Peer-To-Peer News - The Week In Review - February 25th, '12

[JackSpratts]

Since 2002


































"We think [Hadopi] is ineffective, obsolete and built on false logic." – Aurélie Filippetti, French National Assembly


"There is absolutely nothing to complain about. The Internet is a great stroke of luck for the music industry, or better: the Internet is a blessing for us." – Eric Berger, Sony Music



































February 25th, 2012




Piracy Wars: Grooveshark's Looming Shutdown and Why Pirate Bay May Be Next
John Paul Titlow

Online music piracy has been an issue for well over a decade, but things have gotten much more interesting in the last few months. The shutdown of Megaupload was more or less the opening shot in the latest phase of the ongoing war over online piracy. Even before Kim Dotcom was carried away in handcuffs, things were already getting dramatic with the debate over SOPA and the widespread online protests that ultimately killed the bill as we knew it.

Given the police power used to detain Kim Dotcom and the DDoS attacks launched by Anonymous in retaliation, the whole affair started to feel more like an actual war last month. Call them The Piracy Wars.

The Megaupload case - and the many issues raised in its aftermath - is far from over. In the meantime, the Piracy Wars continue.

One of the latest targets of copyright holders is Grooveshark, the popular music streaming site that has long faced criticism for copyright infringement. The litigation brought against the company by all three major American music labels is still ongoing, but the site may be facing some ominous challenges in the meantime.

Grooveshark could soon be blocked by ISPs in Denmark, thanks to a ruling by a court in that country siding with copyright holders who say the company is responsible for copyright infringement and hasn't done enough to stop it. The ruling comes just days after a music blog called RnBXclusive was shut down by U.K. authorities for hosting copyrighted material.

Grooveshark has been a thorn in the side of major music labels for quite some time. The company has long claimed that its protected by the Digital Milenium Copyright Act (DMCA), but the music industry insists that its activities go beyond what the DMCA permits. Evidence presented in Universal Music's lawsuit against Grooveshark claims that company employees were complicit in the uploading of illegal material to the site, and were even rewarded for doing so. The company denies those claims.

The Pirate Bay could also find itself blocked in the U.K. after a judge ruled that the popular torrent site is complicit in copyright infringement.

In 2009, the founders of the Pirate Bay were found by a Swedish court to be guilty of violating copyright laws and sentenced to jail time. That sentence has since been upheld.

After the shutdown of Megaupload, several other cyberlockers and file-sharing sites either shut themselves down, scaled back operations or publicly proclaimed why they're different from Megaupload in the hopes of avoiding a similar fate.
https://www.readwriteweb.com/archive...wn_and_why.php





The Pirate Bay Faces UK Ban After High Court Ruling

The Pirate Bay, one of the world’s most popular filesharing websites, could soon be blocked in Britain after the High Court ruled it illegally encourages users to infringe music copyright.
Christopher Williams

The judgment by Mr Justice Arnold makes it more likely that major broadband providers will be ordered to cut off the Pirate Bay, which has been the scourge of the music and film industries for almost a decade.

It acts as a searchable index of links to BitTorrent trackers, which allow users to download files from each other. All the most popular files are copyright films, music and software.

The website claims to be the largest website of its kind, with more than four million trackers, and according to record labels generated up to $3m in advertising in October last year. Some 3.7 million Britons are Pirate Bay users, according to ComScore, and Alexa consistently ranks it in the 100 most popular websites in the world.

Because it does not itself host copyright material, the Pirate Bay’s defenders have often argued that it works in a similar way to Google, but Mr Justice Arnold found its operators “actively encourage” copyright infringement.

“In my judgment, the operators of [The Pirate Bay] do authorise its users' infringing acts of copying and communication to the public,” he said.

“They go far beyond merely enabling or assisting,” adding that Pirate bay users meanwhile have “a common design to infringe”.

"I conclude that both users and the operators of [The Pirate Bay] infringe the copyrights of the Claimants (and those they represent) in the UK."

The Pirate Bay was not represented in court. It is based in Sweden and has remained online over the years despite numerous attempts by copyright holders to shut it down, and its founders’ criminal convictions in 2009 for helping millions of users to infringe copyright.

"Despite their ability to do so and despite the judicial findings that have been made against them, the operators of [The Pirate Bay] take no steps to prevent infringement," said Mr Justice Arnold.

"On the contrary, as already explained, they actively encourage it and treat any attempts to prevent it (judicial or otherwise) with contempt."

The BPI, the record labels’ trade association, said today’s High Court ruling was a step towards having access tot the website blocked in Britain.

“The High Court today ruled that The Pirate Bay is illegal. The site defrauds musicians and causes huge damage to the music industry and wider creative industries,” said Geoff Taylor, the organisation’s chief executive.

“The ruling helps clarify the law on website blocking and we will now proceed with our application to have the site blocked to protect the UK's creative industries from further harm.”

It follows a landmark decision against BT in the case of NewzBin2 last year. The website, which also helped users to download films and music from each other, had already been ruled illegal but moved overseas, out of the reach of British courts.

In the first ruling of its kind, the High Court said broadband providers could be ordered to block access to NewzBin2 under the Copyright, Designs and Patents Act. So far BT and Sky have cut off access, though determined users are able to circumvent the blocking system.

The case was expected to prompt similar actions by copyright holders, of which the attempt to cut off the Pirate bay is the first.
http://www.telegraph.co.uk/technolog...rt-ruling.html





BitTorrent Crackdown: Police Raid Private Tracker, Others Shut Down
enigmax

Anti-piracy group Antipiratbyrån is making good on its threats to take file-sharing sites offline in Sweden. During the last 48 hours, police in Sweden and the Netherlands swooped on key staff and hardware connected to a long-standing private BitTorrent tracker. As yet another popular eBook site closes, famous tracker Scene Access is being warned – you’re next.

Following the announcement this month that Sweden’s Supreme Court would not be hearing an appeal of the Pirate Bay trial, entertainment industry lawyers warned that file-sharing sites in Sweden were living on borrowed time. All 150 sites with Swedish connections were advised to shut down – or else.

For Swepiracy, a private BitTorrent tracker founded in 2006, it’s now too late. On Thursday, police in Sweden and the Netherlands swooped on the 30,000 member site after it was accused by the authorities of being one of the most important locations when it comes to illegally distributing Swedish films.

Anti-piracy group Antipiratbyrån said that the tracker’s operators had ignored warnings to close down and instead took measures to protect themselves. The site’s servers were in the Netherlands, but police there assisted their Swedish counterparts and took the site down.

This is not the first time that Swepiracy has been taken offline. Following a similar torrent site crackdown following the “guilty” verdict in the Pirate Bay trial in April 2009, Swepiracy disappeared for a few weeks, but reappeared before the month was out.

Now, Antipiratbyrån say they will take the operators of Swepiracy to court and seek damages “according to The Pirate Bay model.” They also warn that other sites – including The Internationals (which was recently closed down only to later reappear) and famous private tracker Scene Access – are next if they don’t comply.

Also this week, police in Gothenburg carried out a raid against an individual they say is suspected of widespread file-sharing on The Pirate Bay and another local site, Shareitall. The man denied the charges and was subsequently released.

Other Swedish-based sites have already had enough. This week the admins of eBook-focused site Bibliotik.org closed down the site of their own free will.

“Bibliotik has shutdown all operations. We are no longer able to assume the risks involved. The staff would like to apologize for the sudden (but necessary) decision and thank everyone that participated and made Bibliotik such a great place for so long. We love you guys!” they said in an announcement.

Earlier this week, Sweden’s number 2 torrent site Tankafetast shut down after its operators decided that enough was enough. At the time, Antipiratbyran confirmed they had threatened the site with legal action. However, just days later, the site has changed owners and is now back online.
https://torrentfreak.com/bittorrent-...t-down-120225/





RapidShare Slows Download Speeds To Drive Away Pirates
enigmax

During the last week, users who rely on RapidShare’s free service have been complaining of reduced download speeds. Several theories have been circulating, mainly focusing on the file-hoster trying to drive users to take up premium accounts. But according to RapidShare the reason is simple – to drive pirates away from their service. Fast download speeds are still available for free, but they come at a different kind of cost.

During the wake of the Megaupload raids in January, TorrentFreak continuously monitored the cyberlocker world. We watched file-hosters panic and we watched bewildered users of their services try to find alternatives.

The fallout was fascinating to watch. Some hosters eventually closed down and some changed their policies, but it soon became clear that immediately usable capacity had become much more rare, at least on terms acceptable to users.

Interestingly – and despite the glaring omission of a cash rewards program – around warez blogs and release sites we saw an increased interest in RapidShare. Site users asked again and again for uploaders to put material up on the Swiss-based file-hoster.
Then a little over a week ago reports started coming in that users of RapidShare’s free service had experienced dramatic speed drops down to around 30/kbs. Speculation was rife that the company was exploiting the Megaupload closure fallout to drive users to their premium, non-limited products. So we asked RapidShare, and this was their fascinating response.

“On January 19th Megaupload was shut down by the FBI. Shortly thereafter, several other file hosters curbed their services or entirely stopped their operations,” the company told TorrentFreak.

“RapidShare has been faced with a severe increase in free user traffic and unfortunately also in the amount of abuse of our service ever since, suggesting that quite a few copyright infringers have chosen RapidShare as their new hoster of choice for their illegal activities,” the company explained.

“We have thus decided to take a painful yet effective step: to reduce the download speed for free users. We are confident that this will make RapidShare very unpopular amongst pirates and thus drive the abusive traffic away.”

RapidShare says that there is a direct link between free users of file-hosting services and copyright infringement. Those who like to pirate prefer not to pay, the company believes, not least because they want to avoid connecting their personal payment details to a copyright-infringing cyberlocker account.

Now, there will be those who say that however RapidShare dress it up, the company will be aware that the restrictions will drive users to their premium services to get better speeds. But interestingly RapidShare is now offering ways for users to get faster download speeds without paying a dime – providing those uploading the original files they’re trying to access do some work.

“We knew that through the action taken we would even affect some RapidPro customers, especially those who offer their own files via websites or blogs and heavily depend on a possibility for free users to download their files. Therefore, we have decided to offer those customers a kind of deregulation that allows free users to download their files with the fastest possible speed again,” the company says.

What this means is that uploaders of content will have to provide RapidShare with details on the nature of their account including what type of files they’re sharing, the name of the sites and blogs where the download links are getting posted, and the uploader’s email address and telephone number.

RapidShare adds that by signing up to the scheme, uploaders give the company the right to check their files and websites for illegal activities.

In recent months RapidShare has made substantial efforts to demonstrate it is a responsible file-hoster that takes the law seriously, but this action is perhaps the strongest indication yet that the company wants to disassociate itself from infringing content and a Megaupload-style fate.
https://torrentfreak.com/rapidshare-...irates-120224/





Did Napster, Torrents, File Sharing, Kill the Record Industry? Who Cares?
Tim Worstall

There’s an interesting paper that speaks to the great issue of the effect that the digital revolution has had on the record industry. Or perhaps the recording industry is a better formulation.

There’s no doubt that Napster, torrents, file sharing in general, have had an effect on the way the industry organises itself, upon the profits and incomes that are made within it. But the important question we need to ask ourselves is, do we care about that?

And the correct answer is that no we shouldn’t. I’ve touched on this here but I’ll expand a little.

The first and most obvious reason that we just don’t give even Rhett Butler’s damn is that we don’t care about the producers. Not just record producers that is, we don’t in fact care about the producers of anything. We don’t care about their wages, their financial health, race, creed or colour. What we do care about is the ability of the consumer to consume and we’re only interested in that list of producer worries in so far as it impacts upon that ability to consume.

So with music, or recorded music, we don’t really care about EMI or Sony Records or any of the others. We care only in so far as they are able to, or in their absence someone else is able to, supply us with the music we wish to consume.

Which brings us the the whole point of Intellectual Property, or IP. This is true of patents, of copyright. They are not there to provide a just reward for the creators of new things for us to consume. They are there to encourage the next wave of potential creators by showing that the last wave got rich producing things we enjoyed consuming. This is known as an incentive to create and as the first thing you need to know about economics has it, incentives matter.

So, we’d be rather interested in knowing whether the torrents (or as we might call it, outright theft of IP) has reduced the incentive to create?

We might also be interested in whether they have reduced the quality of what is created anew for us. This could be another indication of declining incentives and thus an indication that we should do something about this.

And that’s where the interesting paper comes in. This one sitting right here. Using, dare I say it, a pretty cute data set and models we find actually that the quantity of new music created has not decreased even as the old is being stolen left right and centre and nor has the quality.

That last might sound counter-intuitive for we can all hear with our own ears that the new music is nothing like the quality of what it was in our own youth. In fact I can assert with calm confidence that everything produced after 1984 was rubbish and every thing in the past 20 years simply noise. But the reason for that is not any decline in the absolute standard of music being produced: it’s that I’m approaching 50 and this reaction to new music goes along with the territory like weight gain and the forehead lengthening by the day.

The reason we’ve not seen a decline in quantity or quality of music produced even in the face of seemingly declining incentives is that while the digital technologies have made stealing music cheaper they have also made making music so. And the incentives are not in fact the gross income from something, they are the nett income. Incentives, in fact, seem to have stayed about the same: something evident from our continuing to get vast oceans of new music with no decline in quality.

At which point we really can declare that we care not a whit for the futures of the record or recording companies. IP is not about creating a just and righteous income stream from creation. It is about carefully balancing the incentives to make sure that we encourage the next wave of invention and innovation. And as that invention and innovation seems to be coming along just fine we’ve a pretty good clue that the incentives are suitably in place.

In short, no matter what the RIAA says, that we’re getting new and good music shows that file sharing isn’t killing the music industry. It might well be killing some of the participants in it but then we really don’t care about the producers at all, only about the ability of the consumers to consume. Who seem to be doing pretty well out of this as they’re getting the new music and they’re getting it cheaper too.
http://www.forbes.com/sites/timworst...try-who-cares/





RIAA Insists That, Really, The Music Industry Is Collapsing; Reality Shows It's Just The RIAA That's Collapsing
Mike Masnick

I'm honored to see that the folks at the RIAA have taken the time to read our Sky is Rising report. Unfortunately, they don't seem to like hearing the news that the wider music industry is actually thriving -- because it doesn't work well with their legislative strategy (and, remember, the RIAA's main focus is on passing new legislation to help legacy gatekeeper record labels -- not in helping artists). And, this is understandable. As we detailed in the report, as well as in my talk at Midem, a popular music industry conference, the real story of the report is that the market is thriving for artists and consumers, but is much more challenging for big, lumbering legacy players. That would basically be the RIAA's membership.

Either way, I have to take issue with some of the RIAA's "criticisms" of the report, because they're pretty laughable.

The one problem? The study is highly misleading and doesn’t present an accurate or complete view of what has been really occurring in the United States in recent years.

Want proof? Instead of looking at actual sales data that is widely available, the paper looks at a global sales metric that includes a much wider range of industries outside of music.

Actually, people should read the full report for themselves, where they'll see that we looked at a variety of different data sources to see what the data said, and noted the various caveats with each of them. Oh, and that "global sales metric" that the RIAA complains about? That's directly from the IFPI -- the sister organization of the RIAA, who basically represents the RIAA's views around the world. If the RIAA does not like the IFPI's own numbers, perhaps it should have a talk within its own organization.

[i]Moreover, we see real world examples that consistently show the importance of the “traditional” metrics for working artists. For example, although the industry has embraced the concept of broadening revenue platforms, recent work by the Future of Music Coalition show that few artists are benefitting significantly from these complementary revenue sources.

First of all, we've been huge supporters of FMC's work here and have urged musicians to take part in FMC's survey. I don't recall the RIAA helping out. But, really, the problem is how incredibly misleading the RIAA is here, and how it's deliberately misreading the results of FMC's report. The details -- as we said in our own discussion -- are that there is a lot more competition. So, for those who do not adapt or do not embrace new opportunities, it's no surprise that they face more struggles. But for those who do adapt, things are better. Even more important is that, thanks to these new technologies, services and revenue streams, we have more people who are actually able to make money from their music.

The real problem here is that the RIAA ignores the zeros. In the past, under the old system, if you weren't some hugely successful label musician, you generally weren't a musician at all. You made zero and you dropped out of the market entirely. So you didn't count. But thanks to the new opportunities, many more people can make music, release music and make money from music. But that means a lot more competition. So, sure, if you don't compete with that wider base of competition, perhaps you're going to make less. But that's not a sign indicating a decline in health of the overall market. It's exactly the opposite.

I'm reminded of the early studies when computers were first introduced into the workplace. For about a decade afterwards, there were studies that showed that, on average, offices that had computers on every desk saw productivity decline. So, some argued, companies shouldn't computerize. But that's a misunderstanding of statistics. The problem was that many companies didn't know how to properly use computers. Those that did were thriving. Those that didn't had negative results -- and when you netted it out, early on, the negative results outweighed the positive, but that turned the corner once people started to figure things out.

The same thing is happening in the music industry. Many artists are so used to the way things were that they don't quite understand how to embrace and use these new offerings. For them, life is definitely more difficult. But as more and more tools have made life easier, there's more and more opportunity, and those who do understand these things are seeing success.

And, the FMC's results seem to support that. Many artists they surveyed have seen new revenue streams from these sources, creating new forms of success. Others, have not. But it's not that the technology or some nefarious "piracy" threat is the problem. It's that they haven't fully understood the opportunities presented by the tools.

As for touring, the paper does accurately state that over a period, revenues from touring did increase. But it oddly omitted the important fact that concert revenues have actually declined since 2009. In fact, in 2010, North American concert ticket sales dropped 15%, according to Pollstar. And in 2011, despite U2 setting a record for the highest grossing tour in history, North American concert sales contracted another 4%.

First of all, the paper didn't just point out that touring revenue "increased," it points out that it tripled. In other words it grew massively at the very same time that the recording industry insisted that the "music industry" was dying. Cute of the RIAA to leave out the scale by which it grew. It is true that we did not include 2010 or 2011 numbers -- and that's simply a function of the fact that we didn't have them. The latest detailed report we had was the 2010 report showing the numbers up until 2009. And we finished the report before the 2011 numbers came out (we finished it before the end of 2011). Furthermore, it's worth pointing out that Pollstar's numbers are not the be all, end all, as they focus on the bigger venues and leave out an awful lot of interesting things happening among smaller venues. We have been working on ways to get better data there as well, but didn't have enough solid data to put anything into the report (contrary to the RIAA's claims, we were quite careful to focus on data that was highly credible, and rejected a number of reports that we saw that were less than trustworthy, even if they supported what we saw in the other data).

As for the decline in concert revenue, that would be an issue if the entire point of our report was "all the money is moving to concerts!" But it wasn't. The report was looking at the overall industry, and showing how consumers are spending more money overall, and that the industry is healthy. Frankly a decline in concert revenue over the past couple years is neither surprising nor a major concern. Some of the bigger touring acts have been experimenting with increasingly high prices for concert tickets, and eventually they were going to hit a ceiling and face some pushback. The latest Pollstar numbers suggest they may have found that ceiling. Separately, the data corresponds with a global recession (remember that?) where people may have decided to hold back on what seems like more of a "luxury" -- which includes things like going out to an expensive concert.

Finally, the original paper by Mr. Masnick included factual errors about SoundScan data. The increase in the number of new album releases only reflects the ease with which sales even in very low numbers can be tracked today (only a single copy needs to be sold to be counted). For example, of the approximately 75,000 new albums released in 2010, about 60,000 sold less than 100 copies each, and a mere 1200 of them (less than 2% of the total) accounted for 87% of all new release sales.

Notice the RIAA does not actually say what "factual errors" were in the paper. And that's because they can't. To claim that the increase in new releases is only because of better counting by Soundscan defies reason. For example, TuneCore does not report results to Nielsen Soundscan and it puts out a hell of a lot of releases. Similarly, CDBaby/Disc Makers points out that Soundscan doesn't count its releases either -- which number around 50,000. But even looking at just the Soundscan data, it's foolish to believe that the increase "only" comes from better counting. The ability to record and release an album today is easier than ever before, and with more musicians doing exactly that, pretending that there isn't more music being made today than in the past is just silly.

As for the "low sales" of certain albums, I'm not quite sure what point the RIAA thinks it's proving there. As we noted, much of the opportunity was in moving away from record sales, and in encouraging other business models. That artists are recognizing that, by relying less on direct music sales, seems to support our position, not go against it.

The problem is that the RIAA is, once again, focusing solely on the revenue stream that the labels earn on, rather than what's actually happening in the wider industry.

Regardless of the metrics you choose, the trends in the United States have been clear, with a market less than half as large as it was 10 years ago and 60% fewer employees in the music business.

Um, but that's wrong. First of all, the "market" that is "less than half" is merely the market for recorded music sales. As the paper shows -- and the RIAA does not dispute -- the overall market and the amount of money being spent, has continued to increase. It's just that it's going into different parts of the industry. The parts the RIAA doesn't control. The 60% fewer employees number we debunked a few weeks ago, when the RIAA made the same claim. It represents employees at the legacy gatekeepers: the major record labels only. The major labels have decreased employment from 25,000 to 10,000 people total. First of all, note just how small this is. And this is all of the major record labels. But that does not represent all employment in "the music industry" not by a long shot.

Also, over this same period, the major labels went from the "Big Six" to the "Big Five" (UMG buying Polygram) to the "Big Four" (Sony and BMG merging) to the "Big Three" of today (Universal buying EMI). With so much consolidation, is it really any surprise that overlapping positions might get killed off? Furthermore, as was the point of the entire report, the music industry is changing. The sale of recorded music is no longer the primary driver, and much of that revenue has moved elsewhere. So, um, duh, there will be fewer jobs at the buggy whip makers major labels. But that's a problem for the major labels. It's not a policy problem for the government nor is it a problem for the wider music industry.

Virtually every neutral academic study has concluded that there is real harm to the music community when people download music illegally.

First of all, that is not a summary of "every neutral academic study." It's become the new go-to talking point for the industry to point to that Liebowitz paper and I've been spending a lot of time going through the details for a future post, but rest assured that it's a joke. And, at best, even if you take many of the claims in that paper at face value (and you shouldn't, because they're laughable), all it discusses is the impact on record sales, which again is just one part of the market. With the money shifting to other parts of the market, the only ones this is a problem for... are the major labels who make up the RIAA.

Either way, we're glad that the RIAA decided to check out our study. If they had attended Midem, they could have enjoyed the rather enthusiastic response the report received from numerous musicians and independent labels I spoke to. Lots of folks are excited about the opportunities the world enables today. It's just too bad the RIAA is looking backwards, rather than forward.
http://www.techdirt.com/articles/201...llapsing.shtml





MPAA's Chris Dodd Extends SOPA Olive Branch to Silicon Valley
Joshua L. Weinstein

MPAA Chief Chris Dodd made a peace overture to Silicon Valley Wednesday, telling an audience that "Hollywood is pro-technology and pro-Internet."

But he also made clear the legislative battle against piracy wasn't over, maintaining that "a strong system of copyright protection for online content is critical to the continued success of the flourishing Internet marketplace."

The MPAA and the tech community were on opposing sides of the battle over the Stop Online Piracy Act, or SOPA. The MPAA backed the legislation and sister legislation in the United States Senate, Protect Intellectual Property Act, or PIPA. Many high-tech firms, including Google, opposed the measures and an explosion of online opposition stalled the measures in Congress.

Speaking to the Atlanta Press Club on Wednesday, Dodd said that "nearly one-quarter of all global Internet traffic is copyright theft. And at the heart of the problem is the proliferation of parasitic foreign rogue sites whose sole purpose is to facilitate, and profit from, the theft of international property."

The former senator from Connecticut said that "We are not talking about overzealous film buffs or political activists making a statement about freedom of information. We are talking about criminals."

And he drew a comparison between the movie industry and Silicon Valley.

"We cannot draw up a business model that accounts for the wholesale theft of our product," he said. "It's true for pharmacies. It's true for the automobile industry. It's true for software developers. And it's true for us."

Dodd said that, "I firmly believe that our industry cannot survive without the innovations that come out of Silicon Valley every day -- and I know that we must have a free and open Internet to keep those innovations coming. But it works both ways."

He said that "copyright legislation helped to create the Internet of today -- not to mention providing companies like Apple with the incentive to -- as they say -- think different, and to think big."

The one-time candidate for the Democratic nomination for president, told the audience that "we must act to stop the theft of intellectual property online."

"The coalition supporting a crackdown on ... criminal sites includes companies large and small who produce movies, TV shows, music, software, photography, prescription drugs, consumer electronics -- everyone from Gibson Guitars to the Ultimate Fighting Championship."

And he asked audience members for their support.

"If you believe that freedom of speech does not imply, and the ability to innovate does not require, a license to steal, if you believe that the men and women who work hard to make films and TV shows deserve to be fairly compensated ... I invite you to join this coalition and help us move towards a solution to this problem."
http://www.thewrap.com/movies/articl...n-valley-35642





How the European Internet Rose Up Against ACTA
Quinn Norton

Prime Minister Donald Tusk of Poland sent a letter to his fellow leaders in the EU Friday urging them to reject ACTA, reversing Poland’s course with the controversial intellectual-property treaty, and possibly taking Europe with them.

“I was wrong,” Tusk explained to a news conference, confessing his government had acted recklessly with a legal regime that wasn’t right for the 21st century. The reversal came after Tusk’s own strong statements in support of ACTA and condemnation of Anonymous attacks on Polish government sites, and weeks of street protest in Poland and across Europe.

The seeming overnight success came after both years of work by European NGOs, and the spark of the SOPA/PIPA protests in America (which included Wired.com).

ACTA, or the Anti-Counterfeiting Trade Agreement, is an international treaty that was negotiated in secret over the span of four years. While the provisions are currently public, their genesis was hidden from democratic scrutiny, and most nations signed on to ACTA without any chance for their citizenry to review or comment on the process. Beyond its undemocratic origins, it’s often unclear how ACTA’s requirements would be implemented, or could be implemented without creating a technical architecture online that restricts speech. For instance, ACTA’s harsh DMCA-like provisions against anti-circumvention could effectively render some free software, which by its nature can’t support DRM, illegal in the Western world.

Many in Europe, and especially the former Soviet-controlled countries like Poland, are sensitive to anything that smacks of censorship. Activists in places like Poland and Germany saw the specter of authoritarian control in both the secretive imposition of ACTA and in the possible consequences of its technical provisions. The American architects of ACTA, not having had the recent experience of oppression, seem to have often been tone-deaf to the European fears.

Mike “rysiek” Woźniak, vice-president of the board of the Polish Free and Open Source Software Foundation, has been working against ACTA for three years. But in the wake of the SOPA/PIPA protests, the people were ready to listen.

“[The Polish people] felt they were left out of the loop, somebody made an important decision for them and without their knowledge,” Woźniak said. People began to self-organize on Facebook, and the NGOs like Woźniak’s stepped in to give them tips on lawful and effective protests.

On Jan. 25, tens of thousands of Poles from across the political spectrum turned out on the streets of Polish cities to protest the Treaty. Popular Polish websites went dark in echos of the English-language Wikipedia’s Jan. 18 day of darkness (which Wired also participated in). In a moment that generated an iconic image that has raced around the net, members of the Polish Parliament simultaneously donned Anonymous-style Guy Fawkes masks to show their disapproval of ACTA, even as DDOS attacks were still being launched against government sites by the hacker collective.

On Feb. 6, all this activity culminated in an unprecedented conversation between Polish Prime Minister Donald Tusk and — for want of a better word — the internet, that lasted the better part of seven hours.

People used social media to lob questions and comments, but when the anti-ACTA NGOs involved said Twitter and Facebook were not sufficiently open and transparent platforms for voicing public opinions and suggested IRC (Internet Relay Chat) the government agreed. #debataACTA and #debataACTA-pytania were set up on the IRC server of the political hacker group Telecomix, where a geekier set came to participate. The discussions were projected for the PM who answer questions and points for hours while the event was livestreamed and broadcasted over Polish TV and Radio.

Meanwhile, ACTA was causing furor across Europe as thousands turned out from Slovenia to Sweden to Germany.

The Slovenian ambassador who signed ACTA issued a penitent statement about her actions, saying “I signed ACTA out of civic carelessness, because I did not pay enough attention,” even apologizing to her own children, as well as her people. February 11 was declared an Anti-ACTA protest day, with protests in hundreds of European cities, including something north of 30,000 people in Germany.

Then today in Poland, the place that started the European backlash, the Prime Minister issued his total reversal and advised his peers across Europe to join him.

“The fact that the PM called the EU to reject the treaty and the fact that he indicated a strong need for a serious debate on intellectual property law reform is of crucial importance, we agree with that completely. We do hope these are the first steps in a long process and hope that this move will be followed by next, confirming this government’s dedication to solving these issues,” says Woźniak, “This is the first step, an important one, but still just a step… but it does feel like there is a change of air.”

At this point many countries in Europe that have signed the treaty have set aside ratification in response to public outcry, effectively hampering the ratification and implementation of the treaty.
http://www.wired.com/threatlevel/2012/02/europe-acta/





ACTA: EU Court to Rule on Anti-Piracy Agreement
BBC

The European Union's highest court has been asked to rule on the legality of a controversial anti-piracy agreement.

The Anti-Counterfeiting Trade Agreement (Acta) has been criticised by rights campaigners who argue it could stifle free expression on the internet.

EU trade head Karel De Gucht said the court will be asked to clarify whether the treaty complied with "the EU's fundamental rights and freedoms".

The agreement has so far been signed by 22 EU member states.

The European Commission said it "decided today to ask the European Court of Justice for a legal opinion to clarify that the Acta agreement and its implementation must be fully compatible with freedom of expression and freedom of the internet".

Several key countries, including Germany and Denmark, have backed away from the treaty amid protests in several European cities.

Acta is set to be debated by the European Parliament in June.

While countries can individually ratify the terms of the agreement, EU backing is considered vital if the proposal's aim of implementing consistent standards for copyright enforcement measures is met.

As well as the 22 European backers, which include the UK, the agreement has been signed by the United States, Japan and Canada.
'Misinformation and rumour'

Mr De Gucht told a news conference on Wednesday: "Let me be very clear: I share people's concern for these fundamental freedoms... especially over the freedom of the internet.

What is Acta?

• The Anti-Counterfeiting Trade Agreement is an international treaty aiming to standardise copyright protection measures.
• It seeks to curb trade of counterfeited physical goods, including copyrighted material online.
• Preventative measures include possible imprisonment and fines.
• Critics argue that it will stifle freedom of expression on the internet, and it has been likened to the controversial Stop Online Piracy Act (Sopa).
• Acta has been signed by 22 EU members, including the UK, but is yet to be ratified by the European Parliament.

"This debate must be based upon facts, and not upon the misinformation and rumour that has dominated social media sites and blogs in recent weeks."

However, he went on to say that the agreement's purpose was to protect the creative economy.

"[Acta] aims to raise global standards for intellectual property rights," he said, adding that the treaty "will help protect jobs currently lost because counterfeited, pirated goods worth 200bn euros are currently floating around".

Acta's backers face strong opposition within the EU. Viviane Reding, the commissioner for justice, fundamental rights and citizenship, took to Twitter to outline her worries on the treaty.

"For me, blocking the Internet is never an option," she wrote in a statement.

"We need to find new, more modern and more effective ways in Europe to protect artistic creations that take account of technological developments and the freedoms of the internet."
http://www.bbc.co.uk/news/technology-17125469





Sony Music Boss: Censored YouTube Videos Cost Us Millions
Ernesto

Sony Music’s CEO of international business said in a recent interview that the Internet is a blessing for the music industry. Nevertheless, there are still problems that have to be overcome, such as restrictive copyright enforcement by music rights collecting agencies. The Sony boss says that YouTube revenue running into the millions is being lost because German rights group GEMA’s policies prevent artist videos from being shown online in the country.

For years the music industry has blamed Internet piracy for all their troubles.

Slowly, however, the record labels are starting to realize that the Internet is the future and it will ultimately do more good than harm.

One of the people who embraces this positive view is Edgar Berger, Sony Music’s CEO of international business. In a recent interview he stressed the importance of the Internet, while noting that the increase in Internet sales almost makes up for the decline in physical sales.

“There is absolutely nothing to complain about. The Internet is a great stroke of luck for the music industry, or better: the Internet is a blessing for us,” Berger said.

“You can not blame the Internet for harmful excesses. On the contrary. It has brought us tremendous new opportunities,” he added.

But with these new opportunities come new rivals from an unexpected corner. According to the Sony boss, music rights collecting agencies are now preventing innovation in certain countries.

In Germany, for example, most YouTube videos by Sony artists are blocked due to the music rights group GEMA, and not because Sony wants it that way. When asked why Sony’s music is not available on YouTube in Germany, Berger responded bitterly.

“It’s not because of us. You must direct this question to the German collecting agency GEMA, they licensed the copyright very restrictively.”

It turns out that the price GEMA want for views is too high for YouTube, and as a result the videos of some of the world’s most famous artists are blocked.

According to Berger, GEMA’s restrictive regime is not helping the artists or the music labels. In fact, he says the music industry is losing “millions in revenue”. Additionally, it’s one of the prime reasons why the digital music business is so far behind in Germany.

This is not the first time Berger has lashed out against GEMA’s practices. According to the Sony boss it’s time for the music rights group to embrace the digital age.

“We want to see streaming services like Vevo and Spotify in the German market. [These platforms] must not be blocked by GEMA any longer,” he said earlier. “Artists and music companies are losing sales in the millions.”

So here we have the boss of one of the largest music labels blaming another group for their repressive copyright enforcement. It’s the world upside down, but a promising change from Sony’s side.

This is not the first time GEMA has negatively entered the news this year. Last month the popular music streaming service Grooveshark decided to shut down voluntarily due to the “unreasonably high” licensing costs imposed by the music rights group.
https://torrentfreak.com/sony-music-...llions-120224/





Police Raid File-Hosting Site, Arrest Operator and ISP
Ernesto

German police have shut down the cyberlocker Skyload.net and arrested the alleged owner along with a person who provided hosting services to the site. The actions are part of an ongoing sweep against people connected to the popular movie streaming portal Kino.to. Skyload’s operator is suspected of uploading more than 10,000 films to Kino.to’s paid affiliate program.

On June 11th last year Europe witnessed one of the largest piracy-related busts in history.

An international operation shut down the movie streaming portal Kino.to and police made more than a dozen arrests. As collateral damage, several file-hosting services connected to Kino.to also went down.

A few days ago Skyload.net, another cyberlocker with connections to Kino.to, was raided and shut down while the site’s alleged operator Maik P. was arrested. According to the authorities the 28-year-old operator was personally responsible for uploading more than 10,000 films .

The German anti-piracy outfit GVU reports that after Kino.to was shut down Skyload continued its operation by linking unauthorized streams and downloads to alternative movie portals such as kinoX.to.

Together with the operator of Skyload, the police also arrested Marcel E., the 25-year-old owner of the site’s hosting provider. Aside from providing hosting services to the cyberlocker, the Internet provider is also alleged to have hosted servers to release groups and movie streaming portals.

How tight the connections were between the hosting provider and the file-sharing services is unclear from the information currently being made public. It is quite unusual for a hosting provider to get arrested for alleged crimes that were committed through clients.

Both men have been charged with copyright-related offenses and face up to several years in prison if they’re found guilty. Several other people connected to the Kino.to ring have already gone on trial for their part in the site’s operation and the main admin was recently sentenced to three years in prison.

Together with the Megaupload shutdown, the actions against sites affiliated with Kino.to have drastically changed the cyberlocker business. In particular, rewards programs for uploaders became a liability and have been dropped by dozens of sites.
https://torrentfreak.com/police-raid...nd-isp-120221/





Kim Dotcom Wins Bail in Fight Against U.S. Extradition
Gyles Beckford

U.S. crime-fighters failed in a bid to keep alleged Internet pirate Kim Dotcom behind bars on Wednesday when a New Zealand court freed him from jail and instead put him under effective house arrest and banned him from using the Internet.

The court, in upholding a bail application by the German founder of file-sharing website Megaupload, cast some doubt on the multi-millionaire's purported flight risk pending an extradition hearing scheduled for August.

"I'm relieved to go home and see my three little kids and my pregnant wife," a smiling Dotcom, 38, said after the ruling, as he was hustled toward a waiting car by supporters and lawyers.

Wearing his usual black T-shirt, trouser and jacket, he vowed to fight the eventual extradition hearing on U.S. charges of copyright piracy, racketeering and money-laundering.

Kim Dotcom, who has New Zealand residency and is also known as Kim Schmitz and Kim Tim Jim Vestor, had been in custody since his arrest in a military-style raid on January 20 on his mansion outside Auckland by local police acting on a U.S. warrant.

Under the bail conditions, Dotcom, who kept a private helicopter as part of his lavish lifestyle, must live in a small house near the mansion he had rented and wear an electronic tag. He will be restricted in how far he can travel. The judge also banned helicopters from flying to or landing on the property.

Prosecutors say Dotcom was the ringleader of a group that netted $175 million since 2005 by copying and distributing music, movies and other copyrighted content without authorization through Megaupload.com and related websites, among the world's busiest before they were shut down last month.

Dotcom's lawyers say the company simply offered online storage and that he strenuously denies the U.S. charges.

Multiple Passports

Dotcom obtained bail on his second attempt, after the judge said a review of the facts and Dotcom's circumstances showed he was less of a risk of fleeing than before.

This month, the High Court had upheld a lower court judge's ruling that there was a major risk Dotcom, who had passports and bank accounts in three names, might try to flee the country.

But Judge Nevin Dawson Wednesday reasoned that bail could be awarded, given that there was no new evidence that Dotcom had undisclosed funds he could use to aid in a flight from justice.

He said prosecutors had been unable to find any new funds or assets that had not already been seized, and prosecution claims that he was a wealthy man was not sufficient reason to hold him.

Dotcom's three co-accused were also bailed until late August for the hearing of U.S. extradition request.

A U.S. Justice Department spokeswoman declined immediate comment On the New Zealand bail ruling.

Judge David McNaughton, who presided in previous hearings, set August 20 as the earliest date he could hear the extradition case, which he has scheduled to last three weeks.

Prosecutors said the formal extradition application has not yet been received but was expected by early March.

Last week, a U.S. grand jury added more charges against Megaupload and its executives, alleging they took copyrighted material from sites such as YouTube for its own service.

Dotcom and his co-accused were arrested after some 70 armed New Zealand police raided his country estate at the request of the U.S. Federal Bureau of Investigation.

Officers cut Dotcom out of a safe room he had barricaded himself in within the sprawling mansion, reputedly New Zealand's most expensive home. Property including more than a dozen luxury vehicles was seized and bank accounts worth millions were frozen.

A small group of Dotcom's friends and supporters listened through both hearings.

"Of course I'm pleased, absolutely. It's about time," a young woman said, but declined to be named.

Dotcom has told the court earlier that with his assets frozen and business shut down, he had no intention of trying to flee to his native Germany, where he would be safe from extradition.

Legal experts have said extradition hearings are likely to be drawn out with appeals likely all the way to the country's highest court.

(Additional reporting by Jeremy Pelofsky in WASHINGTON; Editing by Lincoln Feast and Mark Bendeich)
http://www.reuters.com/article/2012/...81L09L20120222





Pinterest Might Be Enabling Massive Copyright Theft
Kevin Lincoln

Pinterest is one of the fastest-growing web sites in history.

Launched about six months ago, the site already has more than 10 million monthly visitors and, among social networks, is ranked below only Facebook and Tumblr in terms of average time-spent-per-user per month.

But with massive growth comes major scrutiny.

Choire Sicha at The Awl brought up the question of whether Pinterest might be the most illegal network to hit the Internet yet. More illegal than Napster. More illegal than Megaupload.

Pinterest is a place where users upload photography – sometimes professional, copyrighted photography – that they found elsewhere on the Internet.

We talked to media law attorney Itai Maytal, who's an associate at Miller Korzenik Sommers LLP, to try and understand: Is Pinterest theft on a massive scale? Using what we learned from him, we've created an FAQ to try and answer this question.

Q: First off, what is Pinterest?

A: Pinterest is a social media site that involves "pinning" pictures you like to 'boards' that you create. Its users are heavily female — maybe as much as 95 percent.

Q: Sounds fun.

A: It is! People love the visual element. Because you can combine pictures from all over the web, as well as your own, and put them in one place, it's sort of like an interactive collage.

Q: But wait: You can use other peoples' photos?

A: Yes.

Q: Isn't that illegal?

A: It's not clear. Pinterest definitely allows users to post other photographers' work to the site. But it's not clear that this is illegal.

In its terms of use, Pinterest actually specifies that users shouldn't pin photos they don't own the rights to, a request that is being ignored to an absurd degree. Even if you link and attribute, that does NOT absolve you of the fact that you took someone else's work and re-appropriated it.

It's all about complying with the DMCA, or the Digital Millennium Copyright Act.

Q: That's how YouTube works, right?

A: On YouTube, you're only allowed to post videos you own the rights to. If a copyright holder sees that you posted one of his or her videos, YouTube will take it down upon complaint.

Q: But is it illegal?

A: Pinterest could be in Fair Use territory (meaning, legally protected). Fair Use law allows people to use work they do not own the copyright to. There are four elements to consider when determining if something is Fair Use:

1. The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes
2. The nature of the copyrighted work [is it fictional or factual]
3. The amount and substantiality of the portion [of the work] used in relation to the copyrighted work as a whole
4. The effect of the use upon the potential market for, or value of, the copyrighted work

The big one is that first question. If the use is transformative — if something new is being created by using the picture — then it can be construed as Fair Use.

One of the most famous cases of this, and one that Maytal pointed to as likely to be a major precedent, is Perfect 10 v. Google. A nude-image subscription service. Perfect 10 sued Google because Google's Image search showed pictures that Perfect 10 hid behind a paywall. It claimed that Google was doing it irreparable harm by showing the pictures in its search.

Google won the case. The courts ruled that Google Image search is Fair Use because it's transformative.

Maytal told us, "The use of the thumbnails was highly transformative, allowed users to get to a source of information that they couldn’t otherwise get." Google Image search becomes a social benefit and a reference tool.

Q: So how does Pinterest stack up in these Fair Use conditions?

A: Not well. On question 2, photography is inherently creative — photos are not facts — so that's a point against Pinterest. On question 3, Pinterest, in many cases, allows users to see photos from other sources in their full, original form on Pinterest's site. That's the work in its entirety.

On question 4, if users are able to see the work in its entirety, then they have no need to click through to see it at its source, potentially affecting the market. Also, even if you argue that Pinterest helps photographers or businesses sell products, that doesn't necessarily help.

Q: Isn't helping someone sell their stuff always good?

A: No. A case involving J.D. Salinger's attempt to stop his letters from being published established that a copyright holder always has the right to control the use of his work, even if that means he'll make less money.

Q: What about that first question, of whether Pinterest is transformative?

A: This will be the big issue, and what will likely determine Pinterest's legality. The fact that Pinterest isn't making any money yet definitely helps. Once it starts monetizing these pictures, it will become harder to argue that it's Fair Use.

Money isn't the biggest issue, though. The biggest issue is whether the use is a public service, or creates something new. Pinterest could potentially argue that it's a search or reference tool. But Google only provides thumbnails, which is transformative; you have to go to the original source to see the full picture. That's not the case with Pinterest, and that could be the killer.

Q: Couldn't Pinterest just take down the pictures that are infringement?

A: Yes, and they're supposed to. But they're not doing that. And the question of whether it's up to the service or the users to guard copyright is still being hashed out in the courts.

Q: How is this any different than Tumblr? I post stuff that isn't mine there all the time.

A: Good question! It's not really different. This could be an issue for Tumblr soon enough as well. The difference is that Pinterest seems designed almost entirely for the theft of others' copyrighted material, whereas Tumblr's a blogging service like any other on the Internet, just easier to use.

Q: So, is Pinterest illegal?

A: Quite possibly. Until there's a legal challenge against the site, it'll be hard to know. Pinterest could have some legitimate arguments in favor of itself: Claiming it's a search tool, saying it drives traffic elsewhere, arguing that the way it shows pictures is transformative.

But the big problem is that it grabs entire copyrighted works to re-post. This could be hard to overcome, especially as Pinterest starts growing and becomes more of a destination for a greater audience. The more time users spend on Pinterest, one assumes, the less likely they are to click out to other sites. And why click out when you can see the whole picture right there?
http://www.businessinsider.com/pinte...aq-2012-2?op=1





Toronto & Western Break Ranks to Sign Access Copyright Deal

The universities of Western Ontario and Toronto have signed a deal with Access. Copyright that allows for surveillance of faculty correspondence, unjustified restriction to copyrighted works and two million dollars in fees that will be passed along to students.

The agreement reached last month with the licensing agency includes provisions defining e-mailing hyperlinks as equivalent to photocopying a document, an annual $27.50 fee for every full-time equivalent student and surveillance of academic staff email.

CAUT executive director James Turk des#cribed the news as incredulous.

“Western’s and U of T’s actions are inex#pli#cable,” he said. “They have buckled under outrageous and unjustified demands by Access Copyright at a time when not only have the courts extended rights to use copyrighted material, but also better alternatives are becoming available to the services Access Copyright offers and just before passage of new federal copyright legislation that provides additional protections for the educational sector.”

He also noted the deals undermine efforts underway at universities and colleges nationwide to develop fair new models of scholarly communication and to reach principled copyright arrangements with authors and publishers.

The Supreme Court of Canada is expected to clarify the educational use of copyrighted works in the coming months, a move that could undercut Access Copyright’s bargaining position. In sharp contrast to Western and U of T, many universities have opted out of agreements with the licensing agency or are fighting its demands at the Copyright Board of Canada.

“These two universities threw in the towel prematurely on the copyright battle,” said Turk. “We call on other post-secondary institutions not to follow their example of capitulating to Access Copyright. It’s time to stand up for the right to fair and reasonable access to copyrighted works for educational purposes.”

Turk said CAUT is working with the library community, copyright officers and member academic staff associations “to protect academic rights to the fair use of copyrighted material. We also intend to do everything possible to protect the academic freedom rights of our members threatened by provisions in these two agreements.”

CAUT intervened in 2011 against Access Copyright’s application to the Copyright Board for a new post-secondary education tariff. CAUT also intervened in the two copyright cases currently before the Supreme Court.

Note
A CAUT backgrounder that warns against the copyright agreement is available here.
http://www.cautbulletin.ca/





Why Canada Does Not Belong on the U.S. Piracy Watchlist
Michael Geist

In what has become an annual rite of spring, each April the U.S. government releases its Special 301 report - often referred to as the Piracy Watch List - which claims to identify countries with sub-standard intellectual property laws. Canada has appeared on this list for many years alongside dozens of countries. In fact, over 70% of the world's population is placed on the list and most African countries are not even considered for inclusion.

While the Canadian government has consistently rejected the U.S. list because it "basically lacks reliable and objective analysis", this year I teamed up with Public Knowledge to try to provide the U.S. Trade Representative Office with something a bit more reliable and objective. Public Knowledge will appear at a USTR hearing on Special 301 today. In addition, last week we participated in meetings at the U.S. Department of Commerce and USTR to defend current Canadian copyright law and the proposed reforms.
The full submission on Canadian copyright is available here. It focuses on four main issues: how Canadian law provides adequate and effective protection, how enforcement is stronger than often claimed, why Canada is not a piracy haven, and why Bill C-11 does not harm the interests of rights holders (critics of Bill C-11 digital lock rules will likely think this is self-evident). The section challenging the piracy haven claims states the following:

In recent years, some groups have claimed that Canada has become a “piracy haven.” These inaccurate perceptions have been fuelled in part by the Special 301 process. However, evidence suggests the contrary. In 2010, the World Economic Forum found that global executives actually rank Canadian intellectual property protection ahead of the United States, the United Kingdom, Japan, and most of Europe. The WEF's Global Competitiveness Report ranked Canada 13th for IP protection, including anti-counterfeiting measures. That is ahead of Australia (14th), Norway (16th), United Kingdom (17th), Japan (21st), and the United States (24th).

Evidence even from industry sources suggests that rates of infringement have been declining in Canada. For example, the Business Software Alliance’s annual Global Piracy Report shows Canada steadily declining as it stands among the 15 lowest piracy countries in the world. Canada's is well below the Western European average and well below the other countries on the USTR Special 301 Watch List. While the BSA noted an increase in the dollar amount, this is due almost entirely to currency fluctuations given the stronger Canadian dollar. According to Michael Murphy, Chairman of the BSA Canada Committee, "at 28 per cent, Canada's piracy rate is at an all time low, dropping six percentage points since 2006."

This decline in piracy is not limited to software. In the aftermath of anti-camcording legislation, the Canadian Motion Pictures Distributors Association acknowledged that illegal camcording had largely disappeared from the Canadian market.

Not only have piracy rates been declining in Canada, the legal markets for content have been expanding and revenues of the creative industries have been growing. Statistics Canada reports that operating revenue for motion picture theatres in Canada has grown steadily since 2005, with the industry enjoying operating profit margins of 11.3% in 2010.

Canada is a leader when it comes to online music sales. It is the 6th largest market for recorded music in the world, ranking 6th for digital sales and 7th for physical sales. In fact, the Canadian digital music market has grown faster than the U.S. market for five consecutive years. The Canadian Recording Industry Association recently cited new survey data confirming that young Canadians are music buyers, which it said leads to the conclusion that Canada "is a digital greenfield opportunity." In fact, Canada has been home to a robust digital music market with download services such as iTunes, Hip Digital, Puretracks, Archambault, HMV Digital, 7Digital; non-interactive streaming services such as Galaxie Mobile and Slacker Radio; on-demand streaming such as Rdio, BBM Music, and Zune Music Pass; and streaming music videos such as YouTube and Vevo.

The entertainment software industry has also enjoyed remarkable growth in Canada. The industry is now the third largest in the world, employing 16,000 skilled workers. In 2010, the Entertainment Software Association of Canada commissioned a study by SECOR Consulting that surveyed the industry and asked for the top three risks faced by the Canadian video game industry over the next two to five years. Copyright and piracy concerns ranked near the bottom, well below issues such as changing industry dynamics, lack of talent, government support, rising costs, lack of funding, and outsourcing. In fact, the reference to copyright as a concern was so low - barely above concerns about an economic recession - that SECOR did not discuss it further.

A long section assessing many provisions in C-11 follows, with the conclusion that:

While the Trade Act directs the USTR to ensure that other countries provide adequate and effective protection to US IP rights, it does not define the scope of those rights. In pursuing the Trade Act’s mandate, the USTR must not interpret copyrights to mean unlimited rights tolerant of no limitations and exceptions. Rather the USTR should be guided by U.S. law in evaluating the laws of other countries. Viewed from a U.S. law perspective, Canadian copyright laws provide adequate and effective protection to US IP rights owners. Limitations and exceptions in current Canadian law as well as proposed limitations and exceptions do not derogate from the effectiveness of these protections. Furthermore, Canadian authorities effectively enforce copyright laws. Consequently, rates of infringement in Canada are low and the markets for creative works are expanding. Placement of Canada on the Special 301 Watch List or Priority Watch List in the face of this evidence would be unjustified. It would only lead to undermining the legitimacy of the Special 301 process.
http://www.michaelgeist.ca/content/view/6338/125/





Copyright Cheats Face the Music in France
Eric Pfanner

The curtain has risen on the third act of one of the most ambitious French musical productions, one whose goal is to end digital piracy.

More than two years after France approved a tough crackdown on copyright cheats, the agency that oversees it sent its first cases to the courts last week. Some repeat offenders may temporarily be cut off from the Internet.

Studies show that the appeal of piracy has waned in France since the so-called three-strikes law, hailed by the music and movie industries and hated by advocates of an open Internet, went into effect. Digital sales, which were slow to get started in France, are growing. Music industry revenues are starting to stabilize.

“I think more and more French people understand that artists should get paid for their work,” said Pascal Nègre, president of Universal Music France. “I think everybody has a friend who has received an e-mail. This creates a buzz. There is an educational effect.”

But the curtain has not yet come down for the fallen file-sharers. As a presidential election nears, opposition to the law is heating up.

Rivals of President Nicolas Sarkozy, who championed the measure, say that it infringes on civil liberties. His opponents, building on the momentum from a successful campaign to defeat two U.S. congressional bills aimed at curbing piracy, as well as a swell of protest against an international copyright treaty, want to repeal or revamp the French law.

The agency that administers the three-strikes system, known by the French abbreviation Hadopi, had sent 822,000 warnings by e-mail to suspected offenders as of the end of December. Those were followed up by 68,000 second warnings, issued through registered mail. Of those, 165 cases have gone on to the third stage, under which the courts are authorized to impose fines of €1,500, or nearly $2,000, and to suspend Internet connections for a month.

Éric Walter, the secretary general of Hadopi, said that the relatively low number of third-stage offenders showed that the system had succeeded.

“Our work is to explain to people why piracy is a bad thing and why they should stop,” he said during an interview in the agency’s nondescript headquarters behind the Montparnasse train station in Paris. “When the people understand that, they stop. Of course, some people don’t want to understand. Then we have to transfer their dossiers to the justice system.”

A report commissioned by Hadopi, which has a budget of €11 million and employs 70 people, showed a sharp decline in file-sharing since the system was put in place.

A separate study by researchers at Wellesley College in Massachusetts and Carnegie Mellon University in Pittsburgh suggests that Hadopi has given a lift to legal downloads via the Apple iTunes music store. Since the spring of 2009, when the debate over the measure was raging, through mid-2011, iTunes sales rose much more strongly in France than in other European countries.

While there is no proof that Hadopi was responsible, the study says the case for a link was bolstered by the fact that sales of musical genres that suffer from high levels of piracy, like hip-hop, rose much more than sales of low-piracy genres, like Christian and classical music. The researchers calculated that Hadopi resulted in an extra €13.8 million a year worth of iTunes music sales in France. Adding the potential benefit to other legitimate digital music services, including fast-growing online streaming services, which provide music for online playback rather than downloads, the gain could have been substantially larger, they said.

“We suggest that with regard to mitigation of sales displacement by piracy, a national anti-piracy policy combined with educational efforts is much more effective in the longer term than a small number of high-profile lawsuits,” the researchers wrote.

The question of how to deal with piracy has vexed media executives, exercised policy makers and polarized the public debate in many countries.

After sites like Napster appeared more than a decade ago, the recording industry in the United States pursued a campaign of lawsuits against individual file-sharers, but later backed away because of widespread objections.

Since then, the U.S. authorities and media industries appear to have focused much of their attention on the supply side of the piracy equation. In January, the U.S. Justice Department shut down Megaupload, a so-called locker service. It charged seven people connected with Megaupload with aiding piracy.

The U.S. music and movie industries reached an agreement with major Internet service providers last year to develop a system in which the providers would take “mitigation measures” against accused copyright infringers; those steps could include slowdowns in connection speeds. But the mechanism has yet to be implemented, and it stops short of the French approach, which is enshrined in law and has tougher penalties.

Several other countries, including South Korea and New Zealand, have adopted French-style anti-piracy measures. In South Korea, where the law took effect in 2009, music sales rose 12 percent in 2010 and 6 percent in 2011, according to the music industry federation. Sales in other countries mostly continued to decline.

Lawmakers in Britain have also approved a three-strikes law, though it has yet to be implemented. But there is other evidence in Europe that tougher online copyright enforcement can lift media industry revenues, at least briefly. Music sales rose 10 percent in Sweden in 2009, for example, after the country tightened up its copyright laws, bringing previously lax standards into line with E.U. norms.

Mr. Nègre, at Universal Music, said it was probably no coincidence that Sweden and France had produced the two big European success stories in the legitimate digital music market: the streaming services Spotify and Deezer. These companies — the former was founded in Sweden, the latter in France — resemble pirate sites in that they give users access to millions of songs free, at least for their basic services.

Even opponents of Hadopi acknowledge that the law has resulted in a change in online behavior, though they dispute whether its effect on music industry sales has been beneficial.

Jérémie Zimmermann, co-founder of La Quadrature du Net, a group that campaigns against restrictions on the Internet, said the law had resulted in increased use of virtual private network software and other anonymity tools.

“Apparently some of its intimidation is having a psychological effect,” he said of the three-strikes law, but added: “The political costs of creating an institution like this are tremendous.”

Stories like that of Robert Thollot, a teacher who lives near Saint-Étienne, in central France, have not helped. Mr. Thollot was accused of illegally downloading songs by David Guetta and Rihanna, as well as the film “Iron Man 2.”

Mr. Thollot argued that someone had pirated his log-on to a nationwide Wi-Fi network and downloaded the material while he was in class. After interviewing him, Hadopi dropped his case.

“It’s like when someone steals your bank card number,” said Renaud Veeckman, co-founder of SOS Hadopi, an organization that offers legal help to people who have received warnings from the anti-piracy agency. “Are you responsible, or are you the victim?”

SOS Hadopi has worked with five people whose dossiers have reached the third stage, including Mr. Thollot; all five have been cleared before going to court. This suggests that the actual number of cases that have been forwarded to the justice system may be considerably lower than the 165 third-strike offenders cited by Hadopi. Mr. Walter at Hadopi declined to provide a specific figure.

Whether any of the cases of accused pirates will come to court before the first round of the presidential election, scheduled for April 22, is unclear, as is the fate of Hadopi after the vote.

To Mr. Sarkozy’s right, the leader of the National Front, Marine Le Pen, says she would scrap the law and replace it with a so-called global license, under which consumers would be free to share content and artists would be remunerated in other ways, perhaps with revenue from new taxes.

On the left, the Socialist Party’s nominee for president, François Hollande, also opposes Hadopi.

“We think it is ineffective, obsolete and built on false logic,” said Aurélie Filippetti, a Socialist member of the National Assembly who serves as Mr. Hollande’s spokeswoman on cultural matters.

The Socialists, some of whom previously championed the global license, backed away from it once Ms. Le Pen took it up. Ms. Filippetti said, however, that there could still be a role for new taxes on Internet service providers, search engines or other Internet companies, with the proceeds being distributed to artists. Mr. Hollande also wants a tougher crackdown on sites that enable copying, and a push to develop better legal digital content offers, she said.

Mr. Sarkozy, who announced his candidacy for re-election last week, is sticking to his guns, saying he would try to strengthen Hadopi, giving it more power to crack down on unauthorized streaming and other new forms of piracy.

Mr. Walter insisted that politics had played no role in the decision to send the cases to the courts now, before the election. Hadopi is run as an independent agency.

“I’m proud to work on one of the only initiatives in the world to say, ‘O.K., we have just been speaking for 10 years, we need to try something,”’ Mr. Walter said. “The point was not to know if it was a good idea or a bad idea; the point was to try something and then to say, ‘What have we learned? What do we know now?”’ https://www.nytimes.com/2012/02/20/t...-piracy20.html





How Forbes Stole A New York Times Article And Got All The Traffic
Nick O'Neill

They say a picture is worth a thousand words, but how much is a title worth? If the story that proceeds is any indicator, a title is worth over 6700 words and months of research. It all began Friday when the New York Times published an article “How Companies Learn Your Secrets“. It was an extremely long article which discussed how large companies like WalMart and Target collect data about your individual consumption patters to figure out how to most efficiently make you happy. It was a great piece but there was one problem: it didn’t have the title it deserved.

The original title was “How Companies Learn Your Secrets”. Kashmir Hill, a writer at Forbes, realized this and quickly developed a condensed version of the article with a far more powerful title: “How Target Figured Out A Teen Girl Was Pregnant Before Her Father Did“. It cut out the crap and got to the real shocker of the story. As of the writing of this story, the New York Times article has 60 likes and shares on Facebook versus 12,902 which the Forbes article has. The Forbes article also has a mind boggling 680,000 page views, a number that can literally make a writer’s career.

I had that experience myself at AllFacebook with this article. It was an article that I wrote following 6 months of research on copywriting. The reality is that in the world of newsfeeds and streams, titles matter more than ever before. The best content in the world will fall flat without a great title. Nothing illustrates it better than this recent Target article.

Unfortunately a story like the one that the New York Times wrote is relatively rare in the sense that an incredible amount of work had gone in to the development of it. What’s odd is that the editors clearly knew that Target knowing a customer is pregnant is a juicy story as they put it in the lede. Here’s the article’s lede:

Andrew Pole had just started working as a statistician for Target in 2002, when two colleagues from the marketing department stopped by his desk to ask an odd question: “If we wanted to figure out if a customer is pregnant, even if she didn’t want us to know, can you do that? ”

That line pulls the reader in and keeps them going but they missed one critical step (and the most important step) in pulling in the reader: the title.
http://nickoneill.com/how-fortune-st...affic-2012-02/





NYT Reporter Defends Forbes Writer Accused of ‘Stealing’ His Work
Jim Romenesko

Nick O’Neill started a little kerfuffle over the weekend with his post, “How Forbes Stole a New York Times article and got all the traffic.”

O’Neill said that Forbes writer Kashmir Hill took the New York Times Magazine excerpt of Charles Duhigg’s new book, “cut out the crap and got to the real shocker of the story,” which resulted in “a mind boggling 680,000 page views, a number that can literally make a writer’s career.”

What does Hill have to say about this? She tells Romenesko readers:

I must admit admiration for O’Neill’s skill with headlines. Suggesting Forbes “stole” the piece is just the right kind of attention-grabbing title to get people to click. In fact, I clearly identified the source of the article and block-quoted at length to make clear this was the NYT’s reporting, not mine.

O’Neill’s reaction? “She may be partially right,” he tells me. “My headline demonstrates the importance of a headline, which is what the article is about.”

As for Duhigg, the Times reporter says he’s not troubled by Hill’s repackaging of the excerpt. “If Ms. Hill is kind enough to read my magazine article, and even kinder to spend time writing a post about it, than more power to her.”

I asked the three to weigh in on the flap. Here’s what they sent in emails:

Kashmir Hill

I took a great piece by an excellent reporter and created a version of it that was better for an online audience. This is a big part of what I do as a “new journalist.”

Immersing myself in the intersection of technology and privacy, I do my own reporting for long-form pieces and blog posts, and I riff on what others write. My piece didn’t take off just because of its sexy, tweetable title — though that helped — but because I found what was most compelling in a nine-page piece and put it front and center (while including lots of links back to the original article). The New York Times article is a delicious nine-course dinner; mine is an equally tasty, bite-sized snack for readers on the go. Most readers online are looking for something quick and easy to digest, so my version worked better for them.

Charles Duhigg’s piece is a masterful look at how Target gathers information about its customers and mines it to keep them loyal and better market to them. But as a writer who has covered the privacy beat for four years, what leaped out at me as the gold mine of the piece was the anecdote about Target data-mining its way into customers’ wombs so effectively that it picked up on a teen’s pregnancy before her father did. I ran with that anecdote and the sexy privacy issue Duhigg dug up — Target’s use of predictive analytics — distilling that from the larger piece for my privacy-interested audience. This is not a new or surprising practice in the world of online journalism – what has caught people’s attention is Forbes’ transparency. Thanks to our analytics being public, you can see the avalanche of social media love it triggered and the enviable million page views it garnered. O’Neill assumes that’s more than the New York Times itself got (though he has no evidence of that; only the New York Times knows how often the piece has been read).

Hill's story

I must admit admiration for O’Neill’s skill with headlines. Suggesting Forbes “stole” the piece is just the right kind of attention-grabbing title to get people to click. In fact, I clearly identified the source of the article and block-quoted at length to make clear this was the NYT’s reporting, not mine. O’Neill is right about the New York Times’ headline –”How Companies Learn Your Secrets” — not resonating online. For one, it’s too generic a title in the age of the Wall Street Journal’s ‘What They Know’ series, which has explored over and over again how companies grab data about us in ways we wouldn’t expect. Secondly, it actually reflects only one angle in a multifaceted piece about companies’ attempts to influence our habit formation. There’s lots of other interesting stuff in the piece’s nine pages, but I cut through that to the privacy meat of the story for my audience. And ultimately for a much larger audience. I suspect I drove a ton of traffic to the New York Times that they wouldn’t have otherwise gotten because they hadn’t sold their story quite as well as I did and didn’t create a short version of it that was easy to share and digest online. (Advice the NYT should consider is having their own bloggers tackle long pieces like this and chunk them up for the online crowd – a tactic the Wall Street Journal has effectively employed.)

O’Neill suggests that the “mind boggling” amount of views on my piece “can literally make a writer’s career.” I’m already a staff writer at Forbes (and am not, by the way, paid according to how many readers I attract). While it has certainly proven I’ve got a way with packaging and headlining pieces, my reputation was already established in the journalism and privacy world. My long-running expertise when it comes to privacy issues is part of the reason why my take on Duhigg’s piece had the initial audience and push that helped it go viral.

Nick O'Neill

Whether or not it was literally “stolen” (which some, including Kashmir, may have inaccurately interpreted as plagiarism), I would support what I assume is Kashmir’s position: remixing content is an important part of creating content on the web. It also happens to perform incredibly well. However there is an important question that’s raised: when someone else spends a significant amount of time to research and develop something, is it not them that deserves the majority of the recognition?

In the case of Kashmir Hill’s article, she could argue that recognition was clearly given on many instances throughout the article. However “bringing attention” to the article actually resulted in significant revenue for Forbes. She has attracted over 1 million page views. If Forbes were to generate a CPM of $15 per page, that would amount to $15,000. She only had to put in a couple hours at most to create the article versus the New York Times writer who put in far more time to perform the research. Even if the New York Times was capable of generating as much traffic as Forbes (which it didn’t appear to at first glance) it’s clear which model is more profitable here: provide a new title and summarize another article.

I wouldn’t say that what Kashmir has done is a bad thing, it’s just a result of the current state of online content. I’ve done the exact thing myself on many instances over the years and in many cases I was able to outperform those people who I summarized. Do I feel bad about it? Not at all, it is what it is: the game we’re playing. We can get together at conferences to discuss whether or not this is a good thing for the future of content and discuss on our blogs, but in the meantime Kashmir Hill is going to continue to play the game as aggressively as I do. That strategy is what lead to my title and at this point nearly 40,000 visitors to the article on my site.

Charles Duhigg

Complaining about someone re-writing reporting is kind of like kvetching about the rain: it’s pointless, because you’ll end up wet regardless of your protestations. Every journalist relies on other people’s work. I became a reporter because I wanted to find important ideas and share them. Whether that happens through my authorship, or someone’s summary, is less important to me than making sure the news is spread.

That said, there are two points I thought I would share:

First, the story in the NYT Magazine is an excerpt from a book, The Power of Habit, which comes out next week (on February 28, to be exact) The Times was kind enough to highlight this fact both in a sidebar and by linking to my website. Kashmir Hill, the author of the Forbes summary (and who, as far as I can tell, is a talented writer and seems like a very pleasant person), could have mentioned the forthcoming book. She could have linked to the amazon page. She is under no obligation to do so: no journalist, as far as I’m concerned, has any obligation to hawk someone else’s book.

But, it would have been good manners. (Ah! And I now see Ms. Hill has updated her post to link to the book! Graceful manners wins another day!)

Second (and this is, I think, a more important point): Every writer at some point has to decide why they got into this game. I became a journalist after getting an MBA and working in private equity. Journalism was not the most lucrative decision. (In fact, when I was working as a newspaper intern and living in my in-law’s basement, I think I qualified as the lowest-earning member of my business school class.) But I became a journalist because I wanted to change the world, and thought that reporting and writing offered me the best odds.

So, I don’t begrudge any journalist doing what it takes to get published and make a name in the world. (And, in fact, Ms. Hill has done a public service. As one commentator here said, my article has “tiny-ass font” and “felt draggy draggy draggy.” And the NYT has a paywall! The nerve.)

However, at the end of the day, I think it’s worth gently posing the question: what do you want to do with your life? Again, I don’t begrudge Ms. Hill. I once sold blood to make payroll – and though I wouldn’t recommend the experience, I’m not ashamed of it. If I was starting in journalism today, I would probably be summarizing every story I could find (and it probably wouldn’t even occur to me to mention someone else’s book.)
But every hour spent summarizing is an hour not spent reporting. And at the end of the day, this job is only really fun if you discover what no one else already knows.

In any event, I’m just glad folks saw the reporting.

I’ve been luckier in this life than I have any right to be. And, I have no business judging another journalist’s decisions. If Ms. Hill is kind enough to read my magazine article, and even kinder to spend time writing a post about it, than more power to her. The Internet is great because it’s an open marketplace – and, clearly, there were a lot of people who liked her summary (probably more than they liked my article.) Hopefully, next time, the Times (and I) will be clever enough to attract those readers ourselves.
http://jimromenesko.com/2012/02/21/n...ling-his-work/





Los Angeles Times To Add Paywall
Laura Hazard Owen

It’s been a big week in newspapers starting to charge for content. First it was Gannett; now the Los Angeles Times will launch a metered paywall on Monday, March 5.

The paper announced the changes today. Website visitors will be able to read 15 stories per month for free before the paywall kicks in. They will be charged an introductory rate of 99 cents for the first four weeks; thereafter, the paper will charge $1.99 per week for a website-plus-Sunday-print-edition package and $3.99 per month for website access only. The LA Times says the digital subscription also includes “retail discounts, deals and giveaways.”

Kathy Thomson, president and COO of the LA Times Media Group, says the company “priced the digital subscription with the Sunday newspaper at a lower rate because they are complementary products.”

Access to the paper’s website through mobile phones and tablets remains free for now, but that will change in the future.

In a cost-cutting move, a new weekly lifestyle section launching March 10, “Saturday,” will combine the health, food and home sections, and “those sections will phase out as stand-alone portions of the paper by March 3 but will remain available online.”

According to the Audit Bureau of Circulations, the LAT has an average daily circulation of 572,998 (down 200,000 from two years ago, says the LAT) and the website has 34.8 million unique monthly visitors.

In its coverage of the changes, the LA Times includes some info on the Milwaukee Journal Sentinel, which added a paywall last month: The paper has sold 8,800 digital subscriptions, 75 percent of those to customers who live outside the Milwaukee area but want Green Bay Packers coverage.
http://paidcontent.org/article/419-l...o-add-paywall/





Over-the-Air TV Catches Second Wind, Aided by Web
Christopher S. Stewart

WSJ's Sam Schechner reports over-the-air TV is seeing a second wind in the U.S., thanks to the availability of broadcast TV shows available online and opportunities for people to save on cable TV costs. AP Photo.

It's cool to have rabbit ears again.

Largely relegated to obscurity decades ago, old-fashioned television broadcasts—over the airwaves and not via cable or satellite—are enjoying an unexpected revival in the digital era.

With an increased array of online-video programming now drawing viewers' attention, companies are starting to pitch consumers on complementing online video streamed from the Web with broadcast-TV signals as a way to save money on cable subscriptions.

If it gains traction, this trend could undercut part of the rationale for selling off TV spectrum in voluntary auctions, approved by Congress on Friday, aimed at freeing up spectrum for wireless broadband.

There are signs that consumers are responding. TV-antenna seller Richard Schneider of St. Louis says sales at his company are soaring. Mr. Schneider's Antennas Direct sold 70,000 antennas in January, and he expects to double last year's sales of about 600,000. That was up from 400,000 antennas in 2010.

Wal-Mart Stores Inc. recently agreed to sell Mr. Schneider's antennas, the retailer confirmed Friday, joining Best Buy Co., Costco Wholesale Corp. and others.

Mr. Schneider's antennas cost from $50 to $150, and he says the typical customer saves $96 a month by "cutting the cord" on cable or satellite TV, according a survey his company conducted.

The average monthly bills for basic cable service and broadband service add up $91.44, before add-ons like high definition and premium channels, according to SNL Kagan. By sacrificing basic-cable channels, and signing up for Netflix Inc., a household could pay less than $48 per month.

"Every time that Hulu and Netflix enhance their services, our phones light up," said Mr., Schneider, referring to two online-video services. (Hulu is an online-video service owned by Walt Disney Co., Providence Equity Partners, Hulu employees, Comcast Corp.'s NBCUniversal and News Corp. News Corp. also owns The Wall Street Journal.)

Others have jumped on the bandwagon. Boxee Inc., which sells a set-top box that lets people stream online video, offers a $49 add-on antenna that pulls in broadcast-TV signals.

"Many consumers don't realize they can get these channels over the air in HD for free, or for a small fee from your cable provider," said Avner Ronen, chief executive of Boxee.

A variation of this idea came last week from a new service called Aereo, backed by IAC/ InterActiveCorp chairman and television veteran Barry Diller. Aereo will start next month a service to stream online local-broadcast signals for residents in New York City—where over-the-air reception is difficult—for a monthly fee of $12.

It is aimed as a complement to online video services. But Mr. Diller said, "I think this will mean increased usage for broadcast."

The value of spectrum used by broadcast TV has been hotly debated in the past couple of years, as the FCC has looked for ways to add spectrum for wireless broadband. Last year FCC Chairman Julius Genachowski said the percentage of viewers watching broadcast over the air, rather than through cable or satellite, has fallen to less than 10%, in contrast to the precable-TV days when it was 100%.

While most people get their broadcast channels as part of a pay-TV package that usually includes cable channels, consumers with newer TVs, or an inexpensive converter for old TVs, can receive over-the-air signals from broadcast stations free in areas with good reception. Mr Schneider says the number of channels varies based on the area, from about 90 stations in Los Angeles to about 25 in St. Louis. He says on average that viewers get 30 to 45 channels, as long as they don't live in a canyon or deep valley and are within 65 miles of a transmitting tower.

WSJ Marketplace Editor Dennis Berman visits Mean Street to discuss the possibility that cable TV is facing extinction, caused by the proliferation of alternative methods of distributing video content. Photo: AP.

Cable channels have become the most lucrative part of the entertainment business, mainly because of huge fees paid by cable and satellite subscribers, a cut of which is passed on to the channels. Broadcast stations found it difficult to extract cash payments from distributors until relatively recently. And even now these fees are a relatively small, albeit growing, part of broadcast stations' revenue. SNL Kagan estimates stations will pull in nearly $1.5 billion in such fees in 2011, compared with $38 billion in fees for cable channels.

TV executives lately have warned that cable's rising subscription costs may prompt people to cut back. Indeed, in the past 18 months, the number of overall pay-TV subscribers has largely stagnated, after years of steady growth. At the same time, the number of American households wired with only broadband and broadcast TV jumped 23% to 5.1 million in the third quarter of 2011 compared with the year-earlier period, according to a recent Nielsen study.

"It's not a stretch to think that the broadcast business model will outlive that of cable," said National Association of Broadcasters spokesman Dennis Wharton. "The naysayers can talk all they want about broadcasting being a dinosaur."

The big media companies that own the major broadcast networks are generally eager to preserve the current cable-centric model. Not only do they mostly own big portfolios of cable channels; media outlets also haven't figured out how to generate advertising revenues from online outlets in the same proportion as off-line. So the shift of viewers from traditional TV to the Web could hurt ad revenues.

"There are a lot of moving parts," said Perry Sook, CEO and president of Nexstar Broadcasting Group Inc., which owns a few dozen local-TV stations. In a cord-cutting world, Mr. Sook sees the advantage to broadcasters of fewer channels—even against greater online competition—but worries that the potential ad revenue wouldn't make up for lost subscription fees.

Mr. Schneider, the antenna seller, meanwhile, has been lately partnering with TV stations to give away antennas and spread the gospel of cord-cutting. He says that for some stations the giveaways are about increasing viewership while for others it's "out a sense of duty to their community."

—Sam Schechner contributed to this article.
http://online.wsj.com/article/SB1000...364593094.html





Comcast Launches Subscription Movie Service
Greg Sandoval

The cable TV provider's Xfinity Streampix is designed to give Web access to its films and TV shows, following HBO Go's lead in competing with Netflix.

Comcast announced a new subscription video-on-demand service today that will provide "out of home" access via the Web.

Comcast has named the new service Xfinity Streampix. The cable company's strategy to compete against Netflix, the Web's No. 1 video rental service, has obviously been influenced by HBO.

Streampix is designed to enhance Comcast's existing service, Xfinity, by offering users a broader selection of movies and TV shows. Variety, the Hollywood trade magazine, first reported the story.

HBO Go, the Internet service that enables HBO subscribers to access every episode of the company's past and present shows online, has become a model for cable companies trying to compete online.

Streampix "enables Xfinity video customers to instantly view favorite movies and TV shows in and out of the home," Comcast said in a statement. The TV shows offered include "numerous past seasons of current hit shows and full series."

This is a smart move, as it hits Netflix where it is weakest now: its video-streaming selection. Exclusive licensing deals have locked Netflix out of acquiring the latest movies from five of the six top Hollywood film studios. While Netflix managers have seen rapid growth (gaining more than 24 million subscribers), they have struggled of late to keep the streaming library fresh.

With Netflix customers grumbling about the lack of new titles, Comcast can tell customers, "Hey, the other guy might help you save some money, but is there anything there you want to see?"

Conversely, Comcast's offer isn't without its shortcomings.

A Comcast subscriber must either be a member of one of the company's triple-play packages (high-speed Web, video, phone, etc.), or pay an additional $5 a month for Streampix.

That extra $5 may be the service's Achilles' heel. When it comes to price, Netflix's basic streaming service is far less expensive than any of the U.S. cable offerings.

Comcast said Streampix will be available on multiple Web-connected devices, including smart TVs.
http://news.cnet.com/8301-31001_3-57...movie-service/






Web Deals Cheer Hollywood, Despite Drop in Moviegoers
Brooks Barnes

Movie attendance hit a 16-year low in 2011. Star wattage continues to dim. DVD sales keep plunging. Almost none of the films being honored at Sunday’s Academy Awards have struck a mainstream nerve.

Yet Hollywood has a noticeable spring in its step. After all, it’s not the music business.

Instead of Hollywood suffering its own Napster moment — the kind of digital death trap that decimated music labels first through the illegal downloading of files and then by a migration to legal downloads almost solely through iTunes — several deals announced this month have it feeling more in control.

While studios still consider piracy a huge problem and feel stymied by Silicon Valley (and Washington politics), they nevertheless control their content. And now the Web is coming to them.

Google is developing a home entertainment device and several media companies have announced plans for new online streaming services. Taken together, the moves mean no supplier will have a monopoly over the distribution of films and television on the Internet. With more buyers comes leverage, and higher prices for content.

“The mood has shifted from, ‘Oh, my God, our business models are broken and we’re going to be cannibalized’ to something resembling euphoria,” said Peter Guber, a former chairman of Columbia Pictures who is now chief executive of the Mandalay Entertainment Group, which has interests in movies, TV and sports. “Studios see a robust, accelerating online market.”

Serious Web-based buyers for movies and television shows are popping up all over. Netflix, the DVD-by-mail and streaming service, was already aggressively pursuing Hollywood content and making sizable payments for it. This month, in a clear challenge to Netflix, Verizon and Redbox said they would team up on a service to stream studio films on the Internet. Days later, Amazon completed a deal to buy episodes of Viacom-owned programs, including “Jersey Shore” and “SpongeBob SquarePants,” as it prepares to introduce a stand-alone streaming service that also will compete with Netflix.

Hollywood also anticipates that YouTube and Google will soon expand their movie and television service beyond rentals to include sales. Steadily ramping up their offerings are Walmart’s Vudu, Best Buy’s CinemaNow, Apple’s iTunes and Hulu. And that is just in North America. The competition for online movie and television rights is also heating up in places like Brazil, where NetMovies Entertainment has a deal to stream material owned by the Walt Disney Company.

The money is not yet big enough to make up for lost DVD revenue, but it is substantial. Barton Crocket, an analyst at Lazard Capital Markets, estimates that Netflix spent $937 million for streaming rights in 2011 and will pay $1.8 billion in 2012, as deals activate for CW shows like “90210” and DreamWorks Animation movies and TV shows.

On Tuesday, Netflix struck a deal for certain films from the Weinstein Company, including “The Artist,” the best picture front-runner at the Oscars. The CW deal, signed last year and estimated to be worth $1 billion in and of itself, runs four years. DreamWorks is getting an estimated $30 million a movie over an unspecified number of years. Last month, Disney agreed to provide streaming content to Comcast as part of a 10-year deal that will bring billions of dollars in revenue to Disney.

Studios worked meticulously to get to this point, holding content back, or at least doling it out very carefully. They made restrictive deals for library material, for instance, and tried to avoid exclusive arrangements that would damp competitive bidding. They also have had bandwidth on their side: the music industry was speedily overtaken by the Web in large part because songs are small enough to trade on limited bandwidth.

“We’re still in the learning process, but it’s looking very exciting,” said Ken Werner, president of domestic distribution at Warner Brothers Television. “The digital marketplace is evolving in a way that is very good for us.”

Hollywood has a history of embracing the shiny thing right in front of it, forgetting about long-term sustainability, and some analysts (and a few smart studio executives) worry about the industry’s ability to keep up this momentum.

Do these prices represent a bubble? Will Netflix throw another pie in its own face, as it did last year when it lost 800,000 subscribers after a hasty price increase? Will movie streaming hurt other parts of the entertainment business, by speeding the demise of the DVD, for example, or by denting the ratings for regular TV?

These are difficult questions for studios, said Roy A. Salter, a founder of the Salter Group, a financial and strategic advisory firm with an entertainment focus.

Mr. Salter equates the current boom to the 1980s and ’90s, when TV networks around the world started gobbling up movie rights. That proved to be a bubble as some buyers, confronting slower-than-expected growth, could not make their licensing payments.

“Many people in Hollywood mistook an increase in licensing fees as a new norm and started forecasting future revenues off of that bubble,” Mr. Salter said, adding that current excitement over streaming may be “irresponsible thinking” in the long term.

There are other caveats. One big one involves the movie side of Hollywood, which is less able to capitalize on the streaming of new releases because of the way its contracts are drawn with premium channels like HBO and Showtime; these channels essentially get to put contractual handcuffs on movies during their pay-TV runs — no streaming on rival services. Movie executives are trying to sort it out, but this contractual thicket is complex.

But it is easy to see why Hollywood, seemingly on the wrong side of every business trend of late, is perking up at the online streaming boom. Just a year ago, Netflix was the only company of size paying big upfront money for streaming content, and it was becoming so powerful that studios worried they were following their music counterparts down an iTunes path.

“One buyer is your biggest nightmare,” Mr. Guber said. “They can hear the rattle of your begging cup a mile away.”

So studios are patting themselves on the back for maintaining control, seeing developments as vindication of their strategy. It is confidence that could disappear in an instant — change is coming so fast that the pendulum could quickly swing back away from content’s corner — but Mr. Guber predicts it is only going to get better for studios.

“Nobody’s going to a Web site to see zeroes and ones,” Mr. Guber said, referring to computer coding. “But they will go for oohs and aahs, and the tech companies know it.”
https://www.nytimes.com/2012/02/25/b...oviegoers.html





Seeing Red

Still bloodied by one of the worst self-inflicted corporate disasters in recent memory—last year’s $12 billion wipeout—Netflix C.E.O. Reed Hastings remains adamant about his goal: moving from red envelopes to streaming video. With Hollywood hailing his vision and needing his business, Netflix has started to rebound. But not everyone is sold.

By William D. Cohan

Reed Hastings, 51, the C.E.O. of Netflix, is bloody but only slightly bowed. When his company was at the pinnacle of success, just last summer, he refused my repeated requests to discuss his apparent business prowess. He claimed to be reticent about being interviewed, disdaining the limelight and the attention it brings to him and his family. His low-key, unrehearsed manner—he is prone to gaffes involving hot tubs, among other things—makes it clear he is not having fun when he talks to the media. What little publicity he does is only to benefit Netflix. “It’s an appropriate and necessary sacrifice . . . but on a personal basis, it’s pure downside, because then you just get more recognized,” he says. “You lead a less normal life. I hate the photo shoots. I hate all that stuff.”

But after presiding over perhaps the worst self-inflicted corporate wound since Coca-Cola introduced New Coke, in 1985 (and then promised to continue making the old Coke after a tempest of consumer ire), he finally relented in early December and met me at a Midtown Manhattan hotel. He still had on the garish burgundy shirt and tan jacket he had worn earlier in the afternoon during a UBS investor conference. Despite his stratospheric Silicon Valley reputation and quasi-billionaire status, he comes across more as the preppy hockey player he once was than the high-tech mogul he has become.

As if working his way through some sort of corporate 12-step program, Hastings forthrightly admits that the events of the summer were not his or his company’s finest hour, but he believed it was “healthy” for leaders to have “a reservoir of self-doubt, because it’s how you create an internal dialogue and how you check your assumptions.” Still, despite the company’s rebound in early 2012 (share prices have nearly doubled since December), many Netflix investors wish Hastings had doubted his instincts a bit more than he did.

The son of a lawyer who once served in the Nixon administration, Hastings has degrees in mathematics, from Bowdoin College, and artificial intelligence, from Stanford University, but he was never a desk-bound geek. After stints with the Marines, the Peace Corps (teaching math in Swaziland), and various software start-ups during the initial Internet boom—when he made a first fortune of around $75 million after selling Pure Software, a debugging company—he co-founded Netflix, in 1997, with Marc Randolph.

The series of catastrophic missteps in question regarding Netflix started July 12, when—without a whole lot of preparation or warning—the company announced that if its customers wanted to continue receiving the movies and television shows on DVDs that arrive through the mail in Netflix’s signature red envelopes they would have to pay $7.99 a month for the privilege. If they wanted monthly access to streaming content over the Internet—no DVDs or mail involved, just instant gratification—the cost would also be $7.99. If they wanted access to both DVDs and streaming content, the price would be $15.98 a month ($7.99 plus $7.99), up from a combined monthly price of $9.99. “We think $7.99 is a terrific value for our unlimited streaming plan and $7.99 a terrific value for our unlimited DVD plan,” Jessie Becker, Netflix’s vice president of marketing, announced on the Netflix Blog with the typical corporate happy talk that often accompanies really bad news. “We hope one, or both, of these plans makes sense for our members and their entertainment needs.”

Since this was not rocket science, it took about a nano-second for Netflix’s 24 million or so customers to realize that they were being hit with a 60 percent price increase; what had once cost $10 a month would now cost $16. Even though the price to see a first-run movie in a theater on the nation’s two coasts averages around $13 per ticket, the social networks and the blogosphere lit up with such instant fury you might have thought Hastings had dropped a nuclear device on his customers. Greg Heitzmann, a University of Missouri graduate, was typical of the nearly 13,000 people who went on the Netflix Blog to express their anger: “To say the least, I am shocked and appalled at your recent behavior,” Heitzmann wrote. “Your nominal price increase, while unexpected, does not deter my loyalty. However, your mouthpiece Jessie Becker’s presentation of this upcharge—as an added choice for my own benefit—insults my intelligence and reveals the breadth of your arrogance. Had I been treated like an adult and informed of these changes in a straightforward, honest manner, perhaps we could rekindle our spark. Unfortunately, this course of action is no longer available; your condescending and manipulative tone has irreparably ruined our relationship.” Heitzmann canceled his subscription. He was not alone. More than 800,000 Netflix subscribers dropped the service within months of the July announcement.

As customers continued to flee, Hastings leapt into the fray to try to explain. “I messed up,” he wrote on the Netflix Blog on September 18. “I owe everyone an explanation. It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology.”

“We weren’t doing the price change to raise profits or something,” he elaborated to me. “We were doing it because we were so focused on becoming the streaming company and the global streaming company that we always wanted to be, and always have wanted to be.” He said that he sees the future of Netflix similarly to how big telephone companies see their futures in wireless, rather than in landline, phones. “Most companies that are great at something—like AOL dialup or Borders bookstores—do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business,” he wrote on the blog.

Hastings took the blame for the failure to communicate better with customers. “In hindsight, I slid into arrogance based upon past success,” he wrote. “But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.”

But with the mea culpa behind him, he proceeded to make matters even worse, by announcing that the DVD-by-mail service would be split off from the streaming service and renamed Qwikster—“because it refers to quick delivery,” he explained—with its own Web site and its own C.E.O. The streaming service would still be called Netflix and be the focus of the company’s energy and its future growth. There would be no more price increases—“We’re done with that!”—but keeping both services would now be even more cumbersome, requiring two separate accounts, two separate monthly credit-card charges, and twice as much effort as before. “So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places,” he announced. “Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice versa.” With that, he said, he hoped to regain the trust of his customers.

Accompanying this surprising announcement was a lame video of Hastings along with Andy Rendich—the presumptive new C.E.O. of Qwikster. Hastings was rocking the casual look in a Gap T-shirt underneath some sort of flimsy, ill-fitting teal work shirt. His Oakley sunglasses rested in front of him on his IBM ThinkPad. At one point, he flubbed a line and repeated it—a homey touch that remained in the video. He observed correctly on the Netflix Blog, “You’ll probably say we should avoid going into moviemaking after watching it.”

Faster than you could say “Qwikster,” the amateur video became fodder for the late-night comics. Conan O’Brien spoofed it with a parody video that claimed returning a Netflix DVD was now as easy as just throwing the red envelope out of a moving-car window or putting it in a hedge or flushing it down the toilet. “Don’t worry, we’ll get it,” he cracked. Saturday Night Live recorded its own parody of the Hastings/Rendich video—replete with the goofy attire—and released it on the Internet. (Hastings believes it wasn’t funny enough for the actual show, although it was pretty darn funny.) Then a fake Hastings appeared in another S.N.L. spoof, of a Charlie Rose show. After Rose asks Hastings if Netflix and Apple could be compared, Hastings says, “Comparing Apple to Netflix is like comparing apples to oranges, especially if the oranges made so many mistakes that people stopped eating oranges and just went back to Blockbuster.”

Hastings’s screwups were taking their toll not only on Netflix’s customer base but also on its financial prospects. Fewer customers meant less revenue and cash flow at the very moment Netflix’s ambitions required larger and more expensive deals with the Hollywood studios that provide the content to stream. For more than a year, Netflix’s stock had been a rocket ship as nearly every one of the company’s pronouncements had been met with dizzying investor approval. For instance, after the company announced on the morning of July 5, 2011, that it was set to offer its services in 43 Latin American and Caribbean countries—a potential new broadband customer base estimated at 45 million people—the stock jumped from $268 per share to an all-time high of $291 per share and a market capitalization of more than $15 billion. Shortly thereafter, the stock hit nearly $305 per share. A year earlier, it had been at $117; two years ago, it was at $40. That Netflix traded at a price-to-earnings ratio of more than 80 times its historical earnings seemed to be lost on most investors.

But after Hastings’s missteps, the stock went into free fall, dropping to $113 per share in early October, from $210 in the second week of September. It would hit a low of $62 a share in November. The few—but vocal—short investors (someone who bets a stock’s price will fall and then does what he can to make that happen) and research analysts who had long felt the stock was grossly overvalued and overhyped were wallowing in Schadenfreude.

Finally, on October 10, Hastings pulled the plug on Qwikster. The explanatory blog post was short and sweet. “It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs,” he wrote. “This means no change: one website, one account, one password . . . in other words, no Qwikster.”

And not a moment too soon. Some $12 billion of Netflix’s market capitalization had been wiped out, and some Hollywood suppliers to Netflix had begun to wonder if the company could continue to pay its bills on time. Wall Street’s faith in the company was shattered. People were calling for Hastings’s head. Things were looking so desperate that on November 22—after not having bothered to tap the capital markets when the stock was at or near its all-time high—Netflix raised a fresh $400 million in equity: $200 million from a longtime investor, Technology Crossover Ventures, and another $200 million from public investors at $70 a share. This was seen as a sign by some that the company was strapped for cash.

The question lingers how Hastings, who sits on the boards of both Microsoft and Facebook, could have made such spectacular blunders. Just a year earlier, Fortune had put him on its cover as its “Businessperson of the Year.” His three appearances on Charlie Rose—in 2005, 2006, and 2011—were treated as the Second Coming. Had Hastings come to believe in his own invincibility? Was this a case of pride going before the fall? Or a failure to listen to advice? Or was this a simple failure of public relations?

In an October 24 article in The New York Times, Hastings recalled that he had been soaking in a hot tub with a friend (Hastings lives in Santa Cruz with his wife and two teenage children, after all) when he shared with him the news that Netflix planned to separate the DVD business from the streaming business. “That is awful,” his friend responded. “I don’t want to deal with two accounts.” But Hastings “ignored the warning, believing that chief executives should generally discount what their friends say.” Now he admitted that he had been “guilty of overconfidence and of ‘moving too quickly,’” and “hubris,” even. The harsh reaction from his customers was due to the “angry mood of the country,” he said, citing both the Tea Party and Occupy Wall Street political movements. He again clarified that he did what had to be done. “We still need to move quickly in streaming,” he said.

That same day he told investors on Netflix’s third-quarter earnings call that the decision to create Qwikster was “hard to justify” and that after the price increase “Qwikster became the symbol of Netflix not listening.” He reiterated that “we quickly changed course on that. And we are going to stick with DVD as part of the Netflix brand. And going forward we will be very aggressive on promoting streaming Netflix and the benefits, and anyone who wants to also subscribe to DVDs will be very welcome, but we are going to be pushing and promoting streaming.”

If their critics are now legion, Hastings and Netflix retain the unequivocal support of many of the Hollywood studios, of which Netflix has become an increasingly important customer. “They continue to be a good partner for us,” says Philippe Dauman, the C.E.O. of Viacom. “Reed is a guy who’s smart, who takes calculated risks, and when something goes awry, he admits it, and he moves forward. The subscriber count is stabilized, and actually Reed mentioned that to me when I saw him recently. It’s still a great service. They keep acquiring more content, which makes it more valuable to their customers. In my mind they continue to have a good consumer proposition, and of course they raised some capital, so they’re on very solid ground.”

Explains Ron Meyer, the longtime head of Universal Studios, “When you have the resources they have and the reach that they have—we’re all looking for new revenue streams—they’re the newest and most exciting, and biggest.” How important a customer is Netflix to Universal? “On a scale of 1 to 10, they’re a 10,” Meyer says.

Les Moonves, the president and C.E.O. of the CBS Corporation, thinks Hastings and Ted Sarandos, 47, Netflix’s chief content officer, whose portfolio is dealing with Hollywood, are two of the smartest people in the industry. “Our goal as a content provider is to get paid in as many ways as we possibly can,” says Moonves. “And the reason we welcomed Netflix into the marketplace is they’re paying us in a brand-new way that opens up many horizons for the future.” And that future may include CBS-produced original content for Netflix, Moonves announced on a conference call this month.

Jeffrey Katzenberg, the C.E.O. of DreamWorks Animation, is perhaps Hastings’s biggest booster, claiming that Hastings is one of the few in Silicon Valley who truly deserves being called a visionary. “He has shown a great sense of being able to adapt to a rapidly changing world of how people want to see movies and how they value great movie and television content being brought to them, and how their habits are changing,” he says. Katzenberg thinks Hastings proved to be an effective leader during the summer: “He has shown two of the most exceptional qualities of a great C.E.O. and leader, which is first recognizing how his business is transforming and being very aggressive about innovating and adapting to those changes as they’re going on. It’s just he, I think, moved too far ahead of the transition from hard goods to digital. There’s no question whatsoever what he was pursuing is in fact what ultimately is going to prevail. And the fact that he did it a beat too soon I think is the only mistake.

“Quality number two,” Katzenberg says, “is that, having made a very bold and important and looking-into-the-future decision and then seeing that he got ahead of his customers, he did again what others find so difficult to do, which is acknowledge the mistake, fix it, and reset the business back. There may have been an awkwardness in the process of doing it, but those decisions were bold, smart, and imperative. What those short-term knocks are has just made him and the company smarter and stronger.”

All of this praise is simply too much for Rocco Pendola, one of the most outspoken “shorts” on Netflix’s stock, who unleashed a November 28 tirade against the company on the Seeking Alpha blog. Pendola had been reading Haruki Murakami’s latest book, 1Q84, and he concluded that, like Aomame, the main character in the novel, “I must be living my own reality separate from [Netflix] bulls.” He wrote that he could not understand why, despite the separation fiasco and the near collapse of the stock, any number of publications and research analysts were still trumpeting Netflix as an investment. “Simply put, these moves that Reed Hastings made represent nothing more than desperate reactions to a broken business model,” he wrote.

He then wondered why, if Netflix’s business fundamentals were so good, it had suddenly decided to raise $400 million in new equity—what another blogger called “a desperate cash grab” with absolutely horrible terms. Pendola called “comical” the explanation from Steve Swasey, Netflix’s V.P. of corporate communications, that, while the company had no “pressing need” for the cash, “it’s always nice to have more money than you need.” Concluded Pendola, “If you cannot clearly read the writing on the wall after everything that’s happened, you deserve to lose your money and average this dog down as it craters to below book value. Or, as Murakami stated so well: ‘If you can’t understand it without an explanation, you can’t understand it with an explanation.’”

One of Pendola’s heroes is Tony Wible, who since 2008 has been the media-and-entertainment research analyst for Janney Montgomery Scott, a small Philadelphia-based brokerage that wouldn’t know a tarp loan if it were hit over the head with one. Wible could not be more different from Hastings. At 35 he is chunky and balding but with the irrepressible confidence of youth. Wible used to work for Citigroup—until that company almost went under during the financial crisis—and for years his cubicle was outside the office of Jack Grubman, the infamous telecom analyst who specialized in trading favorable research reports for hundreds of millions of dollars of investment-banking revenue. Grubman, who was paid more than $48 million between 1999 and 2001, pumped up the stock of WorldCom during the years before that telecom company imploded in an ocean of accounting shenanigans. “I vividly and painfully remember those days,” Wible says. “Having gone through seeing what happened with WorldCom, having seen what’s happened with other companies, I feel like you can’t fully trust management. You have to look at what the numbers tell you, and nobody’s going to tell you in advance if something’s not working. I’m sure the guys at Enron and WorldCom would have said everything’s fine. They’re never going to say they’re not fine. I don’t know of any management team that ever goes out proactively to say that things aren’t working or when they’re not going to work.”

When it comes to Netflix, Wible sees red flags everywhere. On June 14 he issued a rare “sell” rating on Netflix’s stock, when it was trading at around $257 per share. (Only 2 percent of Janney’s research reports carry a “sell” rating, and, unlike analysts at both Goldman Sachs and Citigroup, he knows his company won’t be doing investment banking with Netflix anytime soon.) Wible estimated that the true value of Netflix’s stock was then $170 per share, or one-third less than where it was trading.

Wible claimed the company was using two accounting gimmicks to prop up its profitability: not properly amortizing the cost of buying its streaming content (the value of which it was depreciating twice as slowly as that of its DVD content) and doubling the amount of time it took to pay its bills. Both of these, he claims, allowed Netflix to overstate the amount of cash flow it generated in 2010, when it reported $118 million in “free cash flow”; Wible figures the company really lost $12 million, and its cash flow has declined for three of the past four quarters that preceded 2012. The lower cash flow spells trouble, according to Wible, since Netflix is having to pay more and more for its content as well as for the increased broadband usage of its subscribers. The only way it can counter this double whammy is either to raise prices or to increase the number of its subscribers to 60 percent (from its current 30 percent) of homes with broadband by the first quarter of 2012, which it was unable to do. But higher prices were likely to result in fewer subscribers—he predicted correctly—not more.

Wible was also bothered by the sudden resignation of Netflix C.F.O. Barry McCarthy, in December 2010, who had spent the previous year selling his Netflix stock, worth $58 million. And, worse, he believes, Hastings had been continuously selling his stock for several years, some $81 million worth, according to S.E.C. filings—“although we are encouraged to see that he has stopped selling stock as of early October,” says Wible. In December 2011, Netflix announced that Hastings’s total compensation for 2012 would be $2 million, 43 percent below his 2011 compensation of $3.5 million.

The Netflix executives disagree with nearly every one of Wible’s arguments. According to them, Netflix is not stretching payables. It is not misleading anyone about its accounting. (Netflix’s Web site provides a clumsy explanation.) It will be able to continue to grow its subscriber base both in the United States and in foreign countries. The C.F.O. left because he wanted to pursue a C.E.O. role. (He now works for a venture-capital firm.) They don’t waste a moment worrying about the stock price; instead, they spend their time thinking about how to improve their business and how to serve their customers better. Yes, they will pay more for content in the future, but only in a way that makes financial sense for the company and for its subscribers. As for his ongoing stock sales, Hastings says, “I think the message that it sends is the C.E.O. is prudent. I think investors want companies to be led by prudent people, and I should have a stake in the company for sure. I have a huge stake, but you want it to be led by someone who’s also prudent.”

On November 22, with Netflix’s stock down to around $75 per share, Wible issued another “sell” rating with a new price target of $49 per share. He sums up the core problem with Netflix’s business model this way: “If they didn’t position it as a cheap rental service, they probably wouldn’t have gained as much market share, but by positioning it as a cheap rental service, they’re probably not able to take up pricing as much. And what I have maintained is that Reed is a smart guy, but I believe that he’s managing to the best of bad outcomes.”

In recent weeks, following a better-than-expected fourth-quarter 2011 earnings announcement (which saw 220,000 new streaming-only customers and a profit of $52 million in that segment), Netflix’s stock has rebounded to around $124 per share. The bears remain incredulous. “What we have here is a momentum stock divorced from its underlying company’s reality,” Pendola wrote January 27 on the Seeking Alpha blog. “It would not shock me in the least to see [Netflix] move on air back to $300 a share before its next earnings report. At some point, however, the same thing that happened in 2011—a full-on implosion—will take shape sooner, rather than later.” Added Wible, in a recent e-mail, “Seems like we are back to 2010 again.”

By the time Hastings made his first-ever appearance at UBS’s annual global-media-and-communications conference, in Manhattan on December 6, the room was packed with investors wondering what he would say next. “Last year, you couldn’t take a step without people asking about Netflix,” one investor remarked. “This year, everyone is here for the funeral.”

Seated at the front of the room, Hastings took his lumps and tried to move on. “Last year, you were the talk of the conference, I believe,” said Aryeh Bourkoff, the head of investment banking for the Americas at UBS, by way of introduction. “I think there was a combination of mystique and envy and fear—”

“Now it’s just pity,” Hastings quickly interjected.

During our interview, Hastings insisted on putting the whole mess into perspective. “When I look at the challenges that Gandhi had, or the various leaders through history, our challenges pale in comparison to this,” he said. “Over the last 10 years, I’ve read a ton about Winston Churchill and Abraham Lincoln. I’ve worked very hard, but my life’s always been fun. It’s not been the Civil War of 1862. That was dark, and how you hold things together at a time like that is completely different than what we experienced. When we had our stumble—in comparison to a health crisis—I slept well every night. I didn’t get all tense. Our issues were ones that were unfortunate business judgments, not of morality or ethics or scandal.”
http://www.vanityfair.com/business/2...netflix-201202





The Book of Jobs
Maureen Tkacik

[1]Steve Jobs smelled so foul that none of his co-workers at Atari in the seventies would work with him. Entreating him to shower was usually futile; he’d inevitably claim that his strict vegan diet had rid him of body odor, thus absolving him of the need for standard hygiene habits. Later, friends would theorize that he had been exercising what would prove a limitless capacity for sustained and gratuitous lying that came to be nicknamed the “reality distortion field.”

Jobs originally learned the “reality distortion field” from Bob [2] [2]Friedland [2], an enterprising hippie he met by chance one day when he returned early to his dorm room and found Friedland having sex with Jobs’ girlfriend. Bob was four years older than Steve, and had taken two years off to serve a prison sentence for LSD trafficking. Like Steve, Bob would eventually become a billionaire, just in the mining business. His followers would often invoke his old drug dealer nickname “Toxic Bob.”

Steve Jobs needed no nickname. As the title of his definitive biography reminds, Steve Jobs speaks for itself. His name was his essence, what set him apart even among greats like Einstein and Kissinger, iconic figures with whom he shared a biographer, Walter Isaacson (though not the cheesy, descriptive subheads Isaacson used in his books about the other two subjects).

Steve Jobs, the book, is very much a product of its time, which is to say, a product of its subject’s fastidious narcissism and the broader culture’s limitless capacity for nurturing it. With any luck future generations will saddle Steve Jobs, the brand, with the blemish of all the jobs (small “j”) a once-great nation relinquished because of brand-name billionaires like Jobs. But we are not there yet.

Arriving in stores all of a fortnight after his death, the book was instantly deemed by the New York Times as “clear, elegant and concise enough to qualify as an iBio.”

In truth Steve Jobs is the antithesis of concise, but words have a way of inverting meanings in the reality distortion field. Surely Isaacson might have dropped one of 92 references (according to Kindle) to Bob Dylan.

Sometimes the repetition serves a purpose: The drug LSD, referred to 33 times, is clearly important to Jobs. ( [3]The [3] [3]FBI [3] [3]thought [3] [3]the [3] [3]same [3], [3]according [3] [3]to [3] [3]documents [3] [3]released [3] [3]this [3] [3]month [3].) [3] “How many of you have taken LSD?” Jobs taunts an audience of Stanford business school students. “Are you a virgin? How many times have you taken LSD?” he demands of an Apple interviewee. Bill Gates would “be a broader guy if he had dropped acid.” Tripping was “one of the two or three most important things he’d done in his life.” People who had never dropped acid “would never fully understand him.” The generations that followed his own were more “materialistic” and less “idealistic” for not having tripped; also, they all looked like “virgins.” In the binary world within Steve’s reality, having consumed LSD was the key determinant of whether a colleague or employee was deemed “enlightened” or “an asshole.”

To iSummarize: Steve Jobs had a litmus test for evaluating workers: It was a lot like a literal litmus test.

***

Steve never learned to program computers, but he was far too skilled at manipulating people. He wooed all manner of women who were too good for him – such as Joan Baez, who was good enough for Bob Dylan to neglect in the sixties—only to discard them so thoughtlessly it seems like a joke. According to Baez, he experienced a “fervor of delight” while demonstrating a computer programmed to play a Brahms quartet and explaining that future generations of computer orchestras would sound better than humans, down to the innuendo and cadences. This filled Baez with “rage,” she recalled later on with evident amusement; it reinforced Jobs’ growing suspicion that she was “antiquated.” Later, Baez brought him to a dinner party at which he met a 20-year-old who became his new girlfriend.

Jobs’ love life is explored somewhat more laboriously in Steve Jobs than it was in the profile [5] the FBI compiled in 1991 from interviews with 29 people who knew him. Jobs was being researched because the administration of the first President Bush was considering nominating him to the export council. His love life’s prominent role in both the book and his FBI profile underscores Jobs’ extreme consistency. There’s a jilted ex-girlfriend tone to the remarks of most people to whom Jobs was ever close, with the notable exception of the ex-girlfriends themselves, who have for the most part gotten over it. There is no “getting over” Jobs in business. One character witness offered a lengthy discourse to an FBI investigator on the “deceptive” Jobs and his propensity to “twist and distort reality in order to achieve his goals.” He then gave the names and phone numbers of three other individuals who might offer further insight into his cruelty, dishonesty, and deadbeat fatherhood. But finally he granted Jobs a hearty recommendation for the post:

[Redacted] concluded the interview by stating that even though he does not consider Mr. Jobs to be a friend, he possesses the qualities to assume a high level political position. It was [Redacted]’s opinion that honesty and integrity are not required qualities to hold such a position. [Redacted] recommended him for a position of trust and confidence with the government.

If honesty and integrity have no business in public service, they are a downright liability in private enterprise. At least Jobs didn’t usually pretend he believed they were anything else. His management maxim: “It’s better to be a pirate than join the Navy.”

***

Curiously, Steve Jobs’ formative work experience came on a factory floor. He was only 14, but Bill Hewlett himself had given him a summer job on a Hewlett-Packard assembly line, and Jobs called him at home to ask if he’d send him some HP parts for his computer club. Jobs recalled the summer’s experience to Isaacson as a bittersweet rite of passage, evidently still stinging from being teased by a supervisor. The pubescent Jobs had gushed to the supervisor: “I love this stuff, I love this stuff.” He then asked the man what he liked to do best.

“To fuck, to fuck,” the guy responded mockingly.

From this Steve Jobs learned the power of public humiliation, especially when directed at possible “virgins.”

He also seems to have formed a significant grudge toward factories themselves. In 1982, he was so repulsed by the “messy and inelegant” sight of so much “work being done by hand” in a Tokyo Sony factory that he refused to order their disk drives. His underlings circumvented this particular decree by hiring a Sony engineer whom they banished to the closet whenever Jobs visited. But Jobs won out in the end, successfully commandeering an overhaul of the Mac production process to ensure that all its computers would emerge from a veritably dust-free, human-free assembly line. The walls were “pure white,” the robots red and blue and yellow. One of the most expensive robots, once given a new coat of paint, began to chronically malfunction. It was decommissioned. The human manufacturing director quit in solidarity.

“It took so much energy to fight him, and it was usually over something so pointless that finally I had enough,” the director said.

***

In the end, of course, Jobs would bow to shareholder demands and export the robots’ jobs to cheaper human laborers in China. But that is not part of Isaacson’s Steve Jobs, which makes zero mentions of Foxconn, the million-employee contract manufacturer that ultimately enabled the great iResurrection of America’s favorite iBrand.

Foxconn is a subsidiary of Hon Hai Precision, a Taiwanese contract manufacturer founded by a curious man named Terry Guo, who does not seem particularly astute at self-branding. He apparently wears an ancient Yuan Dynasty bracelet in honor of his supposed “personal hero,” Genghis Khan, but his management maxims sound suspiciously Confucian. “I always tell employees: The group’s benefit is more important than your personal benefit,” he once said [8] to the Wall Street Journal. It’s better to join the navy than be a pirate, in other words.

Or is it? Guo’s factories employ 90 percent of Apple’s workers in exchange for less [9] [9]than [9] 5 percent [9]of [9] [9]its [9] [9]profits [9], all so they can consume approximately 99 percent of Apple’s negative press. Guo doesn’t talk to journalists often, but angry employees leaked some comments he made in January at a company annual “family day” at the Taipei Zoo. Taking the stage next to the zoo’s director, he [10] [10]compared [10] [10]Foxconn [10] [10]to [10] [10]his [10] [10]surroundings [10]. “As human beings are also animals, to manage one million animals gives me a headache,” he said.

“What kind of animal jumps off a building?” an indignant Internet commenter wanted to know.

***

Sun Danyong started the Foxconn suicide trend in 2009, following a humiliating interrogation session with security. He texted his girlfriend, told his co-workers he was going to do “something big,” and jumped out of his 12th-story window.

Suicidal people aren’t often motivated by the thought of an ensuing international media event, unless they are planning on taking others down with them. But Sun proved right; his suicide was an international media event, and more improbably it was a media event that mattered, eventually winning his million co-workers a 30 [12]percent [12] [12]raise [12] and flooding their factories with earnest news reporters seeking to chronicle the conditions that might motivate such a bold move.

It was probably inevitable that the media missed the point. The lives of Chinese assembly line workers are not conducive to mainstream media coverage, as the former Wall Street Journal reporter Leslie Chang concluded the morning she began writing Factory Girls, a 2008 book based on a series she’d written about life in the factory metropolis of Dongguan. After a few heated fights with the editor-voices in her head, she began writing in the second person, and a realization struck: She [13] [13]could [13] [13]never [13] go back to newspapers, because “the journalistic voice strangles imagination.”

This becomes less and less bearable when you are attempting to convey life in a place where the imagined is relentlessly replacing reality, and vice versa. The lives of virtually all 1.6 billion Chinese have “changed beyond recognition over the past two decades,” she notes. Anyone who has visited twice will understand that to be an understatement; some things only take a month or so to become unrecognizable.

When imagination is off the table, you get coverage like CNN’s Foxconn series, in which CNN interviews a disgruntled Foxconn employee complaining of “dehumanization” and, lacking anything terribly sensational or sordid, asks her if she might be able to quantify that. We learn that the job entails sticking more [14] [14]than [14] 4,000 [14]stickers [14] [14]onto iPads each day.

In Factory Girls you learn that “dehumanization” is a pretty universal fear of migrant factory workers, but mostly because they are so much more acutely aware of humanity, and the vast spectrum of possibilities it can hold, than most people one encounters these days. It’s hard to explain why, but this renders Chang’s barely connected collage of scenes bizarrely gripping in a way that usually requires an elaborate plot. As she explains in the introduction, her subjects don’t have much in common beyond a kind of self-possession that reminded me of Sun Danyong: “They understood the drama of their own lives and knew why I wanted to write about them.” Their ambition is familiar in a way that reminds you of reality-show teenagers, but their priorities keep changing with the world. As the world around them gets richer, the meaning of wealth shifts; fear of dehumanization is the new fear of poverty.

***

The most inspiring passage of Steve Jobs is the part where Tina Redse refuses to marry him. It is the summer of 1989, they have been dating on and off for five years, and Tina has come closer than anyone to domesticating him. She has brokered peace between Steve and Chrisann Brennan, the mother of his 11-year-old daughter, a woman Jobs had so cruelly ignored after she got pregnant that she’d been reduced to scrawling messages on the walls of the house they shared. Tina has coaxed Jobs into being an occasionally decent dad (a change which would be mentioned somewhat incredulously by a number of the FBI interviewees two years later). She has moved in and out and in again. In one dark hour she left her own message on the walls: “NEGLECT IS A FORM OF ABUSE.” But he claims she is the only woman he has ever truly loved, and she knows this is true enough.

It is not, however, enough. “I didn’t want to hurt him, yet I didn’t want to stand by and watch him hurt other people either,” she said later, describing the overall courtship experience as “painful and exhausting.”

Jobs, on the other hand, had 22 more years of pain and exhaustion to produce, so the reader is not so easily let off the hook.

And so each passing orgy of rage over the color of something made Steve Jobs more successful; each outlandish, last-minute demand made Steve Jobs richer.

***

I happened to move to Guangdong province the same summer as Tiananmen Square. My new home was far away from the protests, but shared Beijing’s compulsory poverty.

Mercifully everyone was getting richer, thanks to factories. A Nike factory opened that year, informing what would become an abiding, personal frustration with the anti-“sweatshop” movement. Back then, the movement seemed naively oblivious to the realities of everyday Chinese; today it seems more cruelly oblivious to the realities of everyday Americans. For 20 years now it has consistently cast Chinese laborers as victims, quantifying that victimhood by an arbitrary formula: How many hours of assembly line toil would be required to purchase whatever overpriced good they happened to be assembling?

But Chinese factories aren’t really sweatshops anymore — rather they’re some of the most sophisticated high-tech manufacturing plants in history. This is not because their workers assembled more and better sneakers every year. It is because China’s government, emulating that of Japan and Taiwan and Korea before it, subsidized industries that required rapid, constant change. And by doing that, China created a working class that is no longer so impoverished that it’s also powerless. Economic growth isn’t always pretty, but if you can legitimately make things better than they were for the majority of the population, it’s worth it.

Over two decades the quintessential Chinese factory worker has gone from earning $50 a month assembling $100 sneakers to $300 or so a month, depending on overtime, assembling $300 or so smartphones. If a Foxconn worker — given the other opportunities in life and the current no-cell-phone policy on the factory floor — was going to splurge on a smartphone, the only reason he wouldn’t buy an iPhone is that Apple products are inevitably a ripoff, which is the not-so-dirty secret of 31.5 percent operating margins.

Because when you work in a factory, brands lose a lot of mystique, as Chang demonstrates in Factory Girls when she experiences a mild panic attack after discovering, all at once, that a teenage subject’s beloved collection of Coach and LeSportsac handbags is not fake. The purse factory at which she works is actually a genuine, officially sanctioned Coach factory, and this is no big deal because she is friends with the security guards, who will let you take a bag out of the factory as long as you promise not to sell it to strangers.

Working at Foxconn is nothing like that. Surveillance [17] [17]cameras [17] are ubiquitous; “ [18]military [18]” protocols the sneaker factories abolished in the early nineties govern every little process; countless rules seem intended purely to subjugate; and security guards are friends with no one, as Sun Danyong learned when an iPhone prototype in his car went missing in the summer of 2009. Foxconn security searched, interrogated, and tortured [19] Sun in episodes he described bitterly to friends. The more he thought about it, the angrier he became.

So he jumped out of his 12th-story window to protest the perverse pathology that values inanimate objects over the humans that make them. Nowhere in his final text messages or chat transcripts did he mention long hours or low wages. The first news reports focused on Foxconn’s draconian confidentiality [20] and non-compete agreements; in ensuing interviews with the Hong Kong labor rights organization Students [21] & [21]Scholars [21] [21]Against [21] [21]Corporate [21] [21]Misbehaviour [21] (SACOM), workers focused mostly on military training, standing, and other practices they described as “nonsense.”

But the nonsense works better closer to home. Excerpts of Adam Lashinsky’s new exploration [22] of Apple’s vaunted “culture of collaboration,” Inside Apple: How America’s Most Admired–And Secretive–Company Really Works, detail a policy prohibiting employees from talking to one another about any topic about which both parties have not yet been officially “disclosed” — Distortionspeak for “cleared to discuss” — by a higher authority.

To be clear: Enforcing such a policy at a company that prides itself on collaboration is pretty much the textbook definition of “Orwellian.” It is also good for shareholder value and a practice that has stood the test of time: Forbidding workers from talking to one another keeps wages down, especially when senior management has struck deals with its rivals (as Apple [23] [23]allegedly [23] [23]did [23]) agreeing to refrain from poaching one another’s talent.

***

Until a decade ago, I didn’t really consider what globalization meant for its really big winners: the corporate elite who reaped inflated margins. That profit was enabled by China’s low-cost manufacturing, along with price-distortion mechanisms of companies’ marketing departments and advertising agencies and intellectual property lawyers. But those are the people you meet as a domestic reporter at the Wall Street Journal, which is where I worked in 2002, when I first traveled to the blandly luxurious Nike campus in Beaverton, Oregon. Scanning the landscape for possible stories, which at the Journal generally entailed some big and undisclosed line item, I wondered how the famous architects who designed the buildings made out compared with the famous athletes for whom the buildings had been named, versus the creative directors who shot the commercials, how they split the residuals, and how the executive I was about to interview stacked up against everyone else.

Anticipating the interview, I realized my breath urgently required gum and found a store with a grandmotherly cashier who was definitely the oldest person for miles. (There for stock options, presumably.)

“Oh, there’s no gum on the Nike campus,” she informed me, solemnly. “It’s Phil [25] [25]Knight [25] policy.”

Assuming material was better than minty breath, I laughed and made a mental note to rib every executive I met about the Phil Knight Policy.

“I don’t know if I would call it a formal policy,” the first VP I asked said stiffly. “I think it’s just part of an overall standard of excellence.”

It gradually dawned on me after this encounter that much of the cultural nonsense I presumed had died with the tech bubble was alive and well. Especially wherever brands had adequately inoculated themselves against the threat of the proverbial “burst,” which in this case just happened to involve a ban on bubblegum. And the nonsense was proliferating. It occurred to me at some point that exploitation would be accepted as so fundamental to the general “lifestyle” that slavery itself could be recast in the jargon of “aspiration.”

***

In 2010, employees of a Bay Area Apple store learned that new hires were getting paid more than experienced staffers, and about a dozen agreed to bring it up during their upcoming performance reviews. One after another, the employees were simply given the same [27] [27]response [27]:

“Money shouldn’t be an issue when you’re employed at Apple. Working at Apple should be viewed as an experience.”

***

In the end Steve Jobs’ contempt for human life did not exempt his own. He sacrificed himself thoughtlessly in one final and meaningless act, an act of radical branding so brave and revolutionary the media listed the cause of death as pancreatic cancer.

Of course, as we learn in Steve Jobs, to attribute Steve Jobs’ death to pancreatic cancer is to libel the cancer. In 2003 Steve Jobs had a pancreatic cancer scare that turned out to be a pancreatic neuroendocrine tumor, an extremely [29] [29]rare [29] [29]and [29] [29]slow [29]- [29]growing [29] [29]condition [29] that accounts for only 1 percent of pancreatic cancer cases. It was the best-case scenario. His wife told Isaacson she remembered his doctors “tearing up with joy” when they learned the good news.

But then Steve Jobs refused to have surgery, once again putting all his faith and bullying, reality-blind certitude into his insufferable brand of sanctimonious veganism. This wasn’t a matter of passing up radiation and chemo; this was a matter of passing up every cancer patient’s dream of not even having to go through radiation and chemo.

“The big thing,” his wife explained to Isaacson, “was that he really was not ready to open his body,” as if such a move might jeopardize his manufacturer’s warranty. Then, burrowing into the depths of reality distortion, she added: “It’s hard to push someone to do that.”

WHAT IN KRISHNA’S NAME WAS HE DOING GETTING A BIOPSY THEN?!

But like all the other internal contradictions that seem to endlessly fascinate the punditry elite about Steve Jobs, this apparent conflict between Jobs’ profound affinity for technology and his bizarre unwillingness to allow it to save his life is another pointless straw man that only serves to further elide the very Jobsian simplicity that lies beneath:

There once lived one of those really obstinate assholes who will constantly tell you he couldn’t change his assholic ways if it killed him. It killed him.

There once lived a pathological liar who convinced the world his particular habits of lying were the foundation of his astonishing business success. That turned out to be a lie.

There once lived a drug dealer named Toxic Bob who taught Steve Jobs how to emit noxious fumes and lie about it. Toxic Bob made billions extracting riches from the earth and leaving the toxins behind for the government to clean up. Toxic Bob now resides in Singapore, where chewing gum is against the law.

Both men stayed very true to their brands.
http://blogs.reuters.com/great-debat...ve-jobs-apple/





An iPhone That’s Cheaper, but Fake
Michael Wilson

A police officer stood on Ninth Avenue at 39th Street on a warm Monday afternoon and saw a man trying to sell a stranger a new, still-in-the-box iPhone 4 on the street, for the too-good-to-be-true price of $150. The man’s name was Iaron Baskerville, 62, and court records indicate that when the officer approached to arrest him for operating without a vendor’s license, Mr. Baskerville said something curious by way of defense.

“The phone,” Mr. Baskerville said, “is fake.”

So what did it look like? Officers opened the box, which looked authentic, and found an odd-looking, poor-boy stepbrother of the real thing.

“I have an iPhone,” said Sgt. John O’Connell, 37, with the nearby 10th Precinct, describing the afternoon last month. “Immediately, you know it’s not a real phone. The screen’s smaller. The buttons don’t fit right. It was more of a box. It didn’t feel as sturdy.”

Then somebody went to turn it on, and everybody got a surprise. The thing turned on. “The screen wouldn’t have the same color,” Sergeant O’Connell recalled. “The apps weren’t as clear.”

Sorry — apps?

“You would touch an app, and it would come up,” he said. “It had a calendar app. It was blurry, but it came up.”

The officers — who work in a cramped, fifth-floor walk-up office with a bulky cathode-ray television and strips of flypaper hanging from the ceiling — had seen nothing like this, and they moved forward. They took the device to the Apple store on West 14th Street to get an official verdict — yes, a manager said, it’s a fake — and acquired a search warrant for the West 28th Street store where the police said the phone came from.

Officers raided the store on Feb. 9 and found what the police described as among the larger inventories of fake Apple electronics for sale on the East Coast. They said there were 436 iPhones, 21 iPads, 128 iPods — all fake. An official from Apple showed up to verify as much.

“If you walked in and said, ‘I want a 32-gigabyte white iPhone,’ they had it,” Sergeant O’Connell said. “The iPad was the size of a Kindle screen.”

Some devices turned on, while others appeared to need to be plugged in first. The police said they also found $2,400 in cash, a bunch of security cameras and two people working, Cindy Liu, 25, and Mo Ling, 36, who were arrested.

There were also 3,697 knockoff versions of the popular Beats by Dr. Dre headphones. They sounded terrible. “It’s like buying ‘Sergeant Pepper’ and discovering it was covered by your neighbors next door,” said Luke Wood, president of Beats.

Counterfeiting seems to be on the rise, with thousands of fake iPhones found in seizures in California in 2010 and 2011, said Leander Kahney, editor and publisher of CultofMac.com, a technology news site devoted to Apple. Last summer, a South Carolina woman believed she was buying a new iPad sealed in a FedEx envelope, only to get home and find that it was made of wood. In 2009, an electronic store owner’s video of his examination of a fake iPhone became a cult hit. Most knockoffs are sold over the Internet, with stores like the one in New York far rarer.

Bernie Minoso, a manager at the store Tekserve, worked at Apple’s Fifth Avenue store for more than five years, and had to face many unhappy owners — up to five a day — right after a new product was released. Their new devices would not communicate with the iTunes store.

“We started seeing this nearly perfect iPod with a different operating system inside,” Mr. Minoso said. “We said, ‘We cannot service this.’ ” But he said he had not seen a fake in years and marveled at the size of the seizure just five blocks from his store.

The fakes are believed to come from China. Some are made of real Apple parts stolen from company factories there, but most are wholly produced with separate materials. “It has to be a clean environment” to make the fakes really work, Mr. Minoso said. “If I were doing it, it would be a dust-free shop.”

Some of the fakes have their fans. “There are some really sophisticated ones coming out of China that some people actually prefer,” Mr. Kahney said. “It has a replaceable battery, so you can swap the battery out, which you can’t do on the iPhone.”

The New York police said their investigation into the little store was continuing.
https://www.nytimes.com/2012/02/25/n...re-common.html





With The AT&T Deal Dead, T-Mobile Plans To Invest $4 Billion In Network Modernization And LTE
Jordan Crook

It would be fitting to say that T-Mobile was derailed from its path in 2011. The company’s big break came in the form of a bid from AT&T to acquire the nation’s number four (and magenta-clad) carrier, but then as quickly as it swept into existence, the deal fell through.

Now, however, T-Mobile has a plan (the “Reinvigorated Challenger Strategy”) to get back on track and “get the business back to growth,” according to the release. This includes a $4 billion network modernization investment to evolve the carrier’s 4G network and help prepare for T-Mo’s LTE service in 2013.

The company will also be investing in the B2B segment, advertising, and attracting new MVNO partners. T-Mobile will continue to remodel its stores and make inroads in new territories, as well as expand the sales force by 1,000 employees.

That $4 billion in network investments will go toward installing new equipment at 37,000 cell sites and reworking their spectrum assets to get ready for an LTE launch in 2013. Now that the AT&T deal has fallen through, T-Mobile will receive new spectrum from the fall-out that will be the key to its plan to refarm spectrum.

This $4 billion investment will be spread out over time, but around $1.4 billion of it will be used over the next two years to go toward network improvement. Once LTE is up and at ‘em, T-Mobile expects to offer service in “the vast majority of the top 50 markets,” with “20MHz service in 75 percent of the top 25 markets.”
http://techcrunch.com/2012/02/23/wit...ation-and-lte/





Phone and Email Records to be Stored in New Spy Plan

Details of every phone call and text message, email traffic and websites visited online are to be stored in a series of vast databases under new Government anti-terror plans.
David Barrett

Landline and mobile phone companies and broadband providers will be ordered to store the data for a year and make it available to the security services under the scheme.

The databases would not record the contents of calls, texts or emails but the numbers or email addresses of who they are sent and received by.

For the first time, the security services will have widespread access to information about who has been communicating with each other on social networking sites such as Facebook.

Direct messages between subscribers to websites such as Twitter would also be stored, as well as communications between players in online video games.

The Home Office is understood to have begun negotiations with internet companies in the last two months over the plan, which could be officially announced as early as May.

It is certain to cause controversy over civil liberties - but also raise concerns over the security of the records.

Access to such information would be highly prized by hackers and could be exploited to send spam email and texts. Details of which websites people visit could also be exploited for commercial gain.

The plan has been drawn up on the advice of MI5, the home security service, MI6, which operates abroad, and GCHQ, the Government’s “listening post” responsible for monitoring communications.

Rather than the Government holding the information centrally, companies including BT, Sky, Virgin Media, Vodafone and O2 would have to keep the records themselves.

Under the scheme the security services would be granted “real time” access to phone and internet records of people they want to put under surveillance, as well as the ability to reconstruct their movements through the information stored in the databases.

The system would track “who, when and where” of each message, allowing extremely close surveillance.

Mobile phone records of calls and texts show within yards where a call was made or a message was sent, while emails and internet browsing histories can be matched to a computer’s “IP address”, which can be used to locate where it was sent.

The scheme is a revised version of a plan drawn up by the Labour government which would have created a central database of all the information.

The idea of a central database was later dropped in favour of a scheme requiring communications providers to store the details at the taxpayers’ expense.

But the whole idea was cancelled amid severe criticisms of the number of public bodies which could access the data, which as well as the security services, included local councils and quangos, totalling 653 public sector organisations.

Labour shelved the project - known as the Intercept Modernisation Programme - in November 2009 after a consultation showed it had little public support.

Only one third of respondents backed the plan and half said they feared the scheme lacked safeguards and technical rigour to protect highly sensitive information.

At the same time the Conservatives criticised Labour’s “reckless” record on privacy.

A called Reversing the Rise of the Surveillance State by Dominic Grieve, then shadow home secretary and now Attorney General, published in 2009, said a Tory government would collect fewer personal details which would be held by “specific authorities on a need-to-know basis only”.

But the security services have now won a battle to have the scheme revived because of their concern over the ability of terrorists to avoid conventional surveillance through modern technology.

They can make use of phone tapping but their ability to monitor email traffic and text messages is limited.

They are known to have lobbied Theresa May, the Home Secretary, strongly for the scheme. Their move comes ahead of the London Olympics, which they fear will be a major target for terror attacks, and amid a climate of concern about terrorists’ use of the internet.

It has been highlighted by a number of attacks carried out after radicalisation took place through websites, including the stabbing by a young Muslim woman of an MP at his constituency surgery.

Sources said ministers are planning to allocate legislative time to the new spy programme, called the Communications Capabilities Development Programme (CCDP), in the Queen’s Speech in May.

But last night privacy campaigners warned the scheme was too open to abuse and could be used for “fishing trips” by spies.

Jim Killock, executive director of the Open Rights Group, a civil liberties campaign organisation, said: “This would be a systematic effort to spy on all of our digital communications.

“The Conservatives and Liberal Democrats started their government with a big pledge to roll back the surveillance state.

“No state in history has been able to gather the level of information proposed - it’s a way of collecting everything about who we talk to just in case something turns up.”

There were also concerns about the ability of phone and internet companies to keep the information secure.

And the huge databases could also be used by internet service providers, particularly to work out which advertising to target at users.

Broadband firms including BT came up with a scheme almost three years ago to target advertising, but it did not get off the ground.

However, if companies were able to exploit the information they will be compelled to keep for the CCDP, they would be much more capable of delivering advertising to computers and even mobile phones based on users’ past behaviour.

Gus Hosein, of Privacy International, said: “This will be ripe for hacking. Every hacker, every malicious threat, every foreign government is going to want access to this.

“And if communications providers have a government mandate to start collecting this information they will be incredibly tempted to start monitoring this data themselves so they can compete with Google and Facebook.”

He added: “The internet companies will be told to store who you are friends with and interact with. While this may appear innocuous it requires the active interception of every single communication you make, and this has never been done in a democratic society.”

A Home Office spokesman said: “It is vital that police and security services are able to obtain communications data in certain circumstances to investigate serious crime and terrorism and to protect the public.

“We meet regularly with the communications industry to ensure that capability is maintained without interfering with the public’s right to privacy.

“As set out in the Strategic Defence and Security Review we will legislate as soon as Parliamentary time allows to ensure that the use of communications data is compatible with the Government’s approach to civil liberties.”

Andrew Kernahan of the Internet Service Providers’ Association said: “It is important that proposals to update Government’s capabilities to intercept and retain communications data in the new communications environment are proportionate, respect freedom of expression and the privacy of users, and are widely consulted upon in an open and transparent manner.”
http://www.telegraph.co.uk/technolog...-spy-plan.html



Homeland Analysts Told to Monitor Policy Debates in Social Media
Charlie Savage

Analysts for a Department of Homeland Security program that monitors social networks like Twitter and Facebook have been instructed to produce reports on policy debates related to the department, a newly disclosed manual shows.

The manual, a 2011 reference guide for analysts working with the department’s Media Monitoring Capability program, raises questions about recent claims by Homeland Security officials who portrayed the program as limited to gathering information that would help gain operational awareness about attacks, disasters or other emerging problems.

Last month, a previous disclosure of documents related to the program showed that in 2009, when it was being designed, officials contemplated having reports produced about “public reaction to major governmental proposals with homeland security implications.”

But the department said it never put that category into practice when the program began in 2010. Officials repeated that portrayal in testimony last week before an oversight hearing by a House Homeland Security subcommittee.

“I am not aware of any information we have gathered on government proposals,” testified Richard Chavez, the director of the office that oversees the National Operations Center, which runs the program.

Still, the 2011 manual, which was disclosed this week as part of a Freedom of Information Act lawsuit, lists a series of categories that constitute an “item of interest” warranting a report. One category is discussion on social media networks of “policy directives, debates and implementations related to DHS.”

It is not clear whether the department has produced such reports. Matthew Chandler, a department spokesman, said Wednesday that in practice the program had been limited to “social media monitoring for situational awareness only.”

He also said the department would review the reference guide and related materials to make sure they “clearly and accurately convey the parameters and intention of the program.”

Ginger McCall of the Electronic Privacy Information Center, an advocacy group that filed the lawsuit and obtained the document, argued that the manual shows that the monitoring may have gone beyond its limited portrayal by department officials.

“The D.H.S. continues to monitor the Internet for criticism of the government,” she said. “This suspicionless, overbroad monitoring quells legitimate First Amendment activity and exceeds the agency’s legal authority."

A federal statute cited by officials last week as the legal basis for the program gives the National Operations Center the authority “to provide situational awareness” for officials “in the event of a natural disaster, act of terrorism or other man-made disaster” and to “ensure that critical terrorism and disaster-related information reaches government decision makers.”

Officials have stressed that the program does not collect personally identifying information, like the names or Twitter account handles of the people making comments, and that it does not monitor, review or collect First Amendment-protected speech.

Still, the program also monitors articles and broadcasts by traditional media outlets. The 2011 manual says that analysts, in addition to flagging information related to matters like terrorism and natural disasters, should also identify “media reports that reflect adversely on D.H.S. and response activities” and collect “both positive and negative reports” on department components as well organizations outside of the department.

The manual includes keywords that analysts should search for. A list of agencies in the keyword section includes not only those in the department dealing with matters like immigration and emergency management, but also the Central Intelligence Agency, several law enforcement agencies in the Justice Department, the Red Cross and the United Nations.

At the hearing last week, lawmakers of both parties said it made sense for the department to use the Internet to gather information about emerging events, but they voiced concerns that if it went further than that, the program might chill people’s freedom of speech and willingness to express dissent online.

“Other private individuals reading your Facebook status updates is different than the Department of Homeland Security reading them, analyzing them and possibly disseminating and collecting them for future purposes,” said the chairman of the subcommittee, Representative Patrick Meehan of Pennsylvania.

Mary Ellen Callahan, the department’s chief privacy director, testified that the program was interested only in events within the department’s mission — like disasters, attacks or continuing operational problems. As an example, she cited a situation in which people post to Twitter about an unusually long line at a particular airport checkpoint.

She also played down the use of keyword searches the program uses for articles and postings on social networks, portraying them as simply related to disasters — “you know, flood, tornado and things like that.”

The 2011 manual contains a fuller list. Many keywords are closely related to various disasters. But a handful are potentially more sweeping, like China, cops, hacking, illegal immigrants, Iran, Iraq, marijuana, organized crime, police, pork and radicals.
https://www.nytimes.com/2012/02/23/u...ial-media.html





Anonymous And Internet Advocates: Where's Your H.R. 1981 Outrage?
David Seaman

Our videocast explaining H.R. 1981 in-depth is posted in full below; the video was featured on YouTube's U.S. homepage yesterday and this morning, thanks to the tremendous level of interest from readers.

Background: H.R. 1981, the nefariously entitled "Protecting Children From Internet Pornographers Act," is actually a wide-ranging Internet surveillance bill that has no place in the United States of America. (Why not call it the Protecting Kittens From Harm Act? Or the American Prosperity Guarantee Act -- just a B.S. name so that politicians in the House and Senate are strong-armed into voting for it, even though it contains utterly insane 1984-style Big Brother surveillance provisions. WebProNews recently called H.R. 1981 a "turd wrapped in cotton candy," actually one of the more diplomatic assessments of the bill.)

It's on the fast-track to becoming law, and it's authored by Rep. Lamar Smith, who created SOPA.

I hope Anonymous and Internet free speech advocates like the EFF will inform their public about H.R. 1981 before it's too late.

Unlike SOPA, this one isn't getting the full court press. Almost no one knows about it.

The government has already taken away your right to a trial and attorney under NDAA. Now they want to monitor all of your online activity, and store it for a full year. As guest expert Chalise Grogan explains in today's videocast (watch it below), this is deeply troubling for a number of reasons:
http://www.businessinsider.com/anony...outrage-2012-2





Eleventh Circuit Finds Fifth Amendment Right Against Self Incrimination Protects Against Being Forced to Decrypt Hard Drive Contents
Orin Kerr

The important decision is In re Grand Jury Subpoena Duces Tecum Dated March 25, 2011. From the opinion by Judge Tjoflat:

We hold that the act of Doe’s decryption and production of the contents of the hard drives would sufficiently implicate the Fifth Amendment privilege. We reach this holding by concluding that (1) Doe’s decryption and production of the contents of the drives would be testimonial, not merely a physical act; and (2) the explicit and implicit factual communications associated with the decryption and production are not foregone conclusions.

First, the decryption and production of the hard drives would require the use of the contents of Doe’s mind and could not be fairly characterized as a physical act that would be nontestimonial in nature. We conclude that the decryption and production would be tantamount to testimony by Doe of his knowledge of the existence and location of potentially incriminating files; of his possession, control, and access to the encrypted portions of the drives; and of his capability to decrypt the files.

We are unpersuaded by the Government’s derivation of the key/combination analogy in arguing that Doe’s production of the unencrypted files would be nothing more than a physical nontestimonial transfer. The Government attempts to avoid the analogy by arguing that it does not seek the combination or the key,
but rather the contents. This argument badly misses the mark. In Fisher, where the analogy was born, and again in Hubbell, the Government never sought the “key” or the “combination” to the safe for its own sake; rather, the Government sought the files being withheld, just as the Government does here. Hubbell, 530 U.S. at 38, 120 S. Ct. at 2044 (trying to compel production of documents); Fisher v. United States, 425 U.S. at 394–95, 96 S. Ct. at 1572–73 (seeking to access contents possessed by attorneys).

Requiring Doe to use a decryption password is most certainly more akin to requiring the production of a combination because both demand the use of the contents of the mind, and the production is accompanied by the implied factual statements noted above that could prove to be incriminatory. See Hubbell, 530 U.S. at 43, 120 S. Ct. at 2047. Hence, we conclude that what the Government seeks to compel in this case, the decryption and production of the contents of the hard drives, is testimonial in character.

Moving to the second point, the question becomes whether the purported testimony was a “foregone conclusion.” We think not. Nothing in the record before us reveals that the Government knew whether any files exist or the location of those files on the hard drives; what’s more, nothing in the record illustrates that the Government knew with reasonable particularity that Doe was even capable of accessing the encrypted portions of the drives. . . .

To be fair, the Government has shown that the combined storage space of the drives could contain files that number well into the millions. And the Government has also shown that the drives are encrypted. The Government has not shown, however, that the drives actually contain any files, nor has it shown which of the estimated twenty million files the drives are capable of holding may prove useful. The Government has emphasized at every stage of the proceedings in this case that the forensic analysis showed random characters. But random characters are not files; because the TrueCrypt program displays random characters if there are files and if there is empty space, we simply do not know what, if anything, was hidden based on the facts before us. It is not enough for the Government to argue that the encrypted drives are capable of storing vast amounts of data, some of which may be incriminating. In short, the Government physically possesses the media devices, but it does not know what, if anything, is held on the encrypted drives. Along the same lines, we are not persuaded by the suggestion that simply because the devices were encrypted necessarily means that Doe was trying to hide something. Just as a vault is capable of storing mountains of incriminating documents, that alone does not mean that it contains incriminating documents, or anything at all.

Based on a very quick skim, the analysis seems mostly right to me — in result, at least, although perhaps not as to all of the analysis. I hope to blog more on the case later on when I have a bit more time.

Also note that the court’s analysis isn’t inconsistent with Boucher and Fricosu, the two district court cases on 5th Amendment limits on decryption. In both of those prior cases, the district courts merely held on the facts of the case that the testimony was a foregone conclusion.
http://volokh.com/2012/02/23/elevent...pted-computer/





Leaked Docs: Heartland Institute Think Tank Pays Climate Contrarians Very Well
John Timmer

Update: The Heartland Institute has acknowledged that some of the documents were theirs, but claims that a strategy document is fraudulent. Although other sources indicate that the Heartland is preparing an educational program, none speak to the motivation behind this program.

The scientific findings relevant to climate change generally appear in journals that the public will never look at. Instead, the public battle over the science and its policy implications often boils down to a battle between scientific societies like the AAAS and National Academies of Science and think tanks like the Cato Institute and Heartland Institute, which contest the scientific consensus. The Heartland has even set up a contrarian counterpart to the Intergovernmental Panel on Climate Change, called the NIPCC (for "nongovernmental" and "international," naturally).

Yesterday, a series of documents that allegedly originated form the Heartland were leaked to a prominent climate blog. The documents reveal that most of the funding for its climate activities come from a small range of very generous donors, and that big plans are afoot for 2012. If the Heartland has its way, it will fund the launch of a new website by meteorologist and climate skeptic Anthony Watts, and prepare a school curriculum intended to keep teachers from addressing climate science.

The documents include a detailed financial statement, which lists all the sources of income. The Heartland is generally antiregulatory (issues its tackled in the past include everything from smoking laws to telecom regulations), and its list of small donors reflects that. Time Warner Cable and AT&T both show up, as does Microsoft. Pharmaceutical and insurance companies also make appearances, along with the Koch brothers and GM. Combined, these large donors ($10,000 or more) provided about three-quarters of the Heartland's $4.5 million budget last year. A single anonymous donor provided about another $1 million.

A glance through the documents (their authenticity has yet to be confirmed; see below), however, quickly reveals that this broad range of donors isn't involved in the Heartland's climate activities. The NIPCC reports, for example, consume about $300,000 a year, but all of that comes from two donors. Half of the cost of Watts' new website (which is rather pricey, at $88,000) comes from a single donor. Another donor has pledged $100,000 towards the school curriculum project.

The content of Watts' next project isn't made clear in the document (his current website is still focused on arguing about the accuracy of the temperature record long after the issues have been reanalyzed to death). But the description of the project that will target public schools is striking.

UPDATE: The following two paragraphs regarding the education strategy are based on a document that the Heartland Institute says is fraudulent.

After complaining that "Principals and teachers are heavily biased toward the alarmist perspective," the document indicates that the $100,000 will go to David Wojick, an engineer with a PhD in the philosophy of science. Wojick will be funded to address "the absence of educational material suitable for K-12 students on global warming that isn’t alarmist or overtly political." To that end, he'll produce a set of modules that explicitly borrows the "teach the controversy" strategy, with each module dedicated to terming different aspects of climate change controversial—humanity's involvement, the accuracy of climate models, the role of CO2 as a pollutant, etc.

This strategy is just as cynical as it sounds. Most of these topics aren't scientific controversies, and one document explicitly notes that the modules aren't focused on enabling teachers to handle climate science better; instead, Heartland hopes to dissuade them from teaching it at all. "Effort will focus on providing curriculum that shows that the topic of climate change is controversial and uncertain—two key points that are effective at dissuading teachers from teaching science."

Wojick isn't the only individual who will be paid well for his role in contesting climate science. Craig Idso, a former coal lobbyist who now helps manage the NIPCC, is getting $11,600 per month for doing so. Fred Singer, a former scientist who often writes editorials that contest the scientific consensus, gets $5,000 a month. A number of others, some still in academia, receive smaller amounts.

UPDATE: the following paragraph is based on information from a document that the Heartland claims is a forgery.

Heartland also claims to be able to mobilize less-formal means of contesting the scientific community. It says it coordinates its work with Watts, along with "other groups capable of rapidly mobilizing responses to new scientific findings, news stories, or unfavorable blog posts." It has also used Forbes blogs (one of its senior fellows has a regular column there) to get its message out. However, its love affair with Forbes is apparently on the rocks, since, " they have begun to allow high-profile climate scientists (such as [The Pacific Institute's Peter] Gleick) to post warmist science essays that counter our own."

Some of these documents are focused on fundraising, and thus might be the product of a bit of wishful thinking. Still, they make the Institute's strategic vision pretty clear, and many of the fundraising details and payments are required as part of tax documents. The most significant question is whether their entire content is authentic.

Many of the extensive details are so mundane that there's little doubt that the leaked documents were based on legitimate ones. The only question is whether some of the text within them has been modified prior to the leak. The Heartland Institute hasn't yet commented publicly on the documents' authenticity, nor has its communications director returned our calls.
http://arstechnica.com/science/news/...-very-well.ars





WikiLeaks, a Postscript
Bill Keller

THIS is apparently the revenge of Julian Assange: everyone who runs afoul of the rock-star leaker is condemned to spend eternity discussing the cosmic meaning of WikiLeaks. As the editor of The Times during our publication of many articles based on that treasury of military and diplomatic secrets, and as the lucky man the WikiLeaks founder singled out as his Least Favorite Journalist, I have participated in half a dozen panel discussions, and turned down at least that many. I can’t complain about the one in Madrid, where, after holding forth in a packed auditorium, the American, British, German, French and Spanish editors who broke news based on WikiLeaks commemorated the collaboration with an after-hours prowl through the Prado Museum and a 27-course meal cooked by master chef Ferran Adrià. (If Europe is dying, Spain is where I plan to go for the wake.) Unforgettable in a different way was the retrospective in Berkeley, where Assange himself, then as now awaiting an extradition ruling in England, was Skyped in on a giant screen, like the mighty Oz, to pontificate on Western media’s failure to turn the files into a kind of Nuremberg trial of American imperialism. About half the audience seemed on the verge of tossing their underwear at the screen.

Add to that the three or four documentaries on the WikiLeaks adventure, the dozen books — including, weirdly, Assange’s unauthorized autobiography — and a couple speculative Hollywood projects, in which I have a twofold interest. (1. The very slight possibility that I might make some money for my small piece of the story. 2. The exceedingly remote chance that a director will take up my wife’s brilliant idea that Assange be played by Tilda Swinton.)

It’s amazing they keep inviting me to these things, since I’m a bit of a spoilsport. My consistent answer to the ponderous question of how WikiLeaks transformed our world has been: really, not all that much. It was a hell of a story and a wild collaboration, but it did not herald, as the documentarians yearn to believe, some new digital age of transparency. In fact, if there is a larger point, it is quite the contrary.

With the subject showing no signs of going away — one more documentary melodrama of our WikiLeaks adventure will be featured at next month’s South by Southwest festival — I decided to check up on the lingering fallout from what may be the nation’s all-time greatest cascade of blown secrets.

Assange himself, who gave a handful of journalists early access to the pilfered data, has moved from a supporter’s country mansion to much more modest digs while he fights extradition to Sweden on sexual abuse charges. An American grand jury is believed to still be mulling an indictment for his role in the leaks. He compiled many hours of interviews for an autobiography, then backed out of the project, but his publisher — in the proper anarchist spirit of WikiLeaks — published it over his objections. (Evidently not for profit. It is No. 1,288,313 on the Amazon list of best-selling titles.) Assange’s newest project, announced last month, is a television talk show in which he will interview “iconoclasts, visionaries and power insiders.” So says the proud buyer of this series, RT (formerly Russia Today), the Kremlin’s English-language propaganda arm and keeper of the cult of Putin. No, not kidding.

Kremlin TV aside, Assange has declined from global notoriety to B-list celebrity: he lacks enough star power for a hosting gig on “Saturday Night Live,” but he did have a cameo in Sunday’s episode of “The Simpsons.”

Bart: “How ya doin’, Mr. Assange?”

Julian: “That’s my personal information, and you have no right to know about it.”

Bada-bing.

The Army private accused of divulging three-quarters of a million secret documents to WikiLeaks, Bradley Manning — who was at first kept in such inhumane custody that the State Department spokesman quit in protest — is scheduled to be arraigned Thursday on charges that could mean life in prison. You don’t have to excuse his alleged crime to think the original sin in the whole drama is that this tormented soul had access to so many secrets in the first place.

What we cannot know for sure is the fate of the many informants, dissidents, activists and bystanders quoted in the American cables. Assange published source names over the strong objections of the journalists who had access to the data (we expunged the names from our reports) and to the horror of human rights groups and some of his WikiLeaks colleagues. I’ve been told that a few exposed sources fled their countries with American help, a few others were detained by authorities, and none are known to have been killed. But would we even know? When I read stories like the Reuters account last week of the three men beheaded in Yemen for giving information to Americans, I worry anew about the many innocent witnesses named in the WikiLeaks cables.

The publication of so many confidences and indiscretions did not bring U.S. foreign policy to a halt. But it did, at least temporarily, complicate the lives of U.S. diplomats. American officials say that foreign counterparts are sometimes more squeamish about speaking candidly, and that it is harder to recruit and retain informants around the world.

As raw material for journalists, the cache of secrets has had a phenomenal afterlife. It’s been 10 months since The Times, The Guardian, Der Spiegel and the other partners in this project filed their last major extracts from the files. And still, literally every day, stories based on the trove appear somewhere in the world, either because local news organizations are catching up with morsels of scandal that did not attract major newsrooms, or because new events cast the cables in a more interesting light. Notably, State Department dispatches reporting on the dissolute lifestyles of Mideast autocrats provided a little extra kindling for the bonfires of the Arab Spring.

But the idea that this was the opening of a floodgate has proved exactly wrong. In the immediate aftermath of the breach, several news organizations (including this one) considered creating secure online drop-boxes for would-be leakers, imagining that new digital Deep Throats would arise. But it now seems clear that the WikiLeaks breach was one of a kind — and that even lesser leaks are harder than ever to come by.

Steven Aftergood, who monitors secrecy issues for the Federation of American Scientists, said that since WikiLeaks the government has elevated the “insider threat” as a priority, and tightened access to classified material. Nudged by an irate Congress, the intelligence agencies are at work on an electronic auditing program that would make illicit transfer of secrets much more difficult and make tracking the leaker much easier.

“A lot of attention has been focused on WikiLeaks and its colorful proprietors,” Aftergood told me. “But the real action, it turns out, is not at the publisher level; it’s at the source level. And there aren’t a lot of sources as prolific or as reckless as Bradley Manning allegedly was.”

For good reason. The Obama administration has been much more aggressive than its predecessors in pursuing and punishing leakers. The latest case, the arrest last month of John Kiriakou, a former C.I.A. terrorist-hunter accused of telling journalists the names of colleagues who participated in the waterboarding of Qaeda suspects, is symptomatic of the crackdown. It is this administration’s sixth criminal case against an official for confiding to the media, more than all previous presidents combined. The message is chilling for those entrusted with keeping legitimate secrets and for whistleblowers or officials who want the public to understand how our national security is or is not protected.

Here’s the paradox the documentaries have overlooked so far: The most palpable legacy of the WikiLeaks campaign for transparency is that the U.S. government is more secretive than ever.
https://www.nytimes.com/2012/02/20/o...ostscript.html





Using Rap to Teach Pithy Lessons in Business
Claire Cain Miller

Silicon Valley, where engineers in khakis write software code, might not at first glance have much to do with the world of rap music, where artists in sagging pants write irreverent lyrics.

But Ben Horowitz, a prominent venture capital investor here, says rap holds a trove of lessons for tech entrepreneurs. Throw business classes and books out the window, Mr. Horowitz says, and listen to rap lyrics instead.

He applies his theory on his blog, where he has attracted a following of tech readers and other executives by offering business lessons, almost all of them preceded by a rap lyric that summarizes a moral, and with recordings from Grooveshark, the music site.

In the process, he has linked two cultures in Silicon Valley, which is not exactly known for its racial or cultural diversity.

Entrepreneurs may do well to listen to Mr. Horowitz’s advice. He started the venture capital firm Andreessen Horowitz with Marc Andreessen, the co-founder of Netscape, and the firm made vast amounts of money on investments in companies like Groupon and Skype, and stands to make more on Facebook’s initial public offering.

Late last month, the firm announced that it had raised its third fund in three years, $1.5 billion in fresh capital, a large amount even in Silicon Valley. The two men previously started Opsware, a data center software company, and sold it to Hewlett-Packard in 2007.

Mr. Horowitz uses rap as an introduction as he philosophizes about business challenges like how to fire executives, why founders run their companies better than outside chief executives and how to stand up to difficult board members.

“All the management books are like, ‘This is how you set objectives, this is how you set up an org chart,’ but that’s all the easy part of management,” Mr. Horowitz said in an interview in his spacious office here on Sand Hill Road, the epicenter of tech investing.

“The hard part is how you feel. Rap helps me connect emotionally.”

How to deal, for instance, with the stress of the 11th-hour, late-night auditing mishap that almost stymied the $1.6 billion sale of Opsware?

Listen to the Kanye West song “Stronger”: “Now that that don’t kill me/Can only make me stronger/I need you to hurry up now/’Cause I can’t wait much longer/I know I got to be right now/’Cause I can’t get much wronger.”

Much of rap is about business, whether the drug business, the music industry or work ethic, said Adam Bradley, an associate professor specializing in African-American literature at the University of Colorado at Boulder who wrote “Book of Rhymes: The Poetics of Hip Hop” and co-edited “The Anthology of Rap.”

“It comes out of the fact that rap is such a direct mode of expression, maybe more so than any other music lyric, because of the emphasis on language, of words above melody or harmony,” Mr. Bradley said.

People think of rap lyrics as being only about money, women, status and cocaine, he said, but more pervasive themes are leadership, collaboration and the vulnerability beneath the swagger — all relevant in business.

Mr. Horowitz said he made that discovery in the early 1980s, when he was introduced to rap as one of few white players on the Berkeley High School football team.

He began using lyrics to make his points when he became a chief executive.

Recently, for instance, one of the entrepreneurs that Andreessen Horowitz financed clashed with a disparaging board member. Mr. Horowitz advised the executive that he was being too deferential and needed to show his strength.

He said he sent the executive “Scream on Em,” a rap song by The Game, because its “superaggressive” lyrics — so aggressive that none can be printed in a family newspaper.

“I couldn’t have explained what I was talking about quite right, but he called and said, ‘I’ve been listening to that song every day, and everything is better,’ ” Mr. Horowitz said.

When he explained on his blog why his venture firm favored founding chief executives, as opposed to those hired to run companies, he had trouble explaining one of the more subtle reasons — people care more about something they started, while outsiders care more about money.

Then he remembered a lyric by Rakim from the song “Follow the Leader:” “You’re just a rent-a-rapper, your rhymes are minute-maid/I’ll be here when it fade to watch you flip like a renegade.”

Mr. Horowitz said, “Because it’s Rakim, and he’s like the greatest rapper of all time, he could fit into two sentences what it took me three pages to explain.”

He has a simple response to those who say Silicon Valley is in the midst of another bubble, including those who have criticized his firm’s large investments as having played a role in inflating the bubble. It’s LL Cool J’s song “Going Back to Cali:” “I’m going back to Cali ... hmm, I don’t think so.”

“It’s totally about the way he said it — ‘Hmm, I don’t think so’ — which is how I was feeling about the bubble talk,” Mr. Horowitz said.

Mr. Horowitz’s use of rap connects two cultures that are rarely linked. African-Americans hold only 6.7 percent of computer jobs, according to the Bureau of Labor Statistics, and their representation among Silicon Valley entrepreneurs is even smaller.

Last fall, Mr. Horowitz’s posts led to an appearance before the Congressional Black Caucus. He talked to the group about how the Internet brings different cultures together and about the role African-Americans have played in social media and mobile technologies.

Silicon Valley “can leave a lot of people on the outside looking in,” said Jason Lee, a follower of the blog who helped organize the panel and is the son of Representative Sheila Jackson Lee, a Texas Democrat and a caucus member.

“The fact that he begins with a relevant hip hop lyric immediately contextualizes the narrative into something familiar and accessible to people from a wide variety of experiences,” Mr. Lee said. “To the extent that more people read his blog, relate to his posts and can place themselves in the situations he describes, I think more people will feel like Silicon Valley has room for them as well.”
https://www.nytimes.com/2012/02/20/t...s-lessons.html





Google to Sell Heads-Up Display Glasses by Year’s End
Nick Bilton

People who constantly reach into a pocket to check a smartphone for bits of information will soon have another option: a pair of Google-made glasses that will be able to stream information to the wearer’s eyeballs in real time.

According to several Google employees familiar with the project who asked not to be named, the glasses will go on sale to the public by the end of the year. These people said they are expected “to cost around the price of current smartphones,” or $250 to $600.

The people familiar with the Google glasses said they would be Android-based, and will include a small screen that will sit a few inches from someone’s eye. They will also have a 3G or 4G data connection and a number of sensors including motion and GPS.

A Google spokesman declined to comment on the project.

Seth Weintraub, a blogger for 9 to 5 Google, who first wrote about the glasses project in December, and then discovered more information about them this month, also said the glasses would be Android-based and cited a source that described their look as that of a pair of Oakley Thumps.

They will also have a unique navigation system. “The navigation system currently used is a head tilting to scroll and click,” Mr. Weintraub wrote this month. “We are told it is very quick to learn and once the user is adept at navigation, it becomes second nature and almost indistinguishable to outside users.”

The glasses will have a low-resolution built-in camera that will be able to monitor the world in real time and overlay information about locations, surrounding buildings and friends who might be nearby, according to the Google employees. The glasses are not designed to be worn constantly — although Google expects some of the nerdiest users will wear them a lot — but will be more like smartphones, used when needed.

Internally, the Google X team has been actively discussing the privacy implications of the glasses and the company wants to ensure that people know if they are being recorded by someone wearing a pair of glasses with a built-in camera.

The project is currently being built in the Google X offices, a secretive laboratory near Google’s main campus that is charged with working on robots, space elevators and dozens of other futuristic projects.

One of the key people involved with the glasses is Steve Lee, a Google engineer and creator of the Google mapping software, Latitude. As a result of Mr. Lee’s involvement, location information will be paramount in the first version released to the public, several people who have seen the glasses said. The other key leader on the glasses project is Sergey Brin, Google’s co-founder, who is currently spending most of his time in the Google X labs.

One Google employee said the glasses would tap into a number of Google software products that are currently available and in use today, but will display the information in an augmented reality view, rather than as a Web browser page like those that people see on smartphones.

The glasses will send data to the cloud and then use things like Google Latitude to share location, Google Goggles to search images and figure out what is being looked at, and Google Maps to show other things nearby, the Google employee said. “You will be able to check in to locations with your friends through the glasses,” they added.

Everyone I spoke with who was familiar with the project repeatedly said that Google was not thinking about potential business models with the new glasses. Instead, they said, Google sees the project as an experiment that anyone will be able to join. If consumers take to the glasses when they are released later this year, then Google will explore possible revenue streams.

As I noted in a Disruptions column last year, Apple engineers are also exploring wearable computing, but the company is taking a different route, focusing on computers that strap around someone’s wrist.

Last week The San Jose Mercury News discovered plans by Google to build a $120 million electronics testing facility that will be involved in testing “precision optical technology.”
http://bits.blogs.nytimes.com/2012/0...-by-years-end/





Massive Information Dump by Anonymous on Hundreds of Cops, Including a ‘Pedo Cop’
Anomaly

Anonymous has been extremely active over the last few weeks; for one, disclosing the inept state of Alabama’s privacy of 40,000 of its residents, after hacking into their site in just minutes. In addition to a mountain of website’s defaced and hacked, the group has surpassed themselves. Again. Imagine what you would expect to find after hacking into the databases of the Los Angeles Police Canine Association‘s website — certainly not disturbing images from an ‘alleged’ pedo cop of unclothed children with adults – the police officer in question, Jesse Flores, should have ‘expected them.’

Included in the trove of information obtained by Anons @CabinCr3w and @ItsKahuna are names, addresses and phone numbers of hundreds of police officers and their membership rosters which were taken upon login.

Disturbing images in the database were provided by this officer:

Jesse Flores
Address: 11630 Oklahoma Ave,
South Gate, CA 90280
Cell Phone: 562-396-237
(His Contacts And Google Data/Other Emails Are Attached In The Release File)

The information obtained includes emails, “We now have all of their emails, and you do as well. The ones that were not just spam are attached to download below as well, including their email attachments.”

Quote in full:

Over the past three weeks, we in the cabin have been targeting law enforcement sites across the United States, be it for injustices they have allowed through ignorance or naivety, taken part in, or to point out the fact that their insecurity failed to protect the safety of those they took an oath to serve. In this venture we have obtained the names and addresses of over 1000 officers, over fifteen thousand police warrants, hundreds of thousands of court summons, over forty thousand social security numbers of citizens proving the police lack of care for the security of the citizens, anonymous tips of criminal informants pertaining to narcotics, criminal informant information and thousands of online police reports. In all of this information, the large amount we have seen none of it has been as disturbing as what we found in this most recent target.

As you will see below, we accessed the databases for http://www.lacpca.com the Los Angelas Police Canine Association. Including names, addresses, and phone numbers of hundreds of officers and their membership rosters which were taken upon login.

After obtaining this information, due to the stupidity of many in reusing passwords we went through and checked the passwords from the site against the emails used to register. To be one of the two unfortunate who did reuse them meant we now have all of their emails, and you do as well. The ones that were not just spam are attached to download below as well, including their email attachments.

In one of these emails, that of Jesse Flores, we found the disturbing content stated earlier. Images of children in an email with the subject “Men In Training” which were of questionable material. The pictures being those such as 1) A small boy looking down the bathing suit of a small girl 2) A small child fully nude 3) A Small boy pulling on the nipple of a grown woman

Obviously, we will not be including the photos from the email in this release but we will be making contact with the appropriate organizations protecting children from exploitation online.

This unethical, and illegal content in the possession of those who are sworn to uphold the law, makes you really question where they stand on their own follow of the law. Here are the dox of pedocop, feel free to tell him how you feel about the abhorrent content of his email.

http://freakoutnation.com/2012/02/21...ng-a-pedo-cop/



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"The greatest enemy of freedom is a happy slave."

To protest SOPA, Wallstreet, our irresponsible leaders and the beloved
bankers who are starving the world for their own selfish needs out of
sheer sadistic fun, On March 31, the Internet will go Black.

In order to shut the Internet down, one thing is to be done. Down the
13 root DNS servers of the Internet. Those servers are as follow:

A 198.41.0.4
B 192.228.79.201
C 192.33.4.12
D 128.8.10.90
E 192.203.230.10
F 192.5.5.241
G 192.112.36.4
H 128.63.2.53
I 192.36.148.17
J 192.58.128.30
K 193.0.14.129
L 199.7.83.42
M 202.12.27.33

By cutting these off the Internet, nobody will be able to perform a
domain name lookup, thus, disabling the HTTP Internet, which is,
after all, the most widely used function of the Web. Anybody entering
"http://www.google.com" or ANY other url, will get an error page,
thus, they will think the Internet is down, which is, close enough.
Remember, this is a protest, we are not trying to 'kill' the Internet,
we are only temporarily shutting it down where it hurts the most.

While some ISPs uses DNS caching, most are configured to use a low
expire time for the cache, thus not being a valid failover solution
in the case the root servers are down. It is mostly used for speed,
not redundancy.

I have compiled a Reflective DNS Amplification DDoS tool to be used for
this attack. It is based on AntiSec's DHN, contains a few bugfix, a
different dns list/target support and is a bit stripped down for speed.

The principle is simple; a flaw that uses forged UDP packets is to be
used to trigger a rush of DNS queries all redirected and reflected to
those 13 IPs. The flaw is as follow; since the UDP protocol allows it,
we can change the source IP of the sender to our target, thus spoofing
the source of the DNS query.

The DNS server will then respond to that query by sending the answer to
the spoofed IP. Since the answer is always bigger than the query, the
DNS answers will then flood the target ip. It is called an amplified
because we can use small packets to generate large traffic. It is called
reflective because we will not send the queries to the root name servers,
instead, we will use a list of known vulnerable DNS servers which will
attack the root servers for us.

DDoS request ---> [Vulnerable DNS Server ] <---> Normal answer <---> Normal Client request
\
| ( Spoofed UDP requests
| will redirect the answers
| to the root name server )
|
[ 13 root servers ] * BAM

Since the attack will be using static IP addresses, it will not rely
on name server resolution, thus enabling us to keep the attack up even
while the Internet is down. The very fact that nobody will be able to
make new requests to use the Internet will slow down those who will try
to stop the attack.

"He who sacrifices freedom for security deserves neither."
Benjamin Franklin

We know you wont' listen. We know you won't change. We know it's because
you don't want to. We know it's because you like it how it is. You bullied
us into your delusion. We have seen you brutalize harmless old womans who were
protesting for peace. We do not forget because we know you will only use that
to start again. We know your true face. We know you will never stop. Neither
are we. We know.

We are Anonymous.
We are Legion.
We do not Forgive.
We do not Forget.

http://pastebin.com/XZ3EGsbc





The Pirate Bay to Defy International Crackdown on Filesharing Websites

Site says it will bypass attempts to shut it down with a more covert system for illicitly downloading films and music
Josh Halliday

The Pirate Bay is planning to defy an international crackdown on filesharing websites after the high court in London signalled that the site should be blocked in the UK.

The filesharing giant said it will bypass attempts to shut it down with a more covert system for illicitly downloading films and music.

The act of defiance comes as the net begins to tighten on some of the web's biggest filesharing sites, following the closure of Kim Dotcom's Megaupload by US authorities last month.

The high court is expected to tell UK internet service providers, such as BT and BSkyB, to block access to The Pirate Bay for UK users. The court ruled on Monday that the site breaches copyright laws on a large scale.

But The Pirate Bay has said it will sidestep the crackdown by "our common enemies" with a new downloading system to be unveiled next week.

In a statement on its official Facebook page, the site said that from 29 February it will stop offering downloads via torrents – which allow users to download music or films directly from their internet browser – and switch to so-called "magnet links" where users do not download files directly from the website.

"Before you go 'oh ma goood why why why?!!!', please understand that it's a necessary move in the saga known as The Pirate Bay," the website said in the message published late on Monday.

"Not having torrents will be a bit cheaper for us but it will also make it harder for our common enemies to stop us (which they can't. But everything that makes it harder for them brings more lolz [laugh out loud] to our lips). So please get used to magnets, cause they are here to stay."

The Pirate Bay ended its statement pledging to fight the controversial anti-piracy pact ACTA, the Anti-Counterfeiting Trade Agreement, which has been roundly criticised by open internet advocates.

The Pirate Bay first moved towards magnet links in November 2009, but this is the first time the site has pledged to abandon torrent files entirely.

The move will make The Pirate Bay easier for users to distribute – a copy of the filesharing system will fit on a removable memory stick – and require less bandwidth to host.

The owners of The Pirate Bay are unknown – but courts in the UK and other jurisdictions have moved against the site in spite of this.

A Seychelles firm called Reservella Ltd has been claimed to be behind the site, according to the high court judgment handed down by Mr Justice Arnold on Monday, but this is disputed.

The four Swedish founders of the site – Fredrik Neij, Gottfrid Warg, Peter Sunde and Carl Lundström – were in 2010 found guilty of aiding and abetting copyright infringement.

Earlier this month The Pirate Bay quickly switched its domain name to the Swedish .se suffix in a bid to prevent US authorities from seizing control of the site.
http://www.guardian.co.uk/technology...?newsfeed=true
















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