inspiring some hard-nosed art. During her set, Ms. Smith described CBGB as, "This place that Hilly so generously offered to us to create new ideas, to fail, to make mistakes, to reach new heights."

In some ways CBGB, which opened in December 1973, ended its life as it had started. It never moved from its initial location, which was originally under a Bowery flophouse, now a homeless shelter. It never changed its floor plan, with a long bar lit by neon beer signs on the way to an uneven floor, a peeling ceiling, a peculiarly angled stage and notorious bathrooms. Through the years, the sound system was improved until its clean roar could make any power chord sound explosive. Mostly, however, CBGB just grew more encrusted: with dust, with band posters stuck on every available surface, with bodily fluids from performers and patrons. Ms. Smith did some casual spitting of her own during her set.

But in a historical long shot, CBGB got lucky. The concepts of bands booked there turned out to be durable ones: Ms. Smith's blunt, visionary and primal songs; Talking Heads' nervously oblique funk, and especially the Ramones' terse, blaring, catchy rockers, which came to define punk-rock. Having nurtured bands like those--and later post-punk bands from Sonic Youth to Living Colour--CBGB became a rock landmark. Its reputation grew strong enough to coast on. Even as its regular bookings grew far less selective through the 1990's and 2000's, every now and then a big-name band would play there as a pilgrimage.

Yet CBGB remained a neighborhood joint. The club's last show wasn't some stage-managed, all-star sendoff destined to be a television special (although it was broadcast live on Sirius satellite radio.) It was just two sets by Ms. Smith with her band and two guests: Flea, the bassist from the Red Hot Chili Peppers, and Richard Lloyd, one of the two guitarists in Television, the band whose early gigs defined CBGB. Ms. Smith's sets included Television's "Marquee Moon," with Mr. Lloyd, and songs from other CBGB bands: Blondie's hit "The Tide is High," the Dead Boys' "Sonic Reducer" and a Ramones medley sung by her guitarist, Lenny Kaye, who changed the lyrics of "Do You Remember Rock and Roll Radio?" from "It's the end of the century" to "It's the end of CBGB." Ms. Smith was ignoring one of Mr. Kristal's early conditions for CBGB bands--that they only perform their own songs--but forgivably.

Punk-rock never promised that it was built to last. The songs always seemed ready to self-destruct; simple and brief, they were often just three chords and a burst of frustration or pugnacity or humor. Some of the musicians were self-destructive, too. Yet punk, as codified by the Ramones, has turned out to fulfill some perennial adolescent need, and it persisted. Bands kept coming along and embracing it, some lasting just long enough for a few local gigs--and possibly a set on one of CBGB's nightly septuple bills--and others becoming the first step for musicians who would go on to bigger things. Punk infiltrated a suburban underground in the 1980's, created its own do-it-yourself circuit, and eventually emerged as million-selling punk-pop in the 1990's. Improbably, CBGB persisted too: an institution built on music that originally sought to topple institutions.

It's a shame to lose any working club in New York City with so much history and, even rarer, such outstanding sound. The prospect of a recreated CBGB in Las Vegas, even with original artifacts, can't make up for it; Las Vegas isn't in the neighborhood. But CBGB did its job so well it created its own competition and heirs. Bands whose music is based on what came out of CBGB in the 1970's perform everywhere from the Mercury Lounge to Madison Square Garden. The closing of CBGB is the end of a lovable chunk of New York City real estate, but it's far from the end of an era. After a yearlong goodbye--since CBGB's disputes with its landlord, the nonprofit Bowery Residents' Committee, first surfaced in 2005--too much mourning is unnecessary.

"Kids, they'll find some other club," Ms. Smith insisted during her set. "You just got a place, just some crappy place, that nobody wants, and you got one guy who believes in you, and you just do your thing. And anybody can do that, anywhere in the world, any time."

After her set was over and the club had partly cleared out, Ms. Smith returned to the stage for a silent postcript. As fans held up outstretched hands, Ms. Smith reached into a bag and handed out little black pins. They read, "What remains is future."

CBGB Brings Down the Curtain With Nostalgia and One Last Night of Rock
Ben Sisario

She had played there many times over the last three decade, but last night, before making her last appearance there, Patti Smith made sure to snap a picture of CBGB.

“I’m sentimental,” she said as she stood on the Bowery and pointed an antique Polaroid toward the club’s ragged, soiled awning, and a mob of photographers and reporters gathered around her.

Last night was the last concert at CBGB, the famously crumbling rock club that has been in continuous, loud operation since December 1973, serving as the casual headquarters and dank incubator for some of New York’s most revered groups — Ms. Smith’s, the Ramones, Blondie, Talking Heads, Television, Sonic Youth — as well as thousands more whose blares left less of a mark on history but whose graffiti and concert fliers might still remain on its walls.

After a protracted real estate battle with its landlord, a nonprofit organization that aids the homeless, CBGB agreed late last year to leave its home at 313 and 315 Bowery at the end of this month. And Ms. Smith’s words outside the club, where her group was playing, encapsulated the feelings shared by fans around the city and around the world: CBGB is both the scrappy symbol of rock’s promise and a temple that no one wanted to see go.

“CBGB is a state of mind,” she said from the stage in a short preshow set for the news media whose highlight was a medley of Ramones songs.

“There’s new kids with new ideas all over the world,” she added. “They’ll make their own places — it doesn’t matter whether it’s here or wherever it is.”

Crowds had been lined up outside since early yesterday morning for a chance to see Ms. Smith and bid farewell to the club, in an event that was carefully orchestrated to maximize media coverage. Television news vans were parked on the Bowery as fans with pink hair, leather jackets and — the most popular fashion statement of the night — multicolored CBGB T-shirts (but not necessarily tickets) waited to be let in and Ms. Smith’s band played a short set for the assembled press.

Curiosity about the club’s last night was mingled with harsh feelings about its fate.

“It’s the cultural rape of New York City that this place is being pushed out,” said John Nikolai, a black-clad 36-year-old photographer from Staten Island whose tie read “I quit.”

Added Ms. Smith outside the club, “It’s a symptom of the empty new prosperity of our city.”

Ms. Smith was CBGB’s last booking as well as one of its first. In the 1970’s, she was the oracular poet laureate of the punk scene, and her seven-week residency in 1975 is still regarded by connoisseurs as the club’s finest moment. With an open booking policy, its founder, Hilly Kristal, nurtured New York rock’s greatest generation, and in turn those groups made CBGB one of the few rock clubs known by name around the world.

“When we first started there was no place we could play, so we ended up on the Bowery,” said Tom Erdelyi, better known as Tommy Ramone, the group’s first drummer and only surviving original member. “It ended up a perfect match.”

It has been a long and painful denouement for CBGB. After settling in 2001 with its landlord, the Bowery Residents’ Committee, over more than $300,000 in back rent, Mr. Kristal, a plucky, gray-bearded 75-year-old, landed back in court last year. The committee, which has an annual budget of $32 million and operates 18 shelters and other facilities throughout the city, said the club owed an additional $75,000 in unpaid rent increases.

Celebrities including David Byrne of Talking Heads and Steven Van Zandt of the E Street Band and “The Sopranos” lined up to help mediate, but an agreement was never reached. Last December, three months after the club’s 12-year lease had expired, it agreed, at the prodding of Justice Carol R. Edmead of State Supreme Court in Manhattan, to finally close.

Muzzy Rosenblatt, the executive director of the Bowery Residents’ Committee, has said that a new tenant has been found for the space. Both Mr. Kristal and the committee also say that CBGB’s accounts have been settled and that there are no outstanding debts.

CBGB (its full name was CBGB & OMFUG, for Country Bluegrass Blues and Other Music for Uplifting Gormandizers) is the latest and highest-profile rock club to vanish from Lower Manhattan in recent years as rents and other expenses have continued to skyrocket. Last year the Bottom Line closed over a debt of $185,000 to its landlord, New York University, and Fez and the Luna Lounge shut down because of development. The Continental, another ragged temple of punk on Third Avenue in the East Village, quit live music last month. Other clubs have sprouted up in Manhattan, but the center of gravity of the city’s club scene has gradually been shifting to Brooklyn.

Mr. Kristal is looking as far as Las Vegas. With the help of the mayor’s office there, he has been inspecting spaces in that city’s Fremont East district, a zone that the city intends to make into “a walkable live entertainment area like Bourbon Street or Beale Street,” according to a statement from the mayor’s office.

The office of Mayor Michael R. Bloomberg helped find a new space in New York but the space it offered, on Essex Street on the Lower East Side, would have taken a prohibitive $5 million to prepare for use, Mr. Kristal said. Calls to the mayor’s office for comment were not returned late last week.

“I’d love to have the place here,” Mr. Kristal said. “If not here, then I’d love to have it in Vegas. I’m going to keep it active no matter what.”

The club’s interior — a narrow corridor with a bar to the right, the stage to the back, stalactites of grime dangling from the ceiling and miles of ancient posters and graffiti all around — is almost as cherished as its music.

“It’s like it’s grown its own barnacles,” said Lenny Kaye, Ms. Smith’s guitarist and a longtime rock critic and historian. “You couldn’t replicate the décor in a million years, and dismantling all those layers of archaeology of music in the club is a daunting task.”

The club’s architectural history stretches back much further than the Ramones era. Marci Reaven, the managing director of City Lore, a nonprofit arts group in Manhattan that studied CBGB in a joint project with the Municipal Arts Society, said it is a rare example of the Bowery’s long past as an entertainment mecca.

“When you get beyond the layers of interior decoration that is CBGB,” she said, “the architecture of the structure probably evokes the 19th and early 20th century years of the Bowery better than any other building on the strip that we know of.”

Mr. Kristal said he planned to preserve as much of the interior as possible and transport it to a new club, wherever that might be.

But CBGB’s symbolic legacy may far outweigh the value of its graffiti and its notorious urinals.

“When I go into a rock club in Helsinki or London or Des Moines, it feels like CBGB to me there,” Mr. Kaye said. “The message from this tiny little Bowery bar has gone around the world. It has authenticated the rock experience wherever it has landed.”

Debate 2.0

Weighing the Merits of the New Webocracy

The Internet has become a wildly optimistic and democratic medium, rife with community-based sites that draw millions of fans and disrupt scores of industries.

Social networking sites like MySpace and Facebook encourage community, friendship and sharing. News aggregators like Digg.com let readers choose the best stories of the day. Citizen journalists and bloggers pursue their own stories and disseminate them for free on the Internet, bypassing the mainstream media altogether.

Dubbed Web 2.0, among other things, this new Internet has captured the attention of Wall Street and Main Street alike, witnessed by the billions spent on companies such as MySpace and by the millions of users who visit those sites religiously. Just last week, the video sharing site YouTube was snapped up by Google for $1.65 billion, sparking talk of a new bubble.

How is this new environment affecting us? What is it doing to the flow of information? And the creation of art? How is it changing our culture? The Chronicle invited two of the Internet's sharpest thinkers to debate these questions. The following was edited for clarity and length.

Chris Anderson is the editor of Wired magazine and author of "The Long Tail," an economic analysis of how technology is changing our world for the better. Andrew Keen, a Web entrepreneur and author of the book "The Cult of the Amateur," to be published in May, is not convinced that technology is bettering us or our society. He believes the new, freewheeling Internet is diluting our culture by celebrating mediocrity.

Join us for the conversation.

Q: What's being called Web 2.0 essentially champions the ideas of community and sharing and openness. It's an environment that champions the values of the crowd over the individual. Democracy over autocracy. How is this latest wave of technology impacting our culture?

Andrew Keen: I don't think technology is doing a great deal for culture. Much of the euphoria and optimism about this latest wave of technology is suggesting that we, through these new technologies, are creating better culture. Better movies and music, for instance.

I am not convinced of that. Perhaps I am a reactionary here, defending an anachronistic culture, but my sense is that this latest, democratized culture, this user-generated content, is actually undermining many of our most valuable institutions, including movie studios, music labels, newspapers and publishing. I'm not convinced that technology is actually doing a great deal for the world at the moment.

Q: Chris, you have a bit more optimistic view on the role technology can play in the world and our economy, as evidenced by your book, "The Long Tail." Do you care to counter what Andrew was just saying?

Chris Anderson: Technology is nothing other than an enabler of individual power. The tools once reserved for professionals are now in the hands of everybody. A lot of people just speak to each other directly without going through intermediaries and having messages diluted or distorted.

I broadly believe in democratic principles. I broadly believe in market principles. I think that the three most powerful forces of our time are evolution, democracy and capitalism, all three of which are very much individualistic, sort of enlightened self-interest and individual agents working autonomously.

History suggests that they are the least bad of the available models. They tend to reach more optimal, but not perfect, solutions. So, if you believe in democracy and if you believe in markets, then you believe in technologies that help them work more efficiently. That's very much what we are seeing today.

Q: That idea of democracy and open markets speaks to the wisdom of crowds -- the idea that mass philosophy or mass culture is somehow a greater good. The Web 2.0 movement is based on the idea that group-think is an improvement over individual thought. Andrew, is the crowd smarter than the individual?

Keen: Before I did all this Silicon Valley stuff, I used to teach political philosophy and I used to teach a class about the beginning of American history, the Federalist Papers.

Many of the arguments that came about then are playing themselves out all over again. I think perhaps the more pertinent issue is one of direct democracy versus representative democracy. What I think you are seeing in this "flattened" world that (New York Times columnist) Tom Friedman writes about, along with so many other pro-technology writers, is the idealization of direct democracy.

I still think that the wisdom that I value -- the scarcity, to put it in economic terms -- is not in the crowd, but in people with talent and experience, whether they exist in political life, in economic life or cultural life.

Rather than fetishizing this idealized crowd -- it seems tremendously abstract -- one can pick up so many examples from history where the crowd has not behaved in a very wise or gentlemanly way. I would rather focus on the value of expertise and the wisdom of people who are trained.

Anderson: I think the fantastic thing about democracy and the open systems we are talking about today is that they define talent and expertise much more efficiently than the old models did.

Let's take cultural and political examples. The old model was that if you wanted to be a filmmaker, you had to go to the Hollywood studios. If you wanted to be a musician and get heard, you would go through the label system. If you wanted to be a published author, you needed to get signed by a publisher.

The new model is, "Just go and do it." Everyone can get out there directly without going through these gatekeepers, and most of what is created is junk, but some of it isn't.

A lot of people are doing things that maybe wouldn't have passed the threshold or the test of admittance. For instance, MySpace or YouTube are turning out to be tremendously popular, but they are not conventional.

I think that talent, expertise and wisdom is more broadly distributed than it was in our old models. That, I think, is a form of crowd behavior, but not the whole crowd acting together. But that crowd is very good at spotting merit and elevating it so that it can get the audience it deserves.

Q: In a way, Chris, the wisdom of crowds leads directly into your "long tail" economic theory. Can you give us a brief synopsis of that theory?

Anderson: The long tail is life after the blockbuster. Or more to the point, it is life after the monopoly of the blockbuster.

Our economy is shifting from mass markets to millions of niche markets. (Editor's note: The term "long tail" specifically refers to the endless x-axis of a classic sales/demand curve).

In the old model, markets have limited shelf space. You only have room to stock the things that are most popular. Now we have markets that have infinite shelf space that don't have to discriminate between the conventionally good or the things that predictably sell well. We can offer everything and then measure what's actually popular. As a result, you can access the whole curve, and what you find is that the long tail, or niche item, is a big and growing market.

Q: Andrew, does the new system do a better job at identifying talent and content?

Keen: I don't think that the old system did a bad job. One of the speeches that really changed my position was actually one made by (former Wired editor and author) Kevin Kelly a couple of years ago when he said that we have a moral obligation to develop technology in order to create the next generation of Hitchcocks, Mozarts and Van Goghs. That's a very interesting position. I don't think it's true.

The classic example would be the Beatles or the Rolling Stones. They got through in the old system. That's obvious. Would they get through today if they were just another band on YouTube or MySpace? Would they have the marketing sophistication to actually make it in this world?

Q: You're saying people get lost in the shuffle on the long tail?

Keen: I'm saying that experts in the music business and experts in the movie business know what they're doing. I am a big fan of Alfred Hitchcock. The guy came here in the early part of the 20th century and had already established himself as a big player in a small pond in the U.K. He came to Hollywood because of (producer David O.) Selznick, who picked him out as a genius. You need the Selznicks of the world. You need the Brian Epsteins (who managed the Beatles). Where is Epstein or Selznick in the long tail?

Anderson: Where do I start? We have plenty of bands who are now becoming popular -- for instance the Arctic Monkeys -- without going through the traditional label system, who are being identified because they're good. Many of them weren't actually terribly sophisticated about online marketing.

By the way, it doesn't take much to become good at online marketing. But, they were talented. Might they have been discovered by an (artist and repertoire) guy, some talent scout? Possibly. Did they need to be discovered by an A&R guy? No.

Increasingly, we have more and more of that. What I suggest is the talent guys are fantastic. The A&R guys are great. There is more talent out there than any one of them can find. I think the problem is that we just didn't know what we weren't finding before. We knew what we were finding and that was good and those guys will continue to do their work.

I believe that there was more talent out there than Hollywood discovered.

By the way, I should stop and point out that I am a Conde Nast editor. I am exactly the gatekeeper that I talk about. I decide what gets in the pages in my magazine. It's hard to do it. We're very discriminating. We try to guess at what's going to be popular. It's hard to get in the door, but once you're in the door you have extraordinary marketing power behind you.

I get that model. That model has fantastic benefits, but it's not the only model. I'm also a blogger and increasingly, as the years migrate, we're going to open our (editorial) doors to voices that weren't identified through the old model. Some of them were self-identified by being commentators or bloggers or participants in our site, and some of them will turn out to have important voices that wouldn't otherwise be heard.

Q: Let's talk about the economics of the long tail. Chris, you mentioned a band called the Arctic Monkeys. They've experienced some success, and they very well might become hugely popular. But do they have any hope of making the money the Rolling Stones and the Beatles did? And do any of your magazine's prospective new contributors, those culled from the blogosphere, are they going to make any money?

Anderson: The simple answer is that some will, most won't. One of the points I make, and I think it's an important point in this era of pure production, if you'll forgive the jargon, is that money is not the only measure of quality. Most bloggers do it for free. Most bands don't quit their day jobs. Most of the people who are uploading videos are doing it for free. There are other incentives that can encourage people to make things beyond money. You have reputation. You have expression. You have fun. In my 20s, I played music and sports for the reasons that most people do: because it's a hell of a lot of fun.

Q: But did you have dreams?

Anderson: It was crazy to have dreams. I wanted to play basketball, but I didn't have any dreams about becoming a pro basketball player because it was crazy. I also played music. Of course, I had no expectations of commercial success, partially because I knew I wasn't any good and partially because the odds are clearly stacked and always have been stacked against commercial success.

That didn't stop me. It doesn't stop people today. I don't feel like a failure or I don't feel cheated because I didn't get any more than beer money out of my music. I had a fantastic time and possibly some of the listeners did, too, although I wouldn't bet on it.

Q: If you take the economic incentive away from writers or musicians, what effect will that have on content and society?

Keen: Look at you guys. We're sitting here in a newspaper office and the newspaper business is in profound crisis. One of the major reasons is because of free content put out by bloggers. The same I think is true of music, where you've had this dramatic decline in sales. This revolution has actually commoditized culture to such an extent that everything becomes free.

In this world of amateur bands and amateur moviemakers on YouTube and amateur bloggers, I think that the consumer, if there is indeed a consumer left, is taking it for granted that everything should be free so that they won't pay for their newspaper, they won't pay for their TV, they won't pay to go to the movies.

I know that Chris is very strong on the economic front, but there has to be a correlation between this explosion of free content on the Internet and the decline in the traditional culture business.

Anderson: People misunderstand free. Most media is, in fact, already free. Television is free to air. Radio is free to air. Newspapers are basically free. What newspapers sell is advertising.

The nominal price we charge for products, which by the way you are losing money on, is simply to qualify the reader or someone who is inclined to read the advertising. So, we're essentially already in a world of free content.

Andrew suggests that music revenues are declining and actually that is not true. CD sales are in decline, but if you include digital singles sales including ring tones and then include ticket sales for live shows, the music business has been relatively flat and actually rising of late.

You have to see it in a much broader perspective of the business. Selling the product is only one way to make money. Selling around the product is a much better way to make money.

Keen: Other than a normal business model, how would you feel if advertisements were sold in your book?

Anderson: Online, fine. If it doesn't interrupt the flow, I have no problem with it.

Keen: I think one of the most pertinent things about what I consider to be a cultural golden age in the 20th century of mass media was that advertising was not packaged in movies. It was not packaged in music and only marginally packaged in newspapers.

I think what's happening is that increasingly you have this collapse of advertising in culture so that you have more and more product placement in movies. You have more sophisticated ways of tying brands into music so that ultimately, you're right. Obviously, there will be a music business. There will be a culture business, but advertising will be so central to it, that the value of culture is going to be profoundly undermined.

When you buy a piece of music, which in some sense is being paid for by Wal-Mart or McDonald's, then I think its core value is much less than if you buy a disc which simply contains music. I see with digital downloads this becoming an increasingly central part of the business model, because if you can't sell the thing, you have to figure out a way that advertising sells it.

Anderson: What does that mean? Buy music being paid for by Wal-Mart? What does that actually mean?

Keen: It means, for example, on YouTube there seems to be more and more sophisticated ways of building brand placement into cultural sales of one sort or another.

Anderson: Give me an example. I don't follow you.

Q: Smirnoff's "TeaPartay" ads on YouTube would be a good example. They're watched for comic value, but advertising is implicit.

Anderson: Do you have an objection to people watching Smirnoff ads on YouTube?

Keen: I don't have an objection to any of those things. What I would like to defend is cultural sales independent of advertising, which I think that the digital revolution is undermining.

Anderson: Are you against advertising?

Keen: I'm not against advertising. I'm against the collapse of advertising in context.

Anderson: Let's talk about the last 20 years. Your concern is that advertising is more pervasive in our culture in the last 20 years, something, by the way, I wouldn't necessarily disagree with.

Keen: Again, I'm not against clear advertising. What I'm against is content, whether it's music or movies, being sold as movies or music but really being financed somehow by a business looking to advertise.

Q: Maybe we can expand this conversation to consider the ideas of democratization, community and sharing -- all central tenets of Web 2.0. To do so, let's try some word association. When I say Wikipedia, the online encyclopedia, what do you two think?

Anderson: I think it is an inspirational and remarkable phenomenon. It is perhaps the most powerful phenomenon of our time. It's wildly imperfect and also, in many ways, beautiful.

I think it's the best encyclopedia world in the world collectively. On the individual level, some of the entries are wrong, some of them are freakishly distorted. It suggests a different usage pattern of the encyclopedia. The old model of encyclopedia was the be-all and end-all of information. The new model of encyclopedia is a starting point for investigation.

Must it be approached with caution and a certain amount of skepticism? Absolutely. Is any single entry guaranteed to be right? No. Collectively, it's the best single place to start an investigation or a search for knowledge. I think it's the best in the world.

Keen: I wouldn't call it an encyclopedia. I think it's a dictionary. I think it's a hyper-democratic dictionary. My biggest concern is not so much mistakes, as Chris was saying, but its size. It's a very bloated, disorganized thing. It seems to me that many of the entries have no real ability to distinguish things which are important from things that aren't.

Q: Is it a lack of editing?

Keen: It depends upon how you define editing. There are just too many people who contribute. It's rather like talking to a technology enthusiast. They just go on and on and on. Sometimes, important entries say nothing at all about world historical figures, whereas you have these very long entries on things, it seems to me, that are not very important.

Q: Maybe now I can ask both of you to define what Web 2.0 means. What does that phrase mean to you?

Anderson: I don't think anybody can agree on a definition, and I tend not to use the term. Not that there isn't something going on. I just find the term too indistinct to use. I talk about peer production, otherwise known as user creation.

The funny thing is there is nothing going on here that we weren't talking about 10 years ago. It's just that it now works. It's all much easier to use. We had Web pages in the '90s, but blogs are much easier.

If Web 2.0 is anything, it's sort of the functional delivery of what we were talking about during Web 1.0. But it's fundamentally about individual empowerment -- letting regular people participate in what was previously the domain of the few.

Keen: Well, again it's this idea of regular people that I'm uncomfortable with. It opens everything up and everyone becomes a mini-Gutenberg. That, in itself, isn't a bad thing. But there is the issue of consequences, cultural and economic. Who wins and who loses? Again, I think that the problem is the way in which these things can be abused.

Q: Another core tenet of Web 2.0 has been "citizen journalism." Can the mainstream media be replaced, or supported, by citizen reporters gathering and disseminating information for free?

Anderson: I'm not sure I know what the word journalism means anymore. Let me give you an example.

My interaction with Microsoft has changed in recent years. I used to read the speeches and see the press releases from Bill (Gates) and Steve (Ballmer) and absorb the top-down messaging from the company. Now, as a consumer, I'm more likely to read the individual blogs of the engineers involved with various products I'm interested in.

I use Windows media center, and there is no level of detail about that product that I'm not interested in. I have a fantastic amount of interest in that, but virtually no interest in some of Microsoft's other products.

Those people, in sort of describing the product development, are doing what used to be the domain of the trade press. Clearly, they are not journalists. They're talking about themselves. In many ways, they are providing an information function that journalism used to do on its own.

Another example: My interest is very intense around my family, my community and my friends. And that sort of diminishes as you move outward. Obviously, traditional journalistic institutions don't scale down to the level of my kid's soccer game. And yet, there is a reporting function that still needs to be done. Is that journalism? I don't know what it is, but I do know that, increasingly, individuals are going to be doing it.

Then you scale all the way out to Iraq, and that's a situation where I'm very much in favor of working with professionals with experience, resources and special access to deliver the news.

Q: At what point does objectivity matter? You were talking about that level of scale. Do you really need an objective reporter at your kid's soccer game? Maybe not, but as you get closer to the PTA, I would imagine you definitely do.

Anderson: I take a somewhat unpopular view. I think the notion of objectivity has never really been attainable. I think it's an outgrowth of that era where there was one or two newspapers in any town and that was the only way a reader could get the information. There was an obligation to be evenhanded.

Increasingly, we have sort of an infinite number of places you can get information. There is less requirement at any one of them to have all sides of the story and be perfectly balanced. Let's face it: No media could ever be objective, and we have biases whether they're explicit or implicit.

In many other countries, you've done away with that notion. In the U.K., you have the left-wing press and the right. They're transparent about where they come from, and if you want two sides of the story, you read two newspapers. Increasingly, in an era of infinite sources, you see the importance of a strongly argued perspective. There is less and less expectation that any one place is going to be dispassionate and perfectly balanced.

Keen: I agree that there is no such thing as objective journalism, whatever that is. I think that Chris' point can actually be used to justify the professional media which we pay for.

I don't think it's any coincidence that on the New York Times Web site they give their news away for free, but you pay for (columnist) Maureen Dowd, you pay for Thomas Friedman, because those are the guys who have a voice. Those are the people who have many years of training as reporters and as columnists.

I think the acquisition of voice is perhaps the most difficult of all things. I agree that newspapers should be more opinionated. I come from the U.K. -- from that tradition. What concerns me is distinguishing between rants, which one finds on so many blogs, and quality opinion.

One of my heroes is Christopher Hitchens, the angry English columnist. No one would ever accuse him of being objective. To maintain that tradition of a Hitchens or a Friedman, I think people still need to buy newspapers, pay their columnists large amounts of money and be able to distinguish that kind of professional wise opinion.

Q: Is there too much noise in the world? Andrew, in a way, you are saying, "I want a handful of people who know what they are talking about to tell me what's going on in the world." Chris is saying, "I'm willing to filter a million voices myself and I'll find out what's important that way." Is that what we're talking about here?

Anderson: Fantastic. When you say I can filter a million voices myself, I am filtering a million voices, but not doing it myself. What I have is layers of filters. There are people out there who have more time than me, have more expertise than me or just find things that I haven't found. I have maybe 200 voices out there that I listen to, but collectively I'm filtering a million voices through all those layers. As a result, I get a richer, higher-quality diet of information better suited to me to pull from a wider pool and wider variety of sources. It's not that much trouble. It's much easier than it's ever been before.

Keen: Again, the thing that concerns me is we seem to be going on this very, very long, complicated journey to get back to where we started. Let me ask you this question: What do you know now that you wouldn't be able to know 15 or 20 years ago?

Anderson: I'm a little confused by the question.

Keen: These layers you are talking about -- give me a concrete example of what you can know through them that traditional mainstream media doesn't enable you to know, which you think is valuable.

Anderson: The Microsoft example I gave was one. The traditional media was not going to give me that level of resolution about my very narrow interest. Traditional media was not going to get scaled down to that level of interest because it's too small to be a commercial proposition. But, that's my interest. I have some very broad interests and I have some very narrow interests.

Q: I wanted to wrap things up by asking where are we going to be in 10 years and where is this movement taking us?

Anderson: I think that the genie is out of the bottle and is going to stay out of the bottle, that people given a voice won't give it up. The tools of the spoken text and video and music and democracy are only going to get more powerful and we're going to have more freedom to do so, and I suspect that more people will find a voice. That's a trend that's not going to stop.

How it changes our culture overall as we become less and less of a cultural lockstep of shared culture and more and more of a tribal culture where we have our niche interests? I think the jury is out as to what that's going to do to us.

Keen: I think we are seeing more fragmentation. I think we are seeing more anger. I think we are seeing this radicalization of culture and life. I think that technology seems to be almost coincidental and has exploded around this at the same time that Americans are very angry about many different things.

It has nothing to do with blogs or technology, but all these things are coming together in a way that concerns me and I think that if our traditional institutions of politics or culture or economics continue to be undermined by this personalization and radical individualization of things, then I think we will be in trouble.

I think that if the Internet becomes more and more of a soapbox to trash elected politicians and mainstream media figures and to conduct these witch hunts on anyone who ever makes a mistake, then I think that eventually we are going to find ourselves in a world where we're just going to be staring at a mirror.

It's going to result in what I call cultural and economic anarchy, and I don't think that is a good thing. I think it will result in less community, which is ironic given the fact that this thing is supposed to be about community.

Warning Over 'Broken Up' Internet
Darren Waters

The internet could one day be broken up into separate networks around the world, a leading light in the development of the net has warned.

Nitin Desai, chair of the Internet Governance Forum (IGF), set up by the UN, warned that concerns over the net's future could lead to separation.

"People are concerned about whether the system we have now will also work five years from now," he said.

Mr Desai was speaking at a conference in London to discuss the net.

The conference was organised by Nominet, the UK body in charge of domain names ending .uk, ahead of the first-ever Internet Governance Forum, a global gathering of stakeholders in Athens later this month.

Mr Desai said there were tensions about the future regulation of the net and over specific issues such as international domain names.

"There are concerns over regulation as the internet, telephony and commerce come together," he said.

"If I look at the internet in five years from now there are going to be very, very, very more internet users in Asia than Europe or America.

"There will be more Chinese web pages than English pages.

"The types of uses for the internet in India and China are very different from western countries - they are not commerce or media; they are essentially public service applications."

The internet was increasingly being shaped by companies and organisations at the "edges" and not by government, public sector bodies and regulators, he said.

This was concerning some countries who wanted more involvement in the development of the net.

"These are the reasons these entities - government and private sector - feel they need to be reassured that the system they are relying on is secure, safe and reliable - that they cannot be suddenly thrown out of that system by some attack," said Mr Desai.

He said the Chinese government was concerned that users still had to type webpage addresses using Latin characters even when the pages were in Chinese.

"A large proportion of the internet users in China do not know the Latin alphabet.

"There are concerns about internationalised domain names in some countries who feel the debate is not moving fast enough."

He warned: "I think this is one of the key issues and if we don't address it with sufficient vigour we will get a Balkanisation of the net."

"There's a point at which the Chinese will say 'We have to have domain names in Chinese characters' and they will set up an independent system."

Other speakers at the conference felt that in some ways a "Balkanised" internet was inevitable.

Professor Howard Williams, who works with the World Bank, said the debate around future regulation of the web rested on the assumption there would be a single web in the future.

'Net neutrality'

"Why would the technology we have at the moment be the ubiquitous technology across the world in the future?"

Prof Williams said Balkanisation was "happening already".

"In the US the issue of net neutrality raises the prospect of a different sort of web," he said.

Earlier this year a US Senate committee approved a bill which lets internet service provides provide some customers with preferential services such as bandwidth and speed.

"Net neutrality" campaigners attacked the plan, saying there should be equal access for all web users.

Chinyelu Onwurah of UK super regulator Ofcom said the impact of Balkanisation would depend on the effect it had on consumer choice.

She said: "If Balkanisation refers to islands of connectivity that have no inter-connectivity between them then clearly that is a bad thing and limits the choice and reach for consumers.

"But if it refers to differentiation and different levels of protection, of functionality and speed, and relates to choice, then that is a positive thing."

David Harrington, of business group the Communications Management Association, said cultural differences would "inevitably Balkanise the net".

"That's been the case since the net was available commercially; it's a matter of degrees," he said.

Mr Desai said the IGF would be the opportunity to discuss many of these issues.

But he reminded delegates at the London conference that the IGF was not a "decision-making body".

He said: "No-one wants to duplicate a telecoms-type regulator on the internet. It's a multi-stakeholder exercise.

"For this reason the IGF has been created. The forum has no membership, it's an open door, a town hall, all views are welcome.

"But it's not a decision-making body. We have no members so we have no power to make decision."

Is AMD Really f&$@£d?
James Morris

We’ve had a stormy relationship with AMD of late. But we’re hardly alone in our concern over the underdog CPU manufacturer’s ability to cope with Intel’s recent reinvigoration. Ever since news started filtering out about Conroe, the AMD fanboys have been deserting their old object of worship faster than it takes to cook an Athlon XP. It was a ‘no-brainer’: Conroe was turning the tables on the Athlon 64, and ‘ass mastering’ it at lower clock speeds – with faster versions already on the way.

There is no denying that Intel’s Core Microarchitecture has the upper hand in virtually every benchmark, and usually by a significant margin. As a result, most hardware enthusiasts have scratched the Athlon 64 FX off their shopping list and written in a Core 2 Duo instead – or even Core 2 Quad. Before jumping on the bandwagon express, though, it’s worth stepping back from the present a bit and putting the current situation in a little more context – both past and future.

Intel has clearly made a huge comeback, and intends to drive home its advantage still further with the Kentsfield quad-core part. From a business perspective, though, the bigger deal is the Xeon version of the Core Microarchitecture. For all the excitement over how much better an Athlon 64 was than a Pentium 4, even more significant was how much better a dual-core Opteron was than a single-core Xeon 800 (for there was no dual-core version until very recently). AMD’s advantage in the workstation and server market was really starting to turn into a whitewash. A few months ago, I tested five £5,000 workstations, and there wasn’t a Xeon in sight – every single one was based on a dual-core Opteron.

You might think that overnight all these manufacturers would be deserting AMD and returning to the new Xeons, which have a similar performance benefit compared to a dual-core Opteron as a Core 2 Duo does over a dual-core Athlon 64. Certainly, if I asked five manufacturers to send me £5,000 workstations now most of them probably would be the new Xeons.
Look ahead

But businesses don’t think quite so short term as this, and they also don’t just think about raw performance. This is particularly true when it comes to mass purchases for corporate use, which has traditionally been an area where Intel has been virtually impregnable. Whatever is happening regarding the performance crown, AMD is making inroads into the business market like never before.

Let’s take Dell for example – one of AMD’s big wins of the last year, and the one everyone is saying looks stupid now Intel is back. As a business customer, you can either buy the Dimension E521 for £499 + VAT (with an AMD Athlon 64 X2 4200+), or the E520 for £50 more (with an Intel Core 2 Duo E6300). They’re both dual-core, and the performance difference is essentially irrelevant to a business customer. But if you’re buying 100 of them, you’d save £5,000 by going for the E521. That’s a fairly easy decision for a financial director to make.

Even in the performance space, you’d be a bit silly to think that AMD’s current position in Intel’s rear-view mirror is for the foreseeable future. Sure, the 30 to 50 per cent lead is going to be hard to overtake. But the difference won’t be anywhere near so obvious this time next year, and the two companies could even be close to parity again. In fact, over the next six months or so AMD looks likely to claw back quite a few per cent already.

AMD has been showing off its 65nm wafers for a few months now, which means the Rev G core is on its way. Even if the DDR2 memory controller which arrived with the Rev F only had a small performance benefit, Rev G has a few more improvements than just the die shrink. The latter will enable higher clock speeds and a lower price, plus allow AMD to compete on an equal playing field to Intel, which has been manufacturing 65nm processors since the Pentium XE 955 at the end of 2005. Spyshots of the new processor revision also show it has some extra Level 2 circuitry, which allegedly includes redesigned branch predictors and prefetchers – one of the areas where the Core Microarchitecture improved over Netburst.

Although AMD processors are far less susceptible than Intel’s Pentium 4 to cache mis-hits, because they have much shorter pipelines, the Core Microarchitecture also has a shorter pipeline. So AMD no longer has this advantage. Reducing cache mis-hits further essentially squeezes more performance out of the processor for free, so it wastes less of its clock cycles. AMD could of course have thrown more cache at the problem, which Intel has also done with its 4MB SmartCache. But in terms of long-term manufacturing costs keeping the cache size smaller and using better prediction circuitry means cheaper processors. With AMD back to the value segment for the time being, this makes a lot of sense.
Quad core

There is also a lot of confusion over when exactly AMD will be releasing its quad-core parts. Most sources are still saying the middle of 2007, but an AMD representative recently mentioned to me something about Q1, and there are even some rumours of a November 3rd launch. However, the latter could be confused with the launch of 4x4, which appears to be two dual-core Opterons on Socket F rebranded as Athlon 64 FX and placed on a dual-socket motherboard.

Either way, it does look like AMD’s quad-core ‘Barcelona’ CPUs will be with us sooner than a lot of people expected – perhaps because this is a necessity for the company to have a hope of keeping up with Intel’s onslaught. AMD’s penchant for calling its quad-core parts ‘native’ in contrast to the dual-die approach found in Kentsfield seems a little snide. But the quad-core architecture is also likely to claw some of Intel’s lead back. The shared Level 3 cache will further reduce wasted clock cycles and keep the cores running at full pelt, plus all four cores can already access each-other’s Level 2 at core speed, as with the Athlon 64 X2.

The Barcelona will also allegedly include a HyperTransport 2 interface, which will give it a distinct advantage in multi-socket arrangements – like 4x4. Looking towards the end of next year, AMD also has HyperTransport 3 on the roadmap, and a new connection called Torrenza. This will allow peripherals (ATI graphics cards perchance?) to be connected directly to the processor via a bus with much more bandwidth than even PCI Express 2.

So although Intel is on top for now, AMD still has a few cards yet to play. These may not amount to the same kind of winning hand the company had for the last couple of years. But to say AMD is done for, and has failed to capitalise on the Athlon 64’s success, is simply short-sighted. The market moves in phases, and there are bigger gameplans than just having the fastest gaming chip around.

Stern Freebie Kicks off New Online Radio Service

Ten months after leaving the commercial airwaves for subscription-based Sirius Satellite Radio, shock jock Howard Stern is out to attract a broad new online audience with his first-ever free Internet broadcast.

Stern's four-hour-plus program will be made available live online at no charge for two days, October 25 and 26, to promote an Internet radio service Sirius is launching this week. A formal announcement was planned for Monday morning.

The new service offers more than 75 channels of CD-quality programming over the Internet--without the need to buy a Sirius satellite receiver--for a monthly subscription fee of $12.95, the company said in a press release.

The service can be accessed by logging on to the Sirius Web site.

The two-day free trial of "The Howard Stern Show" marks the first time he has been available to a nonpaying audience since he left terrestrial FM radio in December 2005.

After next week's promotion, fans will once again have to pay to hear the self-proclaimed "king of all media," either by subscribing to Sirius or its Internet service.

Stern's show and other Sirius programming had been available on the Internet before, but only to existing customers who had purchased a satellite receiver in addition to the $12.95 monthly radio subscription.

Under the new standalone Internet package, users anywhere in the world can subscribe and listen to Stern online without first having to buy satellite hardware, which is sold only in North America, a company spokesman said.

Sirius rival XM Satellite Radio Holdings offers its own standalone Internet service for $7.99 a month.

Stern, a pioneer of ribald radio comedy bits like "Lesbian Dial-a-Date" and "Stripper Jeopardy," stunned the broadcast industry in October 2004 when he announced he was leaving commercial radio for satellite.

After fulfilling the last 14 months on his contract at CBS, Stern debuted in January 2006 on Sirius under a five-year deal valued at $500 million and immediately became the marquee talent of the No. 2 satellite radio provider.

He also recently ventured into the realm of video-on-demand television with an all-Stern channel available through several major cable operators.

Sirius ended the third quarter with 5.12 million subscribers, an audience that pales in comparison to the 12 million listeners who regularly tuned into Stern at the peak of his CBS career. XM posted nearly 7.2 million subscribers for the third quarter.

A Tell-All’s Tale: French Politicians Stray Early and Often
Elaine Sciolino

Did President Jacques Chirac have a child with a Japanese mistress? Did the Socialist politician and would-be presidential candidate Dominique Strauss-Kahn attend a sex soirée? Did former President Valéry Giscard d’Estaing really have as many mistresses as the salons of Paris have claimed?

Sex and politics have intermingled in France for centuries, but the private lives of politicians have historically been kept secret.

This is, after all, the country in which President François Mitterrand concealed for years the existence of a daughter born out of wedlock. It was disclosed by the popular magazine Paris-Match in 1994, just months before he left office, and both of his families attended his funeral two years later.

Now, “Sexus Politicus,” a 390-page tell-all book on the subject, has catapulted to the top of the nonfiction best-seller lists, a reflection of the erosion of privacy in French public life and the appetite for a gossipy read.

The authors, Christophe Dubois and Christophe Deloire, are veteran investigative reporters who have written books about the murder of the prefect of Corsica in 1998 and the rise of Islamic extremism in France.

About 150,000 copies are in print in France, a remarkable number here for a work of nonfiction.

“It’s a rather serious book based on interviews, not just hearsay,” said Patrick Jarreau, one of the editors of Le Monde, though the book does circulate old rumors that the authors say cannot be confirmed. “Sex and politics seven months ahead of a presidential election — that’s a pretty good recipe for success.”

The book’s central premise is that in France, a successful politician is also a seductive politician. Sex, the authors say, is a civic imperative. “Far from being a flaw, to cast yourself in the role of seducer is without doubt an important quality in our political life,” the book claims.

Certainly, power attracts. When Edgar Faure became prime minister in the 1950’s, he gained the lofty title of “president of the Council,” and that apparently made all the difference. “When I was a minister, some women resisted me,” he once was quoted as saying. “Once I became president, not even one.” (He died at age 79 in the bed of his half-clothed mistress).

De Gaulle was the only post-World War II French leader to maintain a strict military discipline over his personal life, the book asserts. More recently, it adds, Mr. Giscard d’Estaing, Mr. Mitterrand and Mr. Chirac juggled the demands of the state, their families and their extracurricular activities with aplomb.

They understood, according to the authors, a fundamental rule of French politics: Good politicians love and are loved.

“When I was president of the republic, I was in love with 17 million French women,” Mr. Giscard d’Estaing said in an interview taped for the television show “Private Life, Public Life” to be broadcast Wednesday. He added, “When I saw them in the crowd, they felt it and then they voted for me.”

The authors speculate that one reason the Socialist former Prime Minister Lionel Jospin was not a more attractive presidential candidate was that he “was too lacking” in seduction.

Mr. Chirac, by contrast, apparently had such power over women that his wife, Bernadette, confessed in a book in 2001 that she suffered from terrible jealousy. “The day Napoleon abandoned Josephine, he lost everything,” she warned him several times.

The book also quotes Mr. Chirac’s chauffeur for 25 years, Jean-Claude Laumond, as saying that Mrs. Chirac would ask, “But in short, Mr. Laumond, where is my husband tonight?”

Considerable space is devoted to the well-documented soap opera marriage of Interior Minister Nicolas Sarkozy, the leading candidate for the presidential nomination for the governing UMP party, and his wife, Cécilia. The editor of Paris-Match was forced to resign after the magazine published a cover photo of Mrs. Sarkozy and her supposed lover looking at a New York apartment layout.

The book speculates that at first Mr. Sarkozy presented himself as lonely and long-suffering, but then thought better of it, letting it be known through supporters that he was happy.

“If I have a free evening, I know with whom I want to spend it,” the weekly magazine Le Point quoted Mr. Sarkozy as saying last fall. (He was reported to have been involved for several months with a prominent newspaper reporter.) He and his wife have since reconciled.

To avoid being prosecuted under France’s tough privacy and anti-defamation laws, the authors of the book withheld the names of some of the lovers, and made sure they kept ample ammunition in their files — from interviews and from police and intelligence reports. Sometimes the book knocks down rumors, but it also cites public reports the authors could not confirm. For instance, the unsubstantiated story about Mr. Chirac fathering a child with a Japanese mistress was told in a book by Guy Birenbaum in 2003.
“We haven’t been attacked because, to be really honest, often we knew more than we wrote,” Mr. Deloire said. “No politician wants to run the risk that more stories will come out in court.”

Instead of protesting, the subjects of the book are staying quiet. Spokesmen for Mr. Chirac, Mr. Sarkozy and Mr. Giscard d’Estaing sent e-mail messages saying they would not comment. Mr. Strauss-Kahn’s office did not respond to several requests.

Unlike in the United States, where such a revelation would become the focus of a blanket media investigation, French journalists barely raised the issue.

Indeed, the reaction of the French people is starkly different from that in the United States, where a sex scandal can threaten to bring down a government.

A January poll by TNS Sofres for the newspaper Le Figaro found that most French voters wanted their next president to be around 50, multilingual, honest and willing to listen. Only 17 percent said they would not vote for those who had extramarital affairs.

That Ségolène Royal, the leading candidate for the Socialist nomination in next year’s presidential election, is not married to the father of their four children has not been an issue.

That said, the French tolerance — or even celebration — of sexual exploits may change if Ms. Royal becomes president.

“This French exception that makes power rhyme with sexual prowess — will it survive the feminization of politics?” Le Figaro asked. “This question has not escaped Ségolène Royal, who predicts the revenge of women if she assumes power.”

Maia de la Baume contributed reporting.

Orionid Meteors to Peak This Weekend
David Shiga

One of the year's best displays of meteors will occur this weekend. Called the Orionids, the meteors are bits of rocky debris shed from Halley's Comet that burn up in Earth's atmosphere.

The display will be visible for both northern and southern hemisphere observers and should produce 20 meteors per hour at its peak. Friday night and Saturday night should be best, especially very early in the morning.

Meteors in the Orionid family can appear anywhere in the sky, but their paths trace back to a spot in the constellation Orion, which gives them their name.

The best strategy is to lie down and stare at as large a patch of sky as possible, rather than focusing directly on Orion. Most of the meteors will be faint and most easily seen from a dark site far from city lights.

Halley's Comet passes through the inner solar system every 76 years, littering its orbit with bits of dust and rock as it goes. The Orionid meteors that we see today are due to debris that has built up along Halley's orbital path over thousands of years.

A Cult of Backyard Rocketeers Keeps the Solid Fuel Burning
Patricia Leigh Brown

Wedge Oldham, a 49-year-old software engineer from Los Angeles, finds nothing sweeter than spending a fall weekend in the Black Rock desert, barking rocket launching commands like “Are we good to go?” into the hot dusty wind.

Nerves jangling, he awaits the moment when Carpe Diem, his homemade 18-foot-long rocket, hurls itself heavenward with 737 pounds of thrust, shockwaves — or “mach diamonds” — surging from its supersonic exhaust. With dazed exuberance he watches it recede into deep blue sky, and then, with the release of parachutes, gently drift four miles away, preserved for another flight.

At a cultural moment when billionaires like Paul G. Allen, the Microsoft co-founder, and Sir Richard Branson, the Virgin Atlantic chairman, are getting into the space business, the members of the Tripoli Rocketry Association are the ultimate do-it-yourselfers — backyard versions of Burt Rutan, the legendary engineer of the first privately financed manned rocket.

From Florham Park, N.J., and as far away as London, 100 launchers came — plumbers, paint contractors, firefighters, bankers and Silicon Valley techies united by their passion for building rockets capable of blasting 94,000 feet into the air, at nearly three-and-one-half times the speed of sound, as one record-setter did this weekend.

Members of a gonzo subculture, the hobbyists have been known to launch Weber grills, Port-A-Potties, bowling balls and pink flamingos. But once a year, on this bleak, 400-square-mile dry lake bed, they meet for the Indy 500 of rocketry, with waivers from the Federal Aviation Administration.

This year, the subculture itself is on the defensive, unsure whether it will soar or come crashing down in a “cato” — lingo for a catastrophic failure. Since Sept. 11, the rocketeers, about 6,000 nationwide, have had to contend with tougher restrictions from the federal government and local fire marshals, and are involved in a seven-year-old dispute with the Bureau of Alcohol, Tobacco, Firearms and Explosives over their use of a propellant.

Bearing names like Questionable Mental Health and the Procrastinator, their rockets are usually restricted to low-altitude launchings from sorghum fields in Kansas, sod farms in South Carolina and frozen Lake Champlain in winter.

“A lot of guys close their eyes and see women. I close my eyes and see rockets,” said Ky Michaelson, 68, a junior high school drop-out from Bloomington, Minn., who has been called “the sultan of thrust” by Outside Magazine.

Mr. Michaelson shot the first amateur rocket into space, and his inventions include a rocket-powered sled that zooms uphill. His record-breaking launching was 72 miles up, at 3,420 miles per hour — factoids embroidered on his rocket-red satin shirt.

Like many of his brethren, Mr. Michaelson developed his passion early with a chemistry set he got for Christmas. He graduated to launching rocket cars in an alley in southern Minneapolis, and today he fills his home with space collectibles, including a hand-held toilet from the Russian space station Mir.

The talk in Nevada was technical minutiae — thrust ratios, fuel efficiency, altitudes. Even over a ravioli dinner at Bruno’s Country Club and Casino,the hobbyists were constantly gesturing in an upward trajectory, forks in hand.

The apogee of the weekend is when they push the button launching creations that teams have spent up to a year making at a cost of thousands of dollars.

“Every time I launch a rocket, a little of me goes up with it,” said Derek Stavenger, a 50-year-old painter from San Francisco. “It’s about escaping the bounds of our restrictive existence on the planet.”

Since the Sept. 11 attacks, the extreme rocketeers have seen their ranks dwindle. In many parts of the country, rockets are prohibited. Local groups face a welter of ordinances and safety codes, as well as F.A.A. restrictions. Tripoli extreme rocketeers also need federal low-explosives permits. On Tuesday, lawyers representing Tripoli and the National Association of Rocketry and officials of the firearms bureau will head to Federal District Court in Washington to resolve the seven-year-old dispute over the hobbyists’ use of a flammable propellant, ammonium perchlorate composite, or APCP. The chemical is the main ingredient on the space shuttle’s solid rocket boosters.

The firearms bureau classifies APCP as an explosive and, amid post-Sept. 11 security concerns, requires that anyone who uses more than two ounces of propellant undergo federal background checks.

“If I was an 18-year-old and told my mom I needed a low explosives permit and that an A.T.F. agent would come to my house, she’d say, Why don’t you just continue with your guitar lessons?” grumbled Ken Good, the president of Tripoli and a vice president at the Federal Reserve Bank in Cleveland.

Rocketeers say the agency has no right to regulate the propellant because it does not explode but rather “deflagrates,” or burns intensely at a controlled rate, like a road flare.

The agency is also concerned that large rockets could be used as weapons. But weapons experts say it is doubtful that the rockets could be significant threats because they do not have guidance systems, which are prohibited by federal law.

“Designing a rocket to go straight up and down is hugely different than making it controllable to hit any kind of a target,” said John Hansman, a professor of aeronautics and astronautics at the Massachusetts Institute of Technology.

Still, the unpredictable does happen. With a spectacular kaboom, an elegantly minimalist rocket designed by Alex McLaughlin, 29, a software engineer from Portland, Ore., broke apart at around 40,000 feet, the hobby rocket equivalent of the Death Zone on Mount Everest.

It is an unforgiving hobby, but it is arguably safer for participants than in the past. Like many of the Black Rock “rocket rats” — largely men of a certain age — Mike Mullane, 61, a retired space shuttle astronaut, recalled his boyhood rocketry experiments with black powder and other dangerous substances. Mr. Mullane said he was “reborn” the day Sputnik was launched in 1957. “It was the 9/11 of my childhood, a blow to the American ego,” he said.

The horizon was soon populated with rocket and moon clubs, with schools “passing out formulas for rocket fuel,” he said. Before the arrival of Estes rocket kits, “the only game in town was getting a steel tube, mixing hazardous material and lighting fuses in the desert,” an activity, he said, that was far riskier than three flights on the space shuttle.

On Oct. 20, 60 members of Tripoli will launch high-powered rockets at the first X Prize Cup in Las Cruces, N.M., in an expo that bills itself as “the world’s first space show.” The X Prize Foundation of Santa Monica, Calif., richly rewards private space innovation. The rocketeers will try to launch an unmanned replica of the Mercury Redstone, which first transported Alan Shepard and Gus Grissom into space.

With space entrepreneurship on the rise, including plans by Robert Bigelow, the owner of Budget Suites hotel chain, to invest $500 million in an inflatable space hotel for tourists, even members of this proletariat rocket nation are being tapped for real projects.

John Carmack, a member who is also the creator of the games Quake and Doom, recruited fellow hobbyists to help design a lunar landing vehicle for a competition sponsored by NASA and the X Prize Foundation.

“It’s more important to me to get people who are building, testing and flying things than an aerospace graduate who has never screwed two bolts together,” Mr. Carmack said.

David Reese, 19, a member of Tripoli since age 8, now works at the Rocket Propulsion Laboratory at the University of Southern California, where he is helping to develop a carbon fiber vehicle designed to go to the edge of space. He ecstatically broke his own record at Black Rock, with a launching of 17,230 feet.

“The Sony Playstation motto is, ‘Leave your world here and play in ours,’ ” Mr. Reese said of a more ubiquitous teenage pastime. “But why leave this world when you can hang out with a bunch of nerds and play with rockets in the middle of the desert?”

No Test Tubes? Debate on Virtual Science Classes
Sam Dillon

When the Internet was just beginning to shake up American education, a chemistry professor photographed thousands of test tubes holding molecular solutions and, working with video game designers, created a simulated laboratory that allowed students to mix chemicals in virtual beakers and watch the reactions.

In the years since, that virtual chemistry laboratory — as well as other simulations allowing students to dissect virtual animals or to peer into tidal pools in search of virtual anemone — has become a widely used science teaching tool. The virtual chemistry laboratory alone has some 150,000 students seated at computer terminals around the country to try experiments that would be too costly or dangerous to do at their local high schools. “Some kids figure out how to blow things up in half an hour,” said the professor, Brian F. Woodfield of Brigham Young University.

Now, however, a dispute with potentially far-reaching consequences has flared over how far the Internet can go in displacing the brick-and-mortar laboratory.Prompted by skeptical university professors, the College Board, one of the most powerful organizations in American education, is questioning whether Internet-based laboratories are an acceptable substitute for the hands-on culturing of gels and peering through microscopes that have long been essential ingredients of American laboratory science.

As part of a broader audit of the thousands of high school courses that display its Advanced Placement trademark, the board has recruited panels of university professors and experts in Internet-based learning to scrutinize the quality of online laboratories used in Web-based A.P. science courses.

“Professors are saying that simulations can be really good, that they use them to supplement their own lab work, but that they’d be concerned about giving credit to students who have never had any experience in a hands-on lab,” said Trevor Packer, the board’s executive director for Advanced Placement. “You could have students going straight into second-year college science courses without ever having used a Bunsen burner.”

Internet-based educators are seeking to convince the board, and the public, that their virtual laboratories are educationally sound, pointing out that their students earn high scores on the A.P. exams. They also say online laboratories are often the only way advanced science can be taught in isolated rural schools or impoverished urban ones. Online schooling, which was all but nonexistent at the elementary and secondary level a decade ago, is today one of the fastest-growing educational sectors, with some half-million course enrollments nationwide.

Twenty-five states operate public, Internet-based schools like the Florida Virtual School, the nation’s largest, which has some 40,000 students. Virtual High School, a nonprofit school based in Maynard, Mass., has 7,600 students from 30 states and many countries. Susan Patrick, a former Department of Education official who is president of the North American Council for Online Learning, estimated that 60,000 public school students were enrolled in some online science course.

John Watson, an education consultant who wrote a report last year documenting virtual education’s growth, said online schools had faced lawsuits over financing and resistance by local school boards but nothing as daunting as the College Board.

“This challenge threatens the advance of online education at the national level in a way that I don’t think there are precedents for,” Mr. Watson said.

The board signaled a tough position this year.

“Members of the College Board insist that college-level laboratory science courses not be labeled ‘A.P.’ without a physical lab,” the board said in a letter sent to online schools in April. “Online science courses can only be labeled ‘A.P.’ if the online provider” can ensure “that students have a guided, hands-on (not virtual) laboratory experience.”

But after an outcry by online schools, the board issued an apology in June, acknowledging that “there may be new developments” in online learning that could merit its endorsement.

Mr. Packer of the College Board said in an interview that the board had set up three five-member panels composed of biology, chemistry and physics professors and online educators, which are to meet in New York next month to review the online laboratories offered by Internet-based schools for A.P. courses.

The board’s rulings will determine whether high schools can apply the A.P. designation to online science courses starting next fall on the transcripts of students applying to colleges, Mr. Packer said.

In recent conversations with college science professors, the board has encountered considerable skepticism that virtual laboratories can replace hands-on experience, he said.

But educators at several prominent online schools pointed to their students’ high scores on A.P. exams.

On the 2005 administration of the A.P. biology exam, for instance, 61 percent of students nationwide earned a qualifying score of three or above on the A.P.’s five-point system. Yet 71 percent of students who took A.P. biology online through the Florida Virtual School, and 80 percent of students who took it from the Virtual High School, earned a three or higher on that test.

“The proof is in the pudding,” said Pam Birtolo, chief learning officer at the Florida Virtual School.

Still, there is tremendous variety. A 2005 guidebook, “Finding an Online High School,” compiled by Vincent Kiernan, a senior writer at The Chronicle of Higher Education, lists 113 Internet-based secondary schools, 32 of which offered at least one A.P. science course. Online curricula are anything but standardized, and new approaches to online laboratories are emerging at a dizzying pace, said Kemi Jona, a computer science professor at Northwestern University.

“It’s not a one-size-fits-all landscape,” Dr. Jona said.

The science courses offered by some online high schools draw on multiple Internet sites that provide data, then lead students through an analysis. At one site, for instance, operated by the University of Arizona, students collect data from the cells of an onion root and use it to calculate the duration of each phase in the cells’ division.

Chemistry and other science courses at many Internet-based high schools include laboratories often characterized as “kitchen science,” in which students use household materials — ice, cooking oil, glass jars — to carry out experiments.

“ ‘Make sure we have potatoes in the house,’ my daughter told me before her last lab,” in which students studied osmosis, said Mayuri Shah, whose daughter Sonia is taking A.P. biology from the Florida Virtual School. Sonia, 16, enrolled in the online course because her high school in Lecanto, Fla., north of Tampa, does not offer it.

That is one of the most common reasons students sign up for online classes, said Ms. Patrick, the North American Council for Online Learning president.

“Thousands of schools in rural areas don’t have science labs, but they have kids who want to go to college and need that science inquiry experience,” she said. “Virtual science labs are their only option.”

ConVal High School in Peterborough, N.H., offers more than a dozen science courses, but zoology is not among them. So Katherine Lantz, a junior, is studying it online.

One recent evening she was at home, moving through a virtual pig dissection screen by screen. One image showed a pig kidney, outlined by pulsing yellow dots.

“Whoa, that’s kind of gross!” Katherine said. She clicked her mouse, causing a virtual scalpel to lay the pig’s kidney open, its internal regions highlighted by blinking labels.

“Its nice to have it enlarged because if we were dissecting this in my school lab this would be hard to see,” Katherine said. “I learn a lot online — as much as I would attending a physical class.”

But Earl W. Fleck, the biology professor who created the virtual pig dissection, believes otherwise. Dr. Fleck began working on the virtual dissection in 1997 to help his students at Whitman College in Walla Walla, Wash., review for tests and to offer a substitute for those who, for ethical reasons, objected to working with once-living specimens.

Dr. Fleck, who is now provost at Hampden-Sydney College in Virginia, said students worldwide found the virtual dissection useful. But he called it “markedly inferior” to performing a real dissection.

“You don’t get the look and the feel and the smell,” he said.

Wireless USB Poised to Cut the Cable
Tom Krazit

The computer industry is still working on the paperless office, but new short-range wireless technologies on tap for next year could at last bring about the cable-free desktop.

The PC and consumer electronics industries have been talking up Certified Wireless USB (Universal Serial Bus) links as a replacement for those tried-and-true USB cables connecting the PC to everything from iPods to keyboards. Delays, unfortunately, have plagued more than a few companies trying to make this a reality.

But by the end of this year, the products that rid your desktop of that tangle of wires should finally start hitting the market.

It's happening now for a combination of reasons. The WiMedia Alliance is planning to make the technology known as "ultrawideband," or UWB, work among a wide variety of consumer electronics devices, from PCs and printers to external hard drives and MP3 players. The USB Implementers Forum, the 1394 Trade Association and the Bluetooth Special Interest Group (SIG) have chosen the WiMedia Alliance's version of UWB technology as the foundation for their next-generation networking technology.

UWB technology can deliver data rates at up to 480 megabits per second at around 3 meters, with speeds dropping off as the range grows to a limit of about 10 meters. Real-world speeds will probably be a little slower, but this is as fast as the wired version of USB 2.0 and much faster than current Wi-Fi networks are capable of transmitting data.

"This stuff is plumbing," Roger Kay, an analyst with Endpoint Technologies Associates, said of the newer-generation wireless technology. "It's important that it be there, it's going to be handy for getting rid of cables hanging around your desk."

However, like many future technologies, high-bandwidth short-range wireless has been a long time in the making. Progress has been delayed in part by a pitched battle between the WiMedia Alliance, led by Intel, and the UWB Forum, led by Freescale, to determine the industry-standard implementation for UWB technology. The WiMedia backers, which also include Sony, Texas Instruments, Hewlett-Packard and Samsung, are pushing forward with chips and devices under the Certified Wireless USB brand.

Hints of the future
Freescale and Belkin attracted attention at the 2006 International Consumer Electronics Show with the introduction of Belkin's CableFree USB Hub. But in April, Freescale left the UWB Forum to focus on developing its own cable-free USB products, killing much of the momentum behind the UWB Forum. Belkin was forced to change suppliers; as a result, the CableFree USB Hub has yet to make it onto store shelves.

The WiMedia Alliance also took longer than expected to deliver so-called Certified Wireless USB products--in part because it needed to improve how the technology dealt with shifting between environments, such as walking into an office full of wireless networks, said the WiMedia Alliance's Mark Fidler, also a senior engineer at Hewlett-Packard. But with those hurdles cleared, products are starting to appear that hint at the future of short-range networking.

At last month's Intel Developer Forum in San Francisco, Intel, Kodak and UWB chipmaker Alereon demonstrated how the Certified Wireless USB version of the technology would work.

Pictures taken on a digital camera could be immediately downloaded to a PC with the push of a button. The first time the devices notice each other, the PC would ask the user if it should connect to that particular camera, hard drive or smart phone. With the PC user's authorization, the latest vacation photos start flowing on the desktop and the devices can be set to automatically recognize each other in the future. It's not hard to imagine these capabilities extending to other devices, such as high-definition televisions, said Eric Broockman, CEO of Alereon.

MP3 players are another potentially big market for this technology, Broockman said. Microsoft's Zune player is going to ship with a 802.11g Wi-Fi chip later this year, allowing two Zune users to share songs. But Certified Wireless USB is much faster and uses less power than Wi-Fi, he said.

Early Certified Wireless USB setups are still going to involve a lot of cables, since the only way consumers will be able to wirelessly connect devices is with dongles. At an Intel Developer Forum in Taiwan on Monday, a contract manufacturer called Gemtech introduced a Certified Wireless USB dongle using chips from Intel and Alereon. In this scenario, a Wireless USB connection could be established by plugging a Gemtech dongle into a printer, and one into a PC, and then associating the two dongles.

This isn't the most elegant setup, however. By next year, Alereon hopes companies will start incorporating its chips into expansion cards that can plug into an ExpressCard slot similar to how many notebook users were introduced to Wi-Fi, Broockman said. Further down the road, Alereon and Intel say they believe PC companies will start incorporating the chips directly onto their motherboards.

One potential hurdle is making sure the technology is easy to use, Fidler said. Early implementations of Bluetooth were notoriously difficult for people who weren't tech-savvy, although things have improved quite a bit. USB cables, however, couldn't be much easier to use.

"The goal is to get (wireless USB technology) easy to use but at the same time we need to maintain security," he said. This will require additional authentication steps to ensure that only authorized devices can associate with a host device.

Zombies Try to Blend in With the Crowd
Joris Evers

Hackers are trying harder to make their networks of hijacked computers go unnoticed.

Cybercrooks are moving to new Web-based techniques to control the machines they have commandeered, popularly referred to as "zombies." Before, they used to send orders via Internet chat services, but with that method, they ran the risk of inadvertently revealing the location of the zombies and themselves.

"All the good guys are being challenged here. (Hackers are) saying: 'You're spotting my traffic. I am going to try and hide it a little better,'" said Rob Fleischman, the chief technology officer at Simplicita, a Denver-based security start-up that helps Internet service providers deal with infected computers on their networks.

The change in tactics makes it harder to identify zombies on a network, and it becomes tougher for security professionals to use the hackers' own tools to spy on them. In addition, the switch to Web-based control increases the threat of zombies to enterprises and other organizations, as that method can't be blocked as easily as the previous technique.

"If you're a bad guy, this is pretty good news. If you're a good guy, I wouldn't say it is bad news, but it is a challenge," said Jose Nazario, a senior software engineer at Arbor Networks, which sells network analysis products. Nazario has done extensive research into zombies, the results of which he presented at last week's Virus Bulletin conference.

Life of a zombie
Hijacked computers have become one of the most serious security problems on the Internet. Malicious remote-control code turns a computer into a zombie via security holes in software, a worm, or a Trojan horse. It then runs silently in the background, letting an attacker send commands to the system, unbeknownst to its owner.

Zombies are the most prevalent threat to Windows PCs, according to a Microsoft report released earlier this year. A security tool downloaded alongside Microsoft's patches removed at least one version of malicious remote-control software from about 3.5 million PCs between January 2005 and March 2006, it said.

Criminals make money by networking their zombies into a "botnet". They put these networks to work mounting denial-of-service attacks against online businesses in extortion schemes; hosting faked Web sites used in phishing scams; and relaying spam. Attackers also often load adware and spyware onto compromised systems, earning a kickback from the makers of these programs or reselling the private data of their victims.

In fighting botnets, investigators found it was relatively easy to identify zombies because of how they communicate with their masters. Most botnets today are controlled via Internet Relay Chat, or IRC, a still-active chat network that is a relic of the early days of the Net.

IRC lets hackers control their bots in real time. As soon as a computer is infected, it connects to a specific chat server and channel, and awaits its commands. But the benefit for the good guys is that they can lurk in the chat rooms, spy on the hackers, and sometimes even identify them. Furthermore, IRC uses its own network protocol.

"IRC is not as common as other protocols," Fleischman said. "It does not blend in. It has a certain signature. You can use technologies to spot it."

Internet service providers already block traffic to the IRC servers used by zombies, and many organizations use network shields, such as firewalls and intrusion detection systems, to block IRC traffic altogether. This prevents a compromised PC on a specific network from contacting its command-and-control center.

These countermeasures have not gone unnoticed in hacker circles. In a classic game of cat and mouse, miscreants are moving command-and-control channels for their botnets away from IRC and onto the Web. There, the zombies will blend in with regular Web traffic, which can't simply be blocked.

"These bots look like people browsing the Web," Fleischman said. "The brilliance here--and I hate to compliment the botmasters--is that they know that there is a giant haystack of Web traffic, and if they hide their command-and-control there, it is harder to spot."

Instead of connecting to an IRC server, newly compromised PCs connect to one or more Web sites to check in with the hackers and get their commands. These Web sites are typically hosted on hacked servers or computers that have been online for a long time. Attackers upload the instructions for download by their bots.

As a result, protection mechanisms, such as blocking IRC traffic, will fail. This could mean that zombies, which so far have mostly been broadband-connected home computers, will be created using systems on business networks.

"The trend to Web-based command and control is really about protecting the command-and-control center and hiding traffic from network administrators," said Randy Abrams, director of technical education at Eset, a security software company. "Web traffic is ubiquitous. IRC channels are well-known and relatively easily located and shut down."

Nazario agreed. "Part of the motivation is the idea of deeper penetration into juicier networks that allow Web-based traffic relatively unfiltered, but don't allow IRC," he said.

At the same time, zombie fighters lose an important capability to identify and spy on botmasters. Security professionals have been able to track hackers by crafting software tools mimicking a bot, and by signing in to IRC networks used to control botnets. On those same networks, the miscreants often also talk to co-conspirators.

"It is like talking to your friends over instant message," Nazario said.

Additionally, botnet operators can sometimes be identified by their Internet Protocol, or IP, address when they sign on to their own IRC server, he said. In the past year or so, law enforcement agencies have been able to arrest several botmasters.

The morphed threat requires work on the part of security people, Nazario said. "We have to speak a whole different language now," he said. "We have to learn new command instructions and new communication mechanisms that each of these bot families uses."

Security providers have found some ways to find and fight the new-style zombies. ISPs and businesses could block the individual Web addresses used by the malicious programs. In the near future, blacklists of such addresses will likely be compiled, experts said.

"You certainly can't just block all outbound Web traffic," Nazario said. "But if you have identified a certain Web server and it is not used for something else, you can go and block just that IP address."

Honeypot lures
To track the activity of bot masters, security professionals have to rely more on their honeypots, which are computers set up for the purpose of being infected, Fleischman said. This gives them the malicious code to dissect and identify the control servers, he said.

Also, a honeypot computer might be used as a control server, which means the attacker can be monitored and possibly identified when logging in, Fleischman said. "Botmasters hate the honeypot technique. They have a thousand bots, and they don't know which one is owned by a good guy," he said.

Individual organizations could invest in technology to more closely monitor Web traffic and spot traffic patterns that indicate bot activity. "But a lot of people don't want to look through that haystack," Fleischman said. "There might be more of a financial investment to scan that. The infrastructure cost is going to be higher."

Arbor identifies about 600 new botnets each day. Only a small number of botnets today, less than 1 percent, according to Arbor, use Web-based command and control. However, that number is likely to increase, as developers for the underground perfect the technique.

While the zombie fighters have to adjust to the new tactics of their adversaries, the battle has not been lost.

"The first variants of Web bots may have thrown people for a loop," said Adam Meyers, a security expert at consulting firm SRA International. "As new command-and-control mediums emerge, the good guys will adapt their containment and investigatory techniques."

The defense industry is always reacting to the bad guys, Nazario agreed. "They always make the first move and we counteract," he said. "That said, the good guys control the infrastructure, so we ultimately have the last word. If we don't like what they're doing, we can shut them down."

Chertoff: Web Could be Terror Training Camp

Disaffected people living in the United States may develop radical ideologies and potentially violent skills over the Internet and that could present the next major U.S. security threat, U.S. Homeland Security Secretary Michael Chertoff said on Monday.

"We now have a capability of someone to radicalize themselves over the Internet," Chertoff said on the sidelines of a meeting of International Association of the Chiefs of Police.

"They can train themselves over the Internet. They never have to necessarily go to the training camp or speak with anybody else and that diffusion of a combination of hatred and technical skills in things like bomb-making is a dangerous combination," Chertoff said. "Those are the kind of terrorists that we may not be able to detect with spies and satellites."

Chertoff pointed to the July 7, 2005, attacks on London's transit system, which killed 56 people, as an example a home-grown threat.

To help gather intelligence on possible home-grown attackers, Chertoff said Homeland Security would deploy 20 field agents this fiscal year into "intelligence fusion centers," where they would work with local police agencies.

By the end of the next fiscal year, he said the department aims to up that to 35 staffers.

Straight Dope on the IPod's Birth
Leander Kahney

Thanks to Apple Computer's penchant for CIA-like secrecy, there are several myths concerning the birth of the iPod.

One of these myths is that the iPod has a father -- one man who conceived and nurtured the iconic device. Steve Jobs, of course, is one candidate; but engineer Tony Fadell has also been named the father of the iPod, as has Jon Rubinstein, the former head of Apple's hardware division. While they all played key roles in the iPod's development, the iPod was truly a team effort.

Here's the story:

In 2000, Steve Jobs' candy-colored iMac was leading the charge for Apple's comeback, but to further spur sales, the company started asking, "What can we do to make more people buy Macintoshes?"

Music lovers were trading tunes like crazy on Napster. They were attaching speakers to their computers and ripping CDs. The rush to digital was especially marked in dorm rooms -- a big source of iMac sales -- but Apple had no jukebox software for managing digital music.

To catch up with this revolution, Apple licensed the SoundJam MP music player from a small company and hired its hotshot programmer, Jeff Robbin. Under the direction of Jobs, Robbin spent several months retooling SoundJam into iTunes (mostly making it simpler). Jobs introduced it at the Macworld Expo in January 2001.

While Robbin was working on iTunes, Jobs and Co. started looking for gadget opportunities. They found that digital cameras and camcorders were pretty well designed and sold well, but music players were a different matter.

"The products stank," Greg Joswiak, Apple's vice president of iPod product marketing, told Newsweek.

Digital music players were either big and clunky or small and useless. Most were based on fairly small memory chips, either 32 or 64 MB, which stored only a few dozen songs -- not much better than a cheap portable CD player.

But a couple of the players were based on a new 2.5-inch hard drive from Fujitsu. The most popular was the Nomad Jukebox from Singapore-based Creative. About the size of a portable CD player but twice as heavy, the Nomad Jukebox showed the promise of storing thousands of songs on a (smallish) device. But it had some horrible flaws: It used Universal Serial Bus to transfer songs from the computer, which was painfully slow. The interface was an engineer special (unbelievably awful) and it often sucked batteries dry in just 45 minutes.

Here was Apple's opportunity.

"I don't know whose idea it was to do a music player, but Steve jumped on it pretty quick and he asked me to look into it," said Jon Rubinstein, the veteran Apple engineer who's been responsible for most of the company's hardware in the last 10 years.

Now retired, Rubinstein joined Apple in 1997. He'd previously worked at NeXT, where he'd been Steve Jobs' hardware guy. While at Apple, Rubinstein oversaw a string of groundbreaking machines, from the first Bondi-blue iMac to water-cooled workstations -- and, of course, the iPod. When Apple split into separate iPod and Macintosh divisions in 2004, Rubinstein was put in charge of the iPod side -- a testament to how important both he and the iPod were to Apple.

Apple's team knew it could solve most of the problems plagued by the Nomad. Its FireWire connector could quickly transfer songs from the computer to player -- an entire CD in a few seconds; a huge library of MP3s in minutes. And thanks to the rapidly growing cell phone industry, new batteries and displays were constantly coming to market.

In February 2001, during the Macworld show in Tokyo, Rubinstein made a visit to Toshiba, Apple's supplier of hard drives, where executives showed him a tiny drive the company had just developed. The drive was 1.8 inches in diameter -- considerably smaller than the 2.5-inch Fujitsu drive used in competing players -- but Toshiba didn't have any idea what it might be used for.

"They said they didn't know what to do with it. Maybe put it in a small notebook," Rubinstein recalled. "I went back to Steve and I said, 'I know how to do this. I've got all the parts.' He said, 'Go for it.'"

"Jon's very good at seeing a technology and very quickly assessing how good it is," Joswiak told Cornell Engineering Magazine. "The iPod's a great example of Jon seeing a piece of technology's potential: that very, very small form-factor hard drive."

Rubinstein didn't want to distract any of the engineers working on new Macs, so in February 2001 he hired a consultant -- engineer Fadell -- to hash out the details.

Fadell had a lot of experience making handheld devices: He'd developed popular gadgets for General Magic and Philips. A mutual acquaintance gave his number to Rubinstein.

"I called Tony," Rubinstein said. "He was on the ski slope at the time. I didn't tell him what he was going to work on. Until he walked in the door, he didn't know what he was going to be working on."

Jobs wanted a player in shops by fall, before the holiday shopping season.

Fadell was put in charge of a small team of engineers and designers, who put the device together quickly. The team took as many parts as possible off the shelf: the drive from Toshiba, a battery from Sony, some control chips from Texas Instruments.

The basic hardware blueprint was bought from Silicon Valley startup PortalPlayer, which was working on "reference designs" for several different digital players, including a full-size unit for the living room and a portable player about the size of a pack of cigarettes.

The team also drew heavily on Apple's in-house expertise.

"We didn't start from scratch," Rubinstein said. "We've got a hardware engineering group at our disposal. We need a power supply, we've got a power supply group. We need a display, we've got a display group. We used the architecture team. This was a highly leveraged product from the technologies we already had in place."

One of the biggest problems was battery life. If the drive was kept spinning while playing songs, it quickly drained the batteries. The solution was to load several songs into a bank of memory chips, which draw much less power. The drive could be put to sleep until it's called on to load more songs. While other manufacturers used a similar architecture for skip protection, the first iPod had a 32-MB memory buffer, which allowed batteries to stretch 10 hours instead of two or three.

Given the device's parts, the iPod's final shape was obvious. All the pieces sandwiched naturally together into a thin box about the size of a pack of cards.

"Sometimes things are really clear from the materials they are made from, and this was one of those times," said Rubinstein. "It was obvious how it was going to look when it was put together."

Nonetheless, Apple's design group, headed by Jonathan Ive, Apple's vice president of industrial design, made prototype after prototype.

''Steve made some very interesting observations very early on about how this was about navigating content,'' Ive told The New York Times. ''It was about being very focused and not trying to do too much with the device -- which would have been its complication and, therefore, its demise. The enabling features aren't obvious and evident, because the key was getting rid of stuff.''

Ive told the Times that the key to the iPod wasn't sudden flashes of genius, but the design process. His design group collaborated closely with manufacturers and engineers, constantly tweaking and refining the design. ''It's not serial,'' he told the Times. ''It's not one person passing something on to the next.''

Robert Brunner, a partner at design firm Pentagram and former head of Apple's design group, said Apple's designers mimic the manufacturing process as they crank out prototypes.

"Apple's designers spend 10 percent of their time doing traditional industrial design: coming up with ideas, drawing, making models, brainstorming," he said. "They spend 90 percent of their time working with manufacturing, figuring out how to implement their ideas."

To make them easy to debug, prototypes were built inside polycarbonate containers about the size of a large shoebox.

The iPod's basic software was also brought in -- from Pixo, which was working on an operating system for cell phones. On top of Pixo's low-level system, Apple built the iPod's celebrated user interface.

The idea for the scroll wheel was suggested by Apple's head of marketing, Phil Schiller, who in an early meeting said quite definitively, "The wheel is the right user interface for this product."

Schiller also suggested that menus should scroll faster the longer the wheel is turned, a stroke of genius that distinguishes the iPod from the agony of competing players. Schiller's scroll wheel didn't come from the blue, however; scroll wheels are pretty common in electronics, from scrolling mice to Palm thumb wheels. Bang & Olufsen BeoCom phones have an iPod-like dial for navigating lists of phone contacts and calls. Back in 1983, the Hewlett Packard 9836 workstation had a keyboard with a similar wheel for scrolling text.

The interface was mocked up by Tim Wasko, an interactive designer who came to Apple from NeXT, where he had worked with Jobs. Wasko had previously been responsible for the clean, simple interface in Apple's QuickTime player. Like the hardware designers, Wasko designed mockup after mockup, presenting the variations on large glossy printouts that could be spread over a conference table to be quickly sorted and discussed.

The output of a committee is a function of the quality of its members and how they're led. As the iPod came together, it garnered more and more attention from Jobs, whose insistence on excellence and high standards are stamped onto the gadget as indelibly as Apple's logo.

"Most people make the mistake of thinking design is what it looks like," Jobs told the Times. "That's not what we think design is. It's not just what it looks like and feels like. Design is how it works."

Jobs insisted the iPod work seamlessly with iTunes, and that many functions should be automated, especially transferring songs. The model was Palm's HotSync software.

"Plug it in. Whirrrrrr. Done," Jobs told Fortune.

The iPod name came from an earlier Apple project to build an internet kiosk, which never saw the light of day. On July 24, 2000, Apple registered the iPod name for "a public internet kiosk enclosure containing computer equipment," according to the filing.
"The name 'iPod' makes much more sense for an internet kiosk, which is a pod for a human, than a music player," said Athol Foden, a naming expert and president of Brighter Naming of Mountain View, California.

But Foden said the name is a stroke of genius: It is simple, memorable and, crucially, it doesn't describe the device, so it can still be used as the technology evolves, even if the device's function changes. He noted the "i" prefix has a double meaning: It can mean "internet," as in "iMac," or it can denote the first person: "I," as in me.

"They discovered in their tool chest of registered names they had 'iPod,'" he said. "If you think about the product, it doesn't really fit. But it doesn't matter. It's short and sweet."

On Oct. 23, 2001, about five weeks after 9/11, Jobs introduced the finished product at a special event at Apple's HQ.

"This is a major, major breakthrough," Jobs told the assembled reporters.

‘Good for the Soul’

With iPod’s fifth birthday around the corner, Steve Jobs discusses the MP3 player’s design, the cool factor and the impact on how we listen to music.
Steven Levy

Oct. 23 marks the fifth anniversary of Apple's iPod. CEO Steve Jobs reflected with NEWSWEEK's Steven Levy (author of "The Perfect Thing," a book about the iPod out this month) about the past, present and future of the device that changed Apple—and the world.

NEWSWEEK: During the iPod's development process did you get a sense of how big it would become?
Steve Jobs: The way you can tell that you're onto something interesting is if everybody who knows about the project wants one themselves, if they can't wait to go out and open up their own wallets to buy one. That was clearly the case with the iPod. Everybody on the team wanted one.

Other companies had already tried to make a hard disk drive music player. Why did Apple get it right?
We had the hardware expertise, the industrial design expertise and the software expertise, including iTunes. One of the biggest insights we have was that we decided not to try to manage your music library on the iPod, but to manage it in iTunes. Other companies tried to do everything on the device itself and made it so complicated that it was useless.

What was the design lesson of the iPod?
Look at the design of a lot of consumer products—they're really complicated surfaces. We tried make something much more holistic and simple. When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there. But if you keep going, and live with the problem and peel more layers of the onion off, you can oftentimes arrive at some very elegant and simple solutions. Most people just don't put in the time or energy to get there. We believe that customers are smart, and want objects which are well thought through.

Some people say that iPod might lose its cachet because it's too popular—how can it be cool when Dick Cheney and Queen Elizabeth have one?
That's like saying you don't want to kiss your lover's lips because everyone has lips. It doesn't make any sense. We don't strive to appear cool. We just try to make the best products we can. And if they are cool, well, that's great.

What products, maybe outside technology, do you consider cool?
I like things that do the job and kind of disappear into my life. Like Levis. They just kind of get faded and disappear, and you don't think about it much. If you look, you appreciate the design, but you feel something from them, too. A lot of quality is communicated through a feeling that people have. They don't understand exactly why, but they know that a lot of care and love was put into the designing of the product.

Let's talk about the iTunes store. How did you get the record labels, which had been resisting digital music, to sign up?
It was a process over 18 months. We got to know these folks and we made a series of predictions that a lot of things they were trying would fail. Then they went and tried them, and they all failed, for the reasons that we had predicted. We kept coming back to visit them every month or two, and they started to believe that we might actually have some insight into this, and our credibility grew with them to the point where they were willing to take a chance with us. Now, remember, it was initially just on the Mac, so one of the arguments that we used was, "If we're completely wrong and you completely screw up the entire music market for Mac owners, the sandbox is small enough that you really won't damage the overall music industry very much." That was one instance where Macintosh's [small] market share helped us. Then about six months later we were able to successfully persuade them to take down the barriers and let us move it out to the whole market.

Now people at some labels think that iTunes, with its dominant market share has too much power.
We've never once gone to them and asked them to lower their prices.

No, but you've asked them not to raise their prices, when some of them wanted to.
Our core initial strategy on the store was that if you want to stop piracy, the way to stop it is by competing with it, by offering a better product at a fair price. In essence, we would make a deal with people. If they would pay a fair price, we would give them a better product and they would stop being pirates. And it worked. If we go back now and we raise prices—this is what we told the record companies last year—we will be violating that implicit deal. Many [users] will say, "I knew it all along that the music companies were gonna screw me, and now they're screwing me." And they would never buy anything from iTunes again.

Do you think that it's fair to the customer that the songs they buy from Apple will only work on iTunes and the iPod?
Well, they knew that all along.

At one point you were saying, “When our customers demand it, that's when we'll consider interoperability.”
Nobody's ever demanded it. People know up front that when they buy music from the iTunes music store it plays on iPods, and so we're not trying to hide anything there.

Microsoft has announced its new iPod competitor, Zune. It says that this device is all about building communities. Are you worried?
In a word, no. I've seen the demonstrations on the Internet about how you can find another person using a Zune and give them a song they can play three times. It takes forever. By the time you've gone through all that, the girl's got up and left! You're much better off to take one of your earbuds out and put it in her ear. Then you're connected with about two feet of headphone cable.

IPods now have video, games, audio books and podcasts. Will iPods always be about the music?
Who knows? But it's hard to imagine that music is not the epicenter of the iPod, for a long, long, long, long, long time. I was very lucky to grow up in a time when music really mattered. It wasn't just something in the background; it really mattered to a generation of kids growing up. It really changed the world. I think that music faded in importance for a while, and the iPod has helped to bring music back into people's lives in a really meaningful way. Music is so deep within all of us, but it's easy to go for a day or a week or a month or a year without really listening to music. And the iPod has changed that for tens of millions of people, and that makes me really happy, because I think music is good for the soul.

New Laws and Machines May Spell Voting Woes
Ian Urbina

New electronic voting machines have arrived in Yolo County, Calif., but there is one hitch: the audio program for the visually impaired in some of them works only in Vietnamese.

“Talk about panic,” said Freddy Oakley, the county’s top election official. “I’ve got gray-haired ladies as poll workers standing around looking stunned.”

As dozens of states are enforcing new voter registration laws and switching to paperless electronic voting systems, officials across the country are bracing for an Election Day with long lines and heightened confusion, followed by an increase in the number of contested results.

In Maryland, Mississippi and Pennsylvania, a shortage of technicians has vendors for new machines soliciting applications for technical support workers on job Web sites like Monster.com. Ms. Oakley, who is also facing a shortage, raided the computer science department at the University of California, Davis, hiring 60 graduate students as troubleshooters.

Arizona, California, Georgia, Indiana, Maryland, Mississippi, Missouri, North Carolina, Ohio and Pennsylvania are among the states considered most likely to experience difficulties, according to voting experts who have been tracking the technology and other election changes.

“We’ve got new laws, new technology, heightened partisanship and a growing involvement of lawyers in the voting process,” said Tova Wang, who studies elections for the Century Foundation, a nonpartisan research group. “We also have the greatest potential for problems in more places next month than in any voting season before.”

Election officials in many of the states are struggling with delays in the delivery of machines before the election as old-fashioned lever and punch-card machines are phased out. A chronic shortage of poll workers, many of them retirees uncomfortable with new technology, has worsened matters.

Wendy S. Noren, the top election official for Boone County, Mo., which includes Columbia, said delays in the delivery of new machines had left her county several weeks behind schedule and with 600 poll workers yet to be trained. Ms. Noren said she also had not yet been provided with the software coding she needed to print the training manuals.

“I think we will make it,” she said, “but my staff is already at the point of passing out, and the sprint is just starting.”

New computerized registration rolls and litigation over new voter identification laws in states like Arizona, Georgia, Indiana and Missouri have left many poll workers and voters unclear about the rules, including whether they are in effect, as the courts have blocked many of the new laws.

“We’re expecting arguments at the polls in these states that will slow everything down and probably cause large numbers of legitimate voters to be turned away or to be forced to vote on provisional ballots,” said Barbara Burt, an elections reform director for Common Cause.

Meanwhile, votes in about half of the 45 most competitive Congressional races, including contests in Florida, Georgia and Indiana, will be cast on electronic machines that provide no independent means of verification.

“In a close race, a machine error in one precinct could leave the results in doubt and the losing candidates won’t be able to get a recount,” said Warren Stewart, policy director for VoteTrustUSA, an advocacy group that has criticized electronic voting.

Deborah L. Markowitz, president of the National Association of Secretaries of State, was less inclined to sound the alarm. She said that since it was not a presidential election year and many states had encouraged voting by mail, fewer people would turn up at the polls than in 2004.

With computerized registration rolls, Ms. Markowitz said, there will be far fewer people incorrectly excluded from the new databases compared with when registration rolls were on paper.

“There will be isolated incidents, there is no doubt about that,” she said. “But over all the system will move faster and with fewer problems.”

Charles Stewart, head of the political science department at the Massachusetts Institute of Technology, published a study this year indicating that from 2000 to 2004, new technology helped reduce the number of improperly marked ballots by about one million votes.

“If you think things are bad and worrisome now, they were much worse before 2000,” Mr. Stewart said, adding that breakdowns in the mechanics of voting are simply more highlighted, not more prevalent.

Still, this is a year of firsts for some local election officials. Cherie Poucher, elections director for Wake County, N.C., which includes Raleigh, said she expected 350,000 voters on Election Day, up from the 30,000 in the May primary. She worries that the county’s 218 optical scan machines may be unable to handle the increased load. During the primary, 12 of the new machines would not boot up and needed to be replaced.

“In the end, we were lucky,” Ms. Poucher said. The machines were replaced within hours, she said, and since her county uses optical scan machines rather than paperless machines, voters were able to deposit paper ballots into a ballot box until replacements arrived.

“I’m an optimist,” she said. “But if we have more failures than we have total machines, it could be really difficult even with the paper ballots.”

Ms. Burt of Common Cause said there was some disagreement about the likelihood of problems, and difficulty in predicting where problems might emerge, in part because there is little uniformity in how elections are conducted.

Except for rudimentary federal rules on voting age, federal financing for states and counties, and protections for minorities and the disabled, elections are shaped by a variety of local laws, conflicting court rulings and technological choices.

“People might refer to it as a national election system but in truth there is no such thing,” Ms. Burt said.

Justin Levitt, a lawyer with the Brennan Center for Justice at New York University School of Law, said that on election night his organization will be keeping particularly close watch on North Carolina, Florida and South Dakota, because of new voter registration databases there.

Under the federal Help America Vote Act passed in 2002, election officials were required to create computerized statewide voter registration rolls. These databases were intended to help streamline registration and decrease fraud, and they help political parties track potentially supportive voters. In some states, however, the databases have blocked large numbers of eligible voters from joining registration lists.

North Carolina, for example, requires that information provided by voters for registration forms match information in the motor vehicle or Social Security databases.

“If someone is listed with their maiden name in one list and their married name in another list, that voter will be blocked from the eligible voter roll,” said Mr. Levitt, adding that these voters may show up in large numbers and not realize that there is a problem.

“I certainly don’t see a disaster, but frankly I’m very concerned,” said Ion Sancho, supervisor of elections in Leon County, Fla., which includes Tallahassee. He said Florida has tried three times to create databases of eligible and ineligible voters but each system has had widespread inaccuracies.

“This is our fourth attempt and I’m worried that voters who have been voting for the last decade will show up at the polls and they won’t be listed anywhere,” Mr. Sancho said.

A report released last Thursday by the Century Foundation, Common Cause and the Leadership Conference on Civil Rights cited concerns that most states have only vague, if any, standards for voting machine distribution.

There is no federal minimum for the ratio of voters to machines and there is wide variation in state standards.

In Wisconsin, the law requires at least one machine for every 200 registered voters. In Michigan, that ratio is 1:600, the report said. Election officials in Ohio, which had some of the longest lines in 2004, passed a law this year setting the ratio at 1:175, the report said. But the law does not take effect until 2013.

Keith A. Cunningham, director of the Allen County board of elections in Ohio and former president of the Ohio Association of Election Officials, said most counties were close to the ratio required by the law.

“I don’t believe it is going to be as bad as everyone is predicting,” Mr. Cunningham said.

Whether there are problems or not, post-election litigation is likely. A study released this year by the Washington and Lee Law Review found that the number of court cases challenging elections has risen in recent years. In 2004, the number was 361, up from 104 cases in 1998.

Jonah Goldman, a lawyer and elections expert with the Lawyers Committee for Civil Rights Under Law, said his organization is prepared for the worst. With the N.A.A.C.P. and the People for the American Way Foundation, the lawyers group will have about 500 people fielding calls to a national hot line (1-866-OUR-VOTE) about problems and providing information to voters and poll workers.

In 2004, a similar hot line fielded more than 200,000 calls and created a database of about 40,000 reported problems. The coalition is dispatching lawyers in a dozen states to address reports of voter intimidation or to see if litigation is needed to extend hours at polling stations.

“We’re not sure what we will be handling,” Mr. Goldman said. “But we’re pretty confident that there will be no shortage of work that night.”

Building a Better Voting Machine
Kim Zetter

It's been six years since the Florida presidential fiasco launched a flurry of spending around the country to replace antiquated punch-card and lever voting machines with expensive new electronic touch-screen machines. Yet new controversies over the security of e-voting machines continue to crop up, making it clear that the new machines are just as problematic as the ones they replaced.

Why can't the voting machine companies get it right?

With election season upon us, Wired News spoke with two of the top computer scientists in the field, UC Berkeley's David Wagner and Princeton's Ed Felten, and came up with a wish list of features we would include in a voting machine, if we were asked to create one.

These recommendations can't guarantee clean results on their own. Voting machines, no matter how secure, are no remedy for poor election procedures and ill-conceived election laws. So our system would include thorough auditing and verification capabilities and require faithful adherence to good election practices, as wells as topnotch usability and security features.

Here, then, is our nomination for the best voting machine for 2008. Use the comments tool below to tell us how your perfect voting machine would look.

Combine the best features of touch-screen and optical-scan machines in a single device. Touch-screens are easy to use and are flexible enough to accommodate disabled voters and multiple languages. Optical-scan devices provide reliable paper trails.

We recommend a third alternative that combines the best attributes of both -- a ballot marking machine, such as one made by Election Systems and Software.

These devices let voters make their choices on a touch-screen. But instead of directly recording the votes digitally onto a memory card, the machine prints the votes onto a full-size paper ballot. Voters or election officials then place the completed ballots onto an optical-scan reader (.pdf), where the votes are recorded digitally.

This system provides the same level of accessibility to disabled voters as touch-screen machines, while producing digital votes that can be counted quickly.

The full-size paper ballot serves as a voter-verified paper audit trail that's far superior to the paper record currently produced by touch-screen machines outfitted with printers. That's because most touch-screen printers use thermal paper -- the kind used in many cash registers -- which produces poor-quality records that tend to curl and tear easily. The printers also jam and can run out of paper, forcing poll workers to replace them in mid-election -- problems that are absent with ballot-marking systems.

Eliminate removable memory cards. Removable memory cards pose an unacceptable security risk for voting machines and we should do away with them, advises UC Berkeley's Wagner.

Current systems require election staff or poll workers to install memory cards into a slot in the voting machine to record the votes. To prevent someone from tampering with the cards, workers are supposed to place tamper-evident tape over the memory-card compartment. But workers often forget to install the tape or take proper action when they discover that the tape over a compartment has been broken.

Recently, Princeton's Felten showed how it's possible to open locks on some voting machines using a standard issue hotel minibar key. Eliminating removable memory cards and compartments would help minimize risks from physical break-ins.

Barring that, Wagner is also looking at viable ways to store election data on a voting machine memory card so it can't be deleted or changed once it's written to the card.

Simplify voting machine software to use minimal lines of code. UC Berkeley's Wagner says current electronic voting systems are more complex than they need to be and contain much more code than is needed to conduct elections. This makes it difficult for certification labs to thoroughly review the code for defects and security vulnerabilities.

"If you've got 50,000 lines of code, that's approaching the complexity of the U.S. tax code," Wagner says.

The problem stems from the origin of most voting systems -- they weren't built from scratch for the specific and narrow purpose of voting but were built from general-purpose computing systems and software libraries modified for elections. As such, they have a lot of dormant features necessary for general-purpose machines, but not for voting. All that extra code in the software provides camouflage in which to hide malicious code.

Wagner and his graduate students are looking at ways to edit the systems to bare essentials. "What we're trying to do is pare this stuff down to the absolute, minimum capabilities so that it's easy to review and certify the machines," Wagner says.

Make self-policing software. Princeton University's Felten says an ideal voting machine would prevent someone from loading software onto the machines that differs from the version of voting software that was certified, as Diebold Election Systems was found to have done in California.

Felten recently made headlines when he and his students hacked a Diebold voting system in a few minutes and installed malicious code on it. He says a machine that would recognize the hash of a software program could prevent a program from running on the machine if its hash doesn't match the approved one. "That is one thing you would want to attend to in the design of the machine -- something in the architecture of the machine," Felten says. Or he would design a machine that could tell officials reliably what program was running on the system so they would know if unauthorized software patches or a different software program altogether had been introduced.

Create transparent code. Once the voting machine code is created, we would follow Australia's example and make the code transparent and available to the public so anyone who wanted to read it could see what was in the system.

In addition, code used in any specific machine would, by law, be made available for inspection on request if the integrity of an election were questioned after the fact. In current circumstances, courts have refused to force voting-machine makers to let parties disputing an election examine their software code.

"To me this is a basic principle," Felten says, "that the process by which elections are conducted and votes are counted should be transparent to voters."
Processes and Procedures

Employ mandatory audits. Poor processes and procedures can undo even the most secure voting system. Therefore, a trustworthy election requires good systems for tracking the chain of custody of election equipment and voting data. Given that election processes and procedures are prone to human error and negligence, voting machine audits should be required under law in every jurisdiction. Such audits would include the following:

Random spot checks: Experts agree that parallel monitoring of machines on election day is essential to make sure the machines are operating properly and the software hasn't been subverted. This involves taking a random number of machines out of commission just before polls open on election morning to run a sample election on them to make sure the machines are recording and counting votes accurately.

Post-election hand audits: In addition to parallel monitoring, manual audits after an election ensure that the digital votes were recorded and calculated correctly. This involves hand counting the paper ballots from a random sampling of precincts and comparing the tally to the digital count from those precincts. Officials also need to compare the total number of votes cast at those precincts to the number of voters who signed in at the polls to determine if the machines lost any ballots or if voters cast more than a ballot each.

Post-election voter verification: At the end of an election, all that really matters is that a voter's choices were included in the final tally and counted accurately. Election officials can use the most secure and transparent voting machines with paper ballots and even do parallel monitoring and hand audits and still lose votes between the time they collect the votes from machines and issue the final results. So how does a voter know with certainty at the end of the day that his or her vote was among those counted in the election results? According to Felten and Wagner, this is a problem for which there is still no easy solution.

Cryptographer David Chaum has proposed one solution (.pdf) that involves voters receiving encrypted receipts that they would compare to final results posted on a website after the election. But the scheme is too technical for election officials to understand and follow, say Felten and Wagner, and too burdensome for voters to bother with.

"We're moving slowly toward understanding that problem of 'Was my vote counted?'" says Felten. "I think someday we may get to the point where we can provide that kind of verifiability but it will take time."

In the meantime, he says, all we can do is take steps to "reduce the window of vulnerability (with elections) -- not to zero, but to far below where it is now."

100 Megs a second

Gigbit DSL: Yes, It Will Happen
Om Malik

Copper is the cockroach of the telecom world – it just doesn’t go away. And if telecom technologists have their way, it could soon be carrying data at speed of gigabit per second. Last week, ECI Telecom and a bunch of other companies announced a new consortium that would work on a technology called the Dynamic Spectrum Management (DSM). The Chief Scientist Office of the Israeli Government has financed the consortium with a grant of about $10 million. DSM is widely viewed as the next evolutionary step after VDSL2. DSM, when commercialized could help provide fiber optic like speeds over copper, the consortium says. DSM addresses one of the biggest issues with the DSL technology – interference also known as crosstalk.

“The main obstacle for the advancement of DSL technology is the interference (”crosstalk”) generated from different DSL lines that share the same telephone cable binder,” said Professor John Cioffi, Professor of Engineering at Stanford University, a pioneer of DSM research, who is also recognized as the inventor of the DMT line code. “DSM is a promising technology for the future evolution of broadband access networks using existing copper infrastructure.”

People should pay attention to what Cioffi says.

He was recently awarded the Marconi Prize (and is the 2006 Marconi Fellow.) He is a soothsayer when it comes to all things DSL. According to DSL Prime, in 1990 he predicted that DSL could deliver between 5-to-10 megabits per second. Then in 2002 he predicted 100 megabits per second over copper. That happened. By 2004 companies like Ikanos and Metalink were showing off chips that could do 100 mega up and down. So now lets take what he is saying very seriously.

“Phone lines are big antennas that radiate into one another,” Cioffi says. “They are their own worst enemies when they are all bundled together. Any kind of [electromagnetic] noise from AM radios, fluorescent lights or your vacuum cleaner can get into these things and cause problems.” (via Stanford Report.)

Back in the 1990s his solution was to transmit data between two modems – say one at home and one at the telco central office – and connect them with each other via 256 different 4 kilobit per second channels. The traffic would flow over the less congested channels, and interference would be overcome.

With DSM, Cioffi is taking copper to the next level. DSM packs more channels and also uses the higher frequency bands that have not been useable because of extreme interference. He is betting that DSM is going to be big, and has decided to start a new company, Adaptive Spectrum and Signal Alignment (ASSIA) Inc. (more details to follow!)

HP Passes Dell in World PC Shipments
Michael Liedtke

Hewlett-Packard Co. supplanted Dell Inc. as the world leader in personal computer shipments during the third quarter, returning the bragging rights to Silicon Valley for the first time in nearly three years, according to figures released Wednesday by two influential research firms.

Both Gartner Inc. and IDC pegged the overall third-quarter growth of the global PC market at just under 7 percent, but that trend was overshadowed by the industry's new pecking order.

The changing of the guard occurred after HP's shipments climbed by 15 percent from a year ago while Dell's edged up by less than 4 percent.

By Gartner's measure, Palo Alto-based HP shipped 110,000 more PCs than Dell to give it a 16.3 percent share of the global market compared to 16.1 percent for its Round Rock, Texas-based rival.

It marks the first time since 2003's final quarter that HP - now the world's largest technology company - has held the top spot. HP expanded its PC business in 2002 with its $19 billion acquisition of Compaq Computer Corp. - a deal engineered by HP's former chief executive, Carly Fiorina, who is now touting her accomplishments in a new memoir.

IDC calculated things differently, but also agreed HP holds a narrow lead in the global market. Although HP shipped 28,000 more PCs than Dell during the quarter, IDC pegged both companies market share of the worldwide market at roughly 17 percent.

Dell retained a substantial lead in the U.S. market, where its dominance of the corporate market gives its a major advantage, analysts said.

Nevertheless, HP also narrowed the gap in the United States, where its market share stood somewhere between 22 and 23 percent. Dell's hovered between 31 and 32 percent, according to the research firms.

Both PC makers recently have been battling image problems brought on by embarrassing incidents.

HP has been rocked by revelations of the shady tactics that investigators deployed in a cloak-and-dagger operation designed to plug a boardroom leak. The subterfuge included obtaining personal phone records under false pretenses - a scheme that culminated in congressional hearings and criminal charges against five people, including HP's former chairwoman.

The scandal, which erupted in early September, apparently didn't deter the sales momentum that HP has been building since Mark Hurd became chief executive during the spring of 2005.

"HP continues execute well by taking advantage of the high-growth markets, particularly the consumer market," said Charles Smulders, a Gartner vice president.

In August, Dell recalled 4.1 million notebook computer batteries made by Sony Corp. because they can overheat and catch fire. That recall probably wasn't a major factor in Dell's lackluster third quarter because desktop computer shipments accounted for most of the weakness, analysts said.

All the other major PC makers also picked up market share at Dell's expense in the third quarter. China's Lenovo Group Ltd. remained third in the worldwide PC market with a roughly 8 percent share, followed by Taiwan-based Acer Inc. at 6 percent and Japan's Toshiba Corp. at 4 percent.

In the United States, Apple Computer Inc.'s shipments rose by more than 30 percent from last year, reflecting strong back-to-school demands for its notebooks. The Cupertino-based company, which has become better known for its ubiquitous iPods, ended the quarter with a 6 percent share of the U.S. market.

Dragged down by Dell, overall PC shipments fell by roughly 1 to 2 percent in the United States, according to Gartner and IDC. It was the first time since the second quarter of 2002 that U.S. PC shipments fell.

The PC industry's outlook for the crucial holiday shopping season remains muddy because Microsoft Corp.'s new operating system, the widely anticipated Vista, won't be sold to consumers until January.

Loren Loverde, director of IDC's worldwide quarterly PC tracker, won't necessarily discourage consumers from buying new computers during the fourth quarter because retailers are expected to slash prices to clear their shelves for the arrival of the new Vista-powered systems.

"Consumers who don't mind buying a computer with Windows XP are going to get some very good deals," Smulders agreed.

Holiday Outlook Healthy for Gadgets
May Wong

Portable music players, cell phones and digital cameras are poised to be in hot demand this holiday season, according to a market survey that also projects a 27 percent boost in spending on electronics gifts.

Digital cameras topped the list as the most popular gizmo consumers intend to give this year, followed by a DVD player or recorder. But for the second year in a row, the most wished-for gadget - among adults and teens - was a portable digital music player.

The Consumer Electronics Association was to announce its annual holiday survey Monday.

With the healthy outlook, the trade group said it expects U.S. electronics industry revenues to reach $140 billion for all of 2006, up more than 9 percent from the $128 billion attained in 2005. For the holiday season, the survey indicates Americans intend to spend about $22 billion in electronics gifts, compared with $17 billion last year.

"We're seeing greater consumer spending across the board and what's benefiting in particular is consumer electronics," said Sean Wargo, the association's director of industry analysis.

After digital cameras and DVD devices, the top electronics gifts were a cell phone, portable music player, a video game system, a portable CD player, a carrying case for laptops or audio players, a television, a cordless phone, additional memory for a digital camera, a notebook computer, and a clock or tabletop radio.

Consumers said they intend to spend an average $804 per household on all holiday gifts - about a quarter, or $195, for electronics. But consumers might be underestimating their electronics spending in responding to the survey.

Apple Computer Inc.'s best-selling iPod player, the Nano, ranges in price from $150 to $250. For video games, Nintendo Co.'s upcoming Wii console will cost $250, while Sony Corp.'s PlayStation 3 will be $500 or $600, depending on the model. Though some digital cameras cost about $150, many mainstream models ring up to twice that or higher.

Buying just one item could eat up or surpass that $195 figure. Consider also that households were planning to buy nine items apiece on average, up from eight last year.

The 28 percent of survey respondents who said they expected to lower their electronics gifts spending this year might prove themselves wrong, Wargo said.

In any case, there's no harm in wishing.

Among the most-wanted electronics gifts for this holiday season were first, the mobile music player, followed by a digital camera, computer, television, video game system, DVD player or recorder, cell phone and camcorder.

The Consumer Electronics Association holiday survey, in its 13th year, was based on phone interviews with 1,019 adult U.S. households in September. It had a margin of error of plus or minus 3 percentage points.

Review: Apple Offers Value in New iPods
Dan Scheraga

Fans of Apple Computer Inc.'s portable music players will find the new, video-capable models of the iPod and its miniature counterpart, the Nano, clearly worth the wait.

As with previous iPods, the Nano now comes in a variety of storage capacities and colors, not just silver and black. There's green, blue, pink and - starting last week - red, each holding 4 gigabytes of music, or roughly 1,000 songs. Silver is available in 2 GB and 4 GB configurations, and the black model holds 8 GB.

The first thing I noticed is that the new Nano is tiny. Very tiny. It's so discreet, slim and light, at 1.4 ounces, that you'll want to check your pants pockets for it twice before putting them in the laundry; I sadly learned the hard way.

Owners of first-generation Nanos will be happy to see that Apple has done away with the device's shiny metal backing, which was notorious for scratching up almost as soon as it was out of the box. Now an elegant, seamless aluminum enclosure wraps around the Nano.

The battery life of the Nano is impressive. Apple rates it at 24 hours, and my own testing of an 8 GB model supported that. It charges quickly, too, powering up to 80 percent capacity in 90 minutes while hooked up to your computer using the included USB cable. A travel adapter for computer-less charging is sold separately.

The Nano's display is 40 percent brighter than the first-generation models. Song and album titles are easy to read. You can also view photos and album covers on it, but the screen is small, so don't expect to be able to see every nuance.

Priced at $149, $199 and $249, respectively, for 2 GB, 4 GB and 8 GB models, the new Nano models pack a lot of punch into a small package at a small price.

I wish I could say the same for the new iPods.

Obviously, the big draw here is the iPod's video capability, something not available in Nanos. The display, though rather small at 2.5 inches diagonally, is beautiful, crisp and 60 percent brighter than its predecessor. However, video images tend to pixelize in areas of low contrast, probably because of the data compression necessary to squeeze video down to iPod size.

Videos - such as television episodes of "Lost" and movies like "Pirates of the Caribbean: The Curse of the Black Pearl" - can be purchased from Apple's iTunes store. Consumers also can convert their own video into the iPod format using iTunes, though I sometimes lost audio when I put my personal video clips on the iPod.

The iPod I tested exhibited other strange behaviors, once freezing my entire computer as I tried to sync it with my music library. It even seemed once to confuse audio with video. When I asked it to play one album, it rapidly cycled through a series of movie images instead.

Apple also revealed this week that a virus had infected a small number of the new video iPods.

No doubt Apple will be quick to smooth these kinks out of new iPods rolling off the assembly line, but it was disappointing to encounter them at all.

The new iPod's battery life is respectable, at 14 hours for music and 6.5 hours for video on the 30 GB model (it is longer for the 80 GB model). That's still greater than the first video iPods, allowing you to watch more shows and movies.

The iPods are reasonably priced at $249 for the 30 GB model and $349 for the 80 GB model, though the value is not quite as compelling as it is for the Nano.

The new Nanos and iPods share a few new features, including the ability to search for songs, artists and albums by letter - helpful when you've got 80 GB of music to browse through. Another addition is gapless playback: no more jarring silence between tracks of albums like "Dark Side of the Moon" where the songs are meant to blend into each other.

Other features were held over from earlier iterations. Both the Nano and the iPod come with the same four dull games included on earlier models, but better games for the video iPod are available for purchase on iTunes. (Sorry Nano users, you're out of luck.)

And as with all iPod flavors, you can buy music from iTunes - and only iTunes. Copy-protected tunes from rival music services generally won't work. You can also play files ripped from your CDs using Apple's free iTunes software for Windows and Mac computers. Synching your music library is as simple as plugging in the USB cord.

Some of my favorite features are the simplest: The playback automatically pauses when the earphones are removed from the jack, so you don't miss a moment of music. The clock can keep track of multiple time zones.

Perhaps the most pleasant surprise of all is in the earphones. Usually a cheap freebie with other portable audio devices, Apple resisted the temptation to pinch pennies here and instead gave them a complete reengineering with the new models.

The result is probably the most comfortable set of earphones I've worn, and they seem never to fall out. The sound quality is great, too, ratcheting up to teeth-rattling volume with almost no distortion. One small disappointment with the earphones: They are still available only in white.

But that complaint is eclipsed by the many things to like about Apple's new iPods. Consumers can feel comfortable laying down their credit card for either one.

Another option is the new iPod Shuffle, which Apple is introducing this month. Barely larger than a cufflink, the Shuffle is designed to be worn, with a clip that fastens onto your clothes.

It holds only 1 GB of music and has no display, making song selection difficult. But at $79, it's attractive for people who intend to use the iPod while jogging or working out.

For my money, though, the Nano is the best bet. I went out and bought my own after my review unit's untimely end in the washing machine.

Portable Media Players Aim for the Masses
Michel Marriott

SEDUCTIVELY lighted music players may be hogging retail shelf space, but their overshadowed cousin, the portable media player, is looking increasingly attractive.

A new generation of portable media players — primarily designed to play video but, in some instances, to record it — is arriving in stores and on the Web. Many of the players are svelte, easy to use and less expensive than their predecessors. They can hold music videos or full-length movies, as well as play music and display digital photos. And more consumers are taking notice.

EchoStar Communications, the parent company of the satellite television service Dish Network, has done more than take notice. This fall, Dish Network is promoting a line of media players that customers can use to record or transfer television programs and movies for portable viewing. The devices, which the company is calling PocketDish players, are priced from $150 to $400.

“The key to this is the on-the-go lifestyle, people on trains, commuting, on planes, families with a digital video recorder but no time to sit and watch the programs on television,” said Cory Jo Vasquez, an EchoStar spokeswoman.

Meanwhile, broadening lines of media players are available at national outlets like Wal-Mart and RadioShack. Executives at Archos, the French company widely credited with creating the category in 2002, said that the number of retail outlets for its products in the United States had increased to 7,000 this fall, from 1,600 in July.

Part of the allure, consumers and retailers say, is that the category is maturing, offering more features at lower prices. Media players start as low as $100 and generally cost no more than $500 for full-featured models with large, bright screens, high storage capacity and recording options.

“The notion of viewing video on portable devices started to be a lot more popular after Apple introduced that functionality on the iPod,” said Ross Rubin, a consumer electronics analyst, referring to the fifth-generation iPod introduced last fall.

But Mr. Rubin, the director of industry analysis for the NPD Group, noted that the video-enabled iPod uses a smallish liquid-crystal-display screen (2.5 inches) for playback, as do other music players that also play video, including the Microsoft Zune, scheduled for release next month.

Dedicated media players with larger screens have tended to be bulky and overly complicated, critics have noted. They also have generally cost much more than music players that double as video players, Mr. Rubin said. For example, an entry-level iPod that plays video costs about $250. Last year, large-screen video players could easily cost twice that; now they are typically priced at $300 to $400.

“Those are still not high-volume products within the portable media player category,” Mr. Rubin said of the larger, feature-laden video players. “They are not a mainstream phenomenon yet.”

But Larry Smith, chief operating officer for Archos, said consumers had made it clear this year that what they wanted were portable devices that could richly and easily deliver video entertainment. “We think that is a validation of what we have been developing over the last four to five years.”

Mr. Smith noted that not only had media player technologies greatly improved this year, so had the means for getting content for the players, whether recording it directly on the players, dragging and dropping video files from computers, or transferring video from digital recorders like TiVo and on-demand services like AOL Video.

Archos’s products include the new 404 ($300, or $350 for a model that records video in DVD quality) and the 504 (which comes in 40-, 80- and 160-gigabyte versions that cost $350, $400 and $600). At the top of the line is the Archos 604, a full-featured player that the company says is the thinnest wide-screen device on the market, at 0.6 inches.

The 604 ($350) has a bright, high-resolution 4.3-inch screen and a 30-gigabyte hard drive that Archos representatives say can store up to 85 movies, 300,000 pictures or 15,000 songs. The 604 can read all standard video formats with DVD resolution; the absence of that ability has hindered many other media players, analysts said.

A standout feature of the new Archos media players is the introduction of the DVR station. It is a separate dock that houses the players’ video recording capacity and a collection of audiovisual input, output and data ports. Mr. Smith said that moving the recording function to the accessory (which costs $100, or $80 when purchased with a player) allowed the players to be smaller and less expensive, yet have larger screens.

The docking station can schedule recording from most sources, including televisions, cable and satellite set-top boxes, DVD players and videocassette recorders, Mr. Smith said. The station can also play content on television at DVD quality and in 5.1 surround sound. Later this fall, Mr. Smith said, the 604 will come in a Wi-Fi version ($450) that can receive content wirelessly.

The new Zen Vision W by Creative, like the 604, features a wide-screen, 4.3-inch display. It ships with a 30-gigabyte hard drive, but is also available in a 60-gigabyte model that can store up to 240 hours of video.

The Zen Vision W, priced at $300 to $500, reads many of the leading video formats; it includes an FM tuner and voice recorder, but does not record video. Generally, content is transferred from a computer by a U.S.B. 2.0 line.

The PMP7040 by Coby ($330) offers a whopping seven-inch screen. Like the Zen Vision W, it does not directly record video, but it plays video in various formats. It also plays digital music.

Doghouse Electronics, a start-up company in Birmingham, Ala., has recently introduced its first products, the 3.5-inch ($300) and 4-inch ($350) RoverTV portable media players. While both pocket-size devices can play many video formats, they also record from television sets, digital video recorders, DVD players and other sources.

The players use flash memory, and each comes with a 2-gigabyte memory card that can store up to four hours of high-quality video and 2,800 songs, said the company’s founder and chairman, Jim Howard. The players include FM tuners.

Other new media players that store their contents in flash memory — but do not record video — include the K-Pex by Kingston Technology, which starts at $130 and is hardly larger than a candy bar. It has a two-inch screen and one gigabyte of memory built in as well as an expansion slot for a miniSD card. Content, including music, pictures and text, can be transferred by a high-speed U.S.B. connection.

And in a nod to pre-teenagers, Tiger Electronics released last month the Massively Mini media player ($80), a child’s palm-size video and music player with an FM radio and a color screen about the size of a postage stamp. The player has 128 megabytes of built-in storage. It, too, uses a U.S.B. connection to transfer content, including pictures.

For videos, the shiny little player comes with video conversion software. Content suitable for children, including short clips from Cartoon Network and interviews with youth stars like Hilary Duff, can also be downloaded free from www.Tigertube.com. And for adults, the media players seem to have bridged an important divide.

“Typically, I would have said that this would be more geared toward early adopters and men,” said Ms. Vasquez, the EchoStar spokeswoman. “But what we’re finding in doing our research is that women are taking more of a front row in adopting these technologies these days.”

A New Gadget on Campus. Who’s It for?
David Pogue

There’s nothing quite as embarrassing as a grown-up trying too hard to look young and hip. A youthful attitude is one thing, but some haircuts, dance moves and jeans sizes just aren’t well suited for middle-age paunches and hairlines.

It’s not much better watching adult corporations try to attract young, hip consumers by pretending to be one of them. Take Sony, for example; this month, it joins a long line of buttoned-up corporations that eye the MySpace/iPod generation with dollar signs in their eyes.

Exhibit A: the new Mylo, a $350 wireless pocket communicator, measuring 4.8 by 0.9 by 2.5 inches, intended for the college crowd. It’s a cool-looking device, available in black or white, that could be the first cousin of the T-Mobile Sidekick. (The name is supposedly derived from “My Life Online,” although there’s a certain inconsistency to the harvesting of initials. Is Sony taking the first letter of each word? Then it should be MLO. Is it taking two letters? Then it would be MyLiOn, which sounds like a stuffed animal.)

The Mylo is not a phone. It doesn’t connect to the cellular networks and doesn’t cost anything to use. Instead, it requires a wireless Internet signal, like the Wi-Fi hot spots that blanket many college campuses. The Mylo’s rounded right end glows blue whenever it detects a signal.

Once it’s online, the Mylo fun begins. Its first and best trick is making voice calls using Skype, the free computer-to-computer chat program that’s become a beloved accessory for 113 million Mac and PC owners around the world.

The Mylo eliminates the computer

on your end. In other words, you can call your Skype buddies just by holding the Mylo up to your head (or using the included earbuds/microphone) as you dash around campus, rather than sitting in front of your PC wearing a headset like a nerd. Call quality is very good, although a one-second audio delay is typical.

The Mylo can also call actual telephone numbers, which increases its usefulness several millionfold. This feature, called SkypeOut, generally costs about 2 cents a minute, but it’s free for calls to the United States and Canada until the end of the year.
That twist alone would make the Mylo a noteworthy gizmo, but that’s just the beginning of its feature list.

For example, the bright, vivid 2.4-inch screen (320 by 240 pixels) slides up to reveal a cramped, BlackBerry-style nano-keyboard. Using it, you can conduct typed chats on any of three networks: Skype, Gmail or Yahoo. These are fairly full-featured instant-messaging programs, with smileys, file transfers (Skype only), chat histories, detailed privacy settings, status messages (“be right back”) and an auto-complete feature that saves typing of long words.

The elephant in the chat room, however, is the weird selection of networks. Why Gmail, for example, and not MSN or AOL Instant Messenger, the single most popular chat network in the world?

There’s also a Web browser, suitable for reading articles or checking Web-based e-mail accounts. Now, as you know, the typical Web page is a lot bigger than a cellphone-size screen. So Sony has provided two different viewing modes, both deeply flawed.

First, the basic browser (no Flash, streaming audio or video) can’t show you the entire Web page at actual size. So you spend an awful lot of energy just scrolling around, both horizontally and vertically.

That might not be so bad if the Mylo had a scroll wheel or a trackball. But all you get is four directional arrow buttons. To scroll, you tap or hold them down with one thumb while pressing a tiny function key with the other. It’s slow, imprecise work.

Alternatively, you can shrink the page to fit the screen. That works great, as long as you have no particular interest in reading the page. The type shrinks down to the size of subatomic particles.

But wait, there’s more. The Mylo can even play your music collection — or at least the part of it that’s in the MP3, WMA or ATRAC formats and not copy protected. That’s right: you can’t play songs from iTunes, Napster, Rhapsody or similar online stores. The toggle switch that controls playback works well enough; you even get to see album cover art, and the music can keep playing while you work in other programs. It pauses when you’re on a Skype call.

There’s even a music networking feature: the bafflingly named Ad Hoc mode. The idea is that once all your friends have Mylos (in Sony’s dreams), you can form a wireless connection with one especially hip friend who’s within 150 feet of you. At that point, you can listen to the music on his Mylo, streamed wirelessly to yours.

Of course, you could also just walk over to your pal and listen the old-fashioned way. But the advantage of the wireless sharing, Sony says, is that when a nearby freeloader is listening to the songs you’ve designated for sharing, you can continue to work on your Mylo — and, if you like, listen to a different set of songs.

You can put photos on your Mylo, too, and give little slideshows to your buddies. Works great, as long as both of you have no classes that day; photos can take forever to appear, about 20 seconds apiece. No matter how cute your campus crush is, that’s too much time for each picture.

The Mylo does a much better job of playing videos. There’s a catch here, too, though: it understands one file format, an MPEG-4 variant in PlayStation Video format. Too bad you need Sony’s Windows-only software ($20) to produce this kind of file.

The Mylo’s battery life is great for music playback (45 hours, says Sony), O.K. for video (8 hours) and so-so for Skype voice calls (3.5 hours).

Now, there’s a lot of good stuff on the Mylo. You can expand its one gigabyte of memory with a memory card (the expensive Memory Stick Pro Duo format). The software offers copy and paste, a note-taking mode, plentiful keyboard shortcuts and a straightforward navigation system including dedicated Back and Home buttons. You can use any graphic as a screen backdrop, and the Mylo thoughtfully memorizes frequently used hot spots, buddy lists and sign-in passwords. The gadget contains a built-in directory of hot spots for major United States cities (courtesy of JiWire.com), and T-Mobile has thrown in a year’s worth of free access at its wireless hot spots.

But that’s like admiring the wrought-iron legs of the deck chairs on the Titanic. Which young people, exactly, does Sony expect to pay $350 for a wireless gadget that doesn’t have a camera, can’t download e-mail, omits AOL Instant Messenger and can’t play music bought online?

There are other depressing signs that Sony isn’t as plugged in to college culture as it thinks. To market the Mylo, Sony has created a Web site called Rushmylo.com, a simulation of fraternity rush week.

You get your first blast of Sony’s sense of humor in the first “room,” where you meet your fellow pledges, apparently tapped for their anatomically and scatologically derived names. (Just how vulgar are they? Let’s put it this way: Grandpa Pus Bucket is one of the few that can be printed in this paper.)

Not sold on the Mylo yet? Well, just wait till you find the big-screen TV in the lounge. There, you get to watch — and even download, for repeated viewing — short videos that really showcase Sony’s classy taste. The comic highlight of one scene is flatulence in a hot tub; in another, it’s an unhappy pledge vomiting after binge drinking, as buddies cheer him on.

Sony may be the first company ever to depict throwing up as a way to sell electronics. “I’m sad that this is what corporations think of my generation,” a member of that generation told me.

The Mylo is far more interesting than the text-only kiddie pagers that bombed before it (like the AT&T Ogo). Wireless hot spots are everywhere these days; why should laptops have all the fun? And that part about free phone calls over Skype is a masterstroke.

Unfortunately, the Mylo can’t replace a cellphone, an iPod or a camera. Sony, in other words, is assuming its collegiate customers are prepared to carry around four gadgets. If Sony had even the slightest understanding of its target audience, it would realize that that’s not going to happen.

Cars to Automatically Detect Speed Limit

Sorry, Smokey. Speeding tickets might become yesterday's headache for drivers who use an automatic speed-limit detection system in the works from German electronics giant Siemens AG.

The system, expected to debut in as-yet-undisclosed cars in 2008, includes an onboard camera that reads speed limit signs. After it spots a sign, the system uses the car's navigation system to check whether the number it detected is plausible: Should the speed limit really be 55 in this urban zone?

Once the limit is established, the system can alert drivers in a display beamed onto the windshield that they're going too fast. Motorists also can let the system tap into the car's cruise control and automatically reduce the speed to the posted limit.

The system won't, however, automatically raise a car's speed to match a suddenly higher limit.

Does this get us closer to a car that can be put entirely on autopilot?

Siemens spokesman Enno Pflug doubts it. In the clear blue sky, putting a plane in a computer's hands is a pretty safe endeavor. Training a machine to adapt to the weaving, halting congestion of life on the road is another matter.

Not to mention that few drivers likely want to just sit there.

"Our aim is more comfort for the driver," Pflug says, "who also likes to drive."

A Virtual World but Real Money
Richard Siklos

It has a population of a million. The “people” there make friends, build homes and run businesses. They also play sports, watch movies and do a lot of other familiar things. They even have their own currency, convertible into American dollars.

But residents also fly around, walk underwater and make themselves look beautiful, or like furry animals, dragons, or practically anything — or anyone — they wish.

This parallel universe, an online service called Second Life that allows computer users to create a new and improved digital version of themselves, began in 1999 as a kind of online video game.

But now, the budding fake world is not only attracting a lot more people, it is taking on a real world twist: big business interests are intruding on digital utopia. The Second Life online service is fast becoming a three-dimensional test bed for corporate marketers, including Sony BMG Music Entertainment, Sun Microsystems, Nissan, Adidas/Reebok, Toyota and Starwood Hotels.

The sudden rush of real companies into so-called virtual worlds mirrors the evolution of the Internet itself, which moved beyond an educational and research network in the 1990’s to become a commercial proposition — but not without complaints from some quarters that the medium’s purity would be lost.

Already, the Internet is the fastest-growing advertising medium, as traditional forms of marketing like television commercials and print advertising slow. For businesses, these early forays into virtual worlds could be the next frontier in the blurring of advertising and entertainment.

Unlike other popular online video games like World of Warcraft that are competitive fantasy games, these sites meld elements of the most popular forms of new media: chat rooms, video games, online stores, user-generated content sites like YouTube.com and social networking sites like MySpace.com.

Philip Rosedale, the chief executive of Linden Labs, the San Francisco company that operates Second Life, said that until a few months ago only one or two real world companies had dipped their toes in the synthetic water. Now, more than 30 companies are working on projects there, and dozens more are considering them. “It’s taken off in a way that is kind of surreal,” Mr. Rosedale said, with no trace of irony.

Beginning a promotional venture in a virtual world is still a relatively inexpensive proposition compared with the millions spent on other media. In Second Life, a company like Nissan or its advertising agency could buy an “island” for a one-time fee of $1,250 and a monthly rate of $195 a month. For its new campaign built around its Sentra car, the company then needed to hire some computer programmers to create a gigantic driving course and design digital cars that people “in world” could actually drive, as well as some billboards and other promotional spots throughout the virtual world that would encourage people to visit Nissan Island.

Virtual world proponents — including a roster of Linden Labs investors that includes Jeffrey P. Bezos, the founder of Amazon.com; Mitchell D. Kapor, the software pioneer; and Pierre Omidyar, the eBay co-founder — say that the entire Internet is moving toward being a three-dimensional experience that will become more realistic as computing technology advances.

Entering Second Life, people’s digital alter-egos — known as avatars — are able to move around and do everything they do in the physical world, but without such bothers as the laws of physics. “When you are at Amazon.com you are actually there with 10,000 concurrent other people, but you cannot see them or talk to them,” Mr. Rosedale said. “At Second Life, everything you experience is inherently experienced with others.”

Second Life is the largest and best known of several virtual worlds created to attract a crowd. The cable TV network MTV, for example, just began Virtual Laguna Beach, where fans of its show, “Laguna Beach: The Real O.C.,” can fashion themselves after the show’s characters and hang out in their faux settings.

Unlike Second Life, which emphasizes a hands-off approach and has little say over who sets up shop inside its simulated world, MTV’s approach is to bring in advertisers as partners.

In Second Life, retailers like Reebok, Nike, Amazon and American Apparel have all set up shops to sell digital as well as real world versions of their products. Last week, Sun Microsystems unveiled a new pavilion promoting its products, and I.B.M. alumni held a virtual world reunion.

This week, the performer Ben Folds is to promote a new album with two virtual appearances. At one, he will play the opening party for Aloft, an elaborate digital prototype for a new chain of hotels planned by Starwood Hotels and Resorts. The same day, Mr. Folds will also “appear” at a new facility his music label’s parent company, Sony BMG, is opening at a complex called Media Island.

Meanwhile, Nissan is introducing its Nissan promotion, featuring a gigantic vending machine dispensing cars people can “drive” around.

And some of this is likely to be covered for the outside world by such business news outlets as CNet and Reuters, which now have reporters embedded full-time in the virtual realm.

All this attention has some Second Lifers concerned that their digital paradise will never be the same, like a Wal-Mart coming to town or a Starbucks opening in the neighborhood. “The phase it is in now is just using it as a hype and marketing thing,” said Catherine A. Fitzpatrick, 50, a member of Second Life who in the real world is a Russian translator in Manhattan.

In her second life, Ms. Fitzpatrick’s digital alter-ego is a figure well-known to other participants called Prokofy Neva, who runs a business renting “real estate” to other players. “The next phase,” she said, “will be they try to compete with other domestic products — the people who made sneakers in the world are now in danger of being crushed by Adidas.”

Mr. Rosedale says such concerns are overstated, because there are no advantages from economies of scale for big corporations in Second Life, and people can avoid places like Nissan Island as easily as they can avoid going to Nissan’s Web site. There is no limit to what can be built in Second Life, just as there is no limit to how many Web sites populate the Internet.

Linden Labs makes most of its money leasing “land” to tenants, Mr. Rosedale said, at an average of roughly $20 per month per “acre” or $195 a month for a private “island.” The land mass of Second Life is growing about 8 percent a month, a spokeswoman said, and now totals “60,000 acres,” the equivalent of about 95 square miles in the physical world. Linden Labs, a private company, does not disclose its revenue.

Despite the surge of outside business activity in Second Life, Linden Labs said corporate interests still owned less than 5 percent of the virtual world’s real estate.

As many as 10,000 people are in the virtual world at a time, and they are engaged in a gamut of ventures: everything from holding charity fund-raisers to selling virtual helicopters to operating sex clubs. Linden also makes money on exchanging United States dollars for what it calls Linden dollars for around 400 Linden dollars for $1 (people can load up on them with a credit card). A typical article of clothing — say a shirt — would cost around 200 Linden dollars, or 50 cents. As evidence of the growth of its “economy,” Second Life’s Web site tracks how much money changes hands each day. It recently reached as much as $500,000 a day and is growing as much as 15 percent a month.

On Tuesday, a Congressional committee said it was investigating whether virtual assets and incomes should be taxed.

But many inhabitants simply hang out for free. For advertisers worried about the effectiveness of the 30-second TV spot and the clutter of real world billboards and Internet pop-up ads, Second Life is appealing because it is a place where people literally immerse themselves in their products.

Steve F. Kerho, director of interactive marketing and media for Nissan USA, said the Second Life campaign was part of a growing interest in online video games. “We’re just trying to follow our consumer, that’s where they’re spending their time,” Mr. Kerho said. “But there has to be something in it for them — it’s got to be fun; it’s got to be playful.”

Projects like the Aloft hotel, an offshoot of Starwood’s W Hotels brand, are designed to promote the venture but also to give its designers feedback from prospective guests before the first real hotel opens in 2008.

The new Sony BMG building has rooms devoted to popular musicians like Justin Timberlake and DMX, allowing fans to mingle, listen to tunes or watch videos. Sony BMG is also toying with renting residences in the complex, as well as selling music downloads that people can listen to throughout the simulated world.

Sibley Verbeck, chief executive of the Electric Sheep Company, a consultancy that designed the Aloft and Sony BMG projects, said the flurry of corporate interest stemmed from the 10 to 20 percent growth in the number of people who had gone into virtual worlds each month for the last three years. Though exact numbers are difficult to come by, the figure should top a few million by next year, he said.

The spread of these worlds, however, is limited by access to high-speed Internet connections and, in Second Life’s case, software that is challenging to master and only runs on certain models of computers.

“If it doesn’t crash and burn then it will become real,” he said. “So now’s the time to start experimenting and learning ahead of your competition.”

As part of that process, businesses are learning that different rules apply when they venture into an arena where audiences are in control. “Users are the content — that’s the thing that everybody has a hard time getting over,” said Michael Wilson, the chief executive of Makena Technologies, which operates the virtual world There.com and helped build Virtual Laguna Beach.

For example, Sun Microsystems kicked off the opening of its Second Life venue with a press conference online hosted by executives and Mr. Rosedale of Linden Labs. But by the time the event was in full swing, several members of the audience had either walked or flown onto the stage, where they were running roughshod over the proceedings.

Even Mr. Rosedale got in on the act: he conjured a pair of sunglasses that he superimposed on a video image of a Sun representative talking on a screen behind the stage. (In virtual world lingo, such high jinks are known as “griefing.”)

Some corporate events have been met with protests by placard-waving avatars. And there is even a group called the Second Life Liberation Army that has staged faux “attacks” on Reebok and American Apparel stores. (The S.L.L.A. says it is fighting for voting rights for avatars — as well as stock in Linden Labs.)

Companies in this new environment have to get used to the idea that they may never know exactly who they are dealing with. Most of those in Second Life have chosen their names from a whimsical menu of supplied surnames, resulting in monikers like Snoopybrown Zamboni and Bitmason Pimpernel; males posing as female avatars and vice versa are not uncommon.

Another issue companies have to contend with is that their brands may already be in these virtual worlds, but illegally. Henry Jenkins, a professor at the Massachusetts Institute of Technology Media Lab, said one Second Life habitué created a virtual reproduction of the Ikea catalog to help people decorate their digital pads.

Mr. Verbeck of Electric Sheep said copyright infringement was rampant. His company runs an online boutique where Second Life residents sell each other pixelized creations of everything from body parts to home furnishings to roller skates — many of them unauthorized knockoffs.

So far, the boutique has not had many requests to stop selling fake products. But “we did have a request from the Salvador Dali Museum — which was great,” Mr. Verbeck said. “Second Life is so surreal that it was perfect.”

Until next week,

- js.

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Old 19-10-06, 03:51 PM   #3
Madame Comrade
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Creative Zen Players Lose FM Recording
Ed Oswald

Creative has apparently bowed to RIAA pressure, issuing a firmware update for two of its players that removes the FM recording feature. In the past, the music industry has argued that recording from radio broadcasts hurt music sales, and has most recently attempted to stop satellite radio services from implementing similar features.
Gee... what next? Banning all radio/tape recorder combos?
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Old 21-10-06, 11:48 AM   #4
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Originally Posted by TankGirl
Gee... what next? Banning all radio/tape recorder combos?
shhh tg. don't give them any ideas...

- js.
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