Peer-To-Peer News - The Week In Review – April 2nd, '05

[JackSpratts]

Quote Of The Week

"What I worry about is a suit right out of the box."

United States Supreme Court Justice Antonin Scalia










Let Them Take A Look At It

Nearly six long years after Shawn Fanning’s Napster exploded the uneasy 100 year old relationship between record company and music consumer the United States Supreme Court finally heard arguments this week for and against Peer-To-Peer programs and the business plans of the companies that own them. Brought by MGM, a Hollywood marketing concern and unit of The Sony Corporation the suit names Grokster and the operations of the Fasttrack family, which also includes Kazaa, Streamcast Networks and the several other clients that have attached themselves to the dated technology like barnacles on a dying whale. While the specifics of the coming decision as it applies to Fasttrack will have little in the way of relevance for the majority of file sharers who have abandoned that compromised mess for other more up to date and open networks, it remains an important case for file sharers and consumers generally since it will in all likelihood determine the course of future technological development. While it happens that in one writers opinion the best programs are freeware applications created by individuals for non-profit use and which will not be directly affected by a suit that blames the "profit motive" for the "stealing of millions of songs," it will nevertheless embolden both the content industry and the congress to begin a systematic purge of any program, and any program creator not meeting their rigid specifications, and let’s face it, that’ll mean just about all of them. Furthermore, unlike Grokster and friends, the individual players writing code in their bedrooms aren’t exactly the type to resist the attacks of these multimillion-dollar legal onslaughts. I’m afraid that in this instance we can argue from the specific to the general and say that a decision against Grokster will be a serious blow to all of us in this community of peers. But that’s not the half of it.

At the very least the future of technological development will be greatly influenced by the Court’s decision, and they know it, and have told us so. They are not comfortable with a world in which the narrow interests of one industry can determine the fate of many others, and that is a positive sign, but whether it means the Justices will rule for the file-sharing companies is simply too complex to predict. It does not appear they will rule directly against them however, and it may turn out they find a third and weaker way, one that continually sends cases through the lower courts for never ending vettings of business plans, constant probings of statute violations, and especially tests for the evanescent "encouragement of such." Even if the recent statutes themselves are suspect, voted off the record and contrary to generations of accepted cultural behavior the courts would serve at the behest of the content aggregators who created them. I’m not sure what decision would be worse.

Sometime in the next three months we will know their decision, and we will go from there. If it is wrong to cheat our descendents out of the most important communication tool in the history of civilization by allowing a handful of old people to control us, such is the weakness of our system. That whatever the Court decides we will continue using these tools is of course the strength of our democracy. This movement is impossible to stop, and any attempts to do so inexcusable expressions of the vanities of this corporate age, at once enamored of itself and in awe of its own perceived power. Real power rests elsewhere. Its expressions markedly different. It moves with quiet intent. Deliberately, forcefully, thoroughly, until it has transformed old into new. We are well on our way to completing the process and neither Washington, Brussels, nor Sydney can stop it. They will continue to expose and exercise their deeply rooted pathological prejudices for inhibiting the growth of their own people but becoming anything more than an aggravating nuisance is for the present beyond them.

Still a decisive victory would be good, and it would be proper as well, as much as the original Sony Betamax VCR decision a generation ago. That too dragged on for years, taking a year or so longer to reach the Court than the Grokster case but the outcome was as uncertain then as it is today, perhaps even more so. Indeed, had it not been for a last minute change of sides by the lone female Justice Sony would have lost, and had that occurred the Internet would be crippled and unrecognizably so today. That the record companies wanted to “shut down the internet” is well known and they would have, had the Betamax decision gone their way, and that’s a numbing thought. That they could not led directly to this bountiful technological tour de force that is the Internet and that has moved our world closer, created undreamed of fortunes, and from subtle to profound improved our lives in countless ways. Such is the power of well-reasoned law. Said the Court in 1982, "The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good. 'The sole interest of the United States and the primary object in conferring the monopoly, lie in the general benefits derived by the public from the labors of authors.'" The importance is the balance. The process of creating it is messy and imperfect, and finding a perfect balance exceedingly rare. Recognizing this the Court in a democracy must always weigh in favor of the people, who after all are the ones granting the monopoly in the first place.

The Betamax decision had unintended consequences that ultimately led to a financial renaissance for the very movie companies who had fought so bitterly to kill it, proving definitively that what was good for the people was great for business. It was not a lesson well remembered in Hollywood however and was completely forgotten in the hysteria surrounding the launch of Napster in May of 1999.

Now as it happens at the very moment the present case reaches the Court Hollywood begins it’s first tentative deal making with P2P firms, and with Shawn Fanning no less, and like the reels inside a videotape or the discs inside an iPod the circle rolls around again.

So with the tension slowly ebbing from the producer vs. sharer equation had this case taken the year or so longer to reach the Court that the Betamax case did the murky depths now facing the Justices would be clearer to plumb. Physical sales of copyrighted materials are today smartly on the rise and the P2P community’s long insistence that both file sharer and content creator can simultaneously survive and even prosper is being backed by real data, even now giving lie to the worst excesses of paid industry fear mongers. The effect of all this is to cast new light upon the media companies’ political lobbying practices, their disingenuous arguments, their never ending extensions of copyright lengths and their ever decreasing instances of recognizing fair use. It is illuminating the content cartels’ transparent duplicity and continuing concentration of power and in full view of an increasingly skeptical public embarrassingly redefining their inflexible demands from a "must" to a "need" to a "want." Should the Justices care to look they may find that in such things do all things rest.













Enjoy,

Jack












Supreme Court Weighs in on File-Sharing
Ted Bridis

Justice Stephen G. Breyer said the same software that can be used to steal copyrighted materials offered at least conceptually "some really excellent uses" that are legal. Justice Antonin Scalia maintained that a ruling for entertainment companies could mean that if "I'm a new inventor, I'm going to get sued right away."

The Supreme Court expressed concerns today over allowing entertainment companies to sue makers of software that allows Internet users to illegally download music and movies, questioning whether the threat of such legal action might stifle Web innovation.

During a lively argument, justices wondered aloud whether such lawsuits might have discouraged past inventions like copy machines, videocassette recorders and iPod portable music players -- all of which can be used to make illegal duplications of copyrighted documents, movies and songs.

Legal Uses

Justice Stephen G. Breyer said the same software that can be used to steal copyrighted materials offered at least conceptually "some really excellent uses" that are legal.

Justice Antonin Scalia maintained that a ruling for entertainment companies could mean that if "I'm a new inventor, I'm going to get sued right away."

While seeming leery of allowing lawsuits, the court also appeared deeply troubled by efforts of the companies that manufacture so-called file- sharing software to encourage Internet piracy and profit from it.

Justice Anthony M. Kennedy pressed a software lawyer on the question of whether profits from trafficking in stolen property can rightfully be used to help finance a young technology business. "That seems wrong to me," he said.

Two lower courts have sided with the software makers, Grokster and StreamCast Networks. How the justices rule could redefine how consumers can watch television shows and films and listen to songs that increasingly are delivered in digital formats.

Supporters of file-sharing technology say a ruling against the software companies could effectively give the entertainment industry a legal veto over up-and-coming gadgets; they fear the threat of expensive lawsuits could hamper development of new devices.

The case has star power on both sides.

Copyrights Remain

Don Henley, Sheryl Crow, the Dixie Chicks and other musicians are backing the major recording labels, saying their livelihoods are threatened if millions of people can obtain their songs for nothing.

About 20 independent recording artists, including musician and producer Brian Eno, rockers Heart and rapper-activist Chuck D, support the file-sharing technology. They say it allows greater distribution of their music and limits the power of huge record companies.

Regardless of the outcome, it still won't be legal to download copyrighted materials over the Internet without permission, though tens of millions of computer users do so each day. And any ruling won't affect thousands of copyright lawsuits filed individually against Internet users caught sharing music and movies online.

But a victory for the entertainment companies would allow lawsuits that could drive companies that make file-sharing software out of business. It also would effectively overturn rules that have governed technology companies for more than two decades: Manufacturers can't be sued for copyright violations committed by customers using their products illegally.

Dan Glickman, head of the Motion Picture Association of America , said the film industry will keep trying to get consumers to buy legal digital movies. "Consumers want a legal, hassle- free, reasonable-cost way to get their products online," he said in an interview yesterday with editors from The Associated Press.

Mitch Bainwol, chief executive of the Recording Industry Association of America , told the AP editors: "We are doing all the things we should be doing to move into this digital age. That is true no matter what the outcome" of the case.

Uphill Battle

Still, the entertainment companies face an uphill battle with the high court.

The trial judge and a U.S. appeals court quoted the Supreme Court in ruling the same file- sharing software millions of people use to steal music and movies also can be used for "substantial" legal purposes, such as giving away free songs, free software or government documents. They reasoned that gave the software's manufacturers protection from copyright lawsuits based on acts by their customers.

The trial court in Los Angeles and San Francisco-based U.S. Court of Appeals for the Ninth Circuit based their decisions on the 1984 Supreme Court Betamax case. The justices ruled Sony (NYSE: SNE) couldn't be sued for copyright infringement if some customers used their VCRs to make illegal copies of movies.

Entertainment companies argue the file-sharing companies should not have blanket protection from copyright lawsuits, especially when they know about and profit from wide-scale piracy. Court documents said some file-sharing software companies earned millions of dollars annually from advertisements built into their software, and ad revenues climb as more people use the software.
http://www.technewsworld.com/story/software/41853.html


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File-sharing opens musical doors

Indie Artists Back P2P Firms In High Court Case
Alex Veiga

Recording industry executive Andy Gershon sees opportunity in the online file-sharing networks that most of his rivals decry as havens for music pirates. As president of V2 Records, home to such established acts as The White Stripes and Moby, Gershon mines such Internet distribution channels for new fans and revenues.

"The cat is so far out of the bag and so far gone that it's pointless to keep fighting it," Gershon said. "I might as well make as many people fans of our music, whether they illegally download it or not."

A number of mostly independent recording artists and labels have experimented with and embraced the freewheeling digital distribution that the Internet affords. And many worry that a victory by major recording companies in a landmark file-sharing case now before the U.S. Supreme Court could short-circuit the very technologies that they believe are making a more level playing field of the music business.

The nation's high court is to hear arguments next Tuesday on whether the entertainment industry can hold file-sharing software firms Grokster Inc. and StreamCast Networks, which distributes Morpheus, liable for what computer users do with the technology.

Lower courts have sided with the software makers, which assert their so-called peer-to-peer technology is as legitimate as a videocassette recorder or a copy machine.

Several artist rights associations, music publishers and well-known musicians, including Don Henley, Sheryl Crow and the Dixie Chicks, are backing the major recording labels, which accuse Grokster and StreamCast of profiting from a business model that depends on piracy.

From 1999 to 2004, the total value of the U.S. recording industry fell $2.4 billion to $12.1 billion - a decline the industry blames primarily on file-sharing.

But some artists, including Wilco frontman Jeff Tweedy, see an upside to file-sharing.

"I look at it as a library. I look at it as our version of the radio," Tweedy said. "It's a place where basically we can encourage fans to be fans and not feel like they're being exploited, which is basically what the whole industry is geared to do."

Tweedy encourages fans to tape Wilco shows and has distributed tracks over the Internet for free months before releasing them on CDs.

He agrees artists should be compensated, but "you try to encourage people to feel more like a patron of the arts instead of a consumer."

V2 Records taps file-sharing networks and other Internet distribution means by selling songs and offering free promotional materials like music videos. Though results are difficult to quantify, Gershon credits ads on Web sites and song giveaways with raising the profile of The Blood Brothers.

"The CD sales have stayed steady," said Gershon. "For a band like this, a lot of the steadiness of the sales is based on people being turned on to it online."

Mitch Bainwol, chairman of the Recording Industry Association of America, says artists and labels can be creative with online distribution and promotion but those decisions should not be left up to listeners.

"If you want to give up your property for free as a way of trying to drive other commercial advantages, that is certainly a strategy one can employ," Bainwol said. "But it should be the individual (artist's) choice."

About 20 independent recording artists, including musician and producer Brian Eno, rockers Heart and rapper-activist Chuck D, filed a legal brief with the high court in support of Grokster and StreamCast. They insist file-sharing and related technologies help expose new audiences to their music - outside established channels of the recording labels.

The artists argue that file-sharing "has the immediate potential to develop into a significantly more prevalent alternative distribution and promotion system." But a ruling that outlaws or limits it "will block that potential from ever being fully realized," the brief contends.

Some are concerned about the possibility of requiring file-sharing companies to filter out unauthorized works, a move the major labels consider crucial to legitimizing file-sharing as a distribution system.

"It definitely would greatly reduce the amount of traffic," said Chip Schutzman, head of online marketing at Sovereign Artists Inc.

Santa Monica-based Sovereign has promoted and sold tracks by Heart using the online Weed file-sharing format, in which listeners can hear a song for free several times before having to buy it. Weed files are distributed to Web sites and across file-sharing networks.

For Sananda Maitreya, who also joined the legal brief, online music distribution gives him the freedom he says he lacked when he was signed with a major label in the 1980s under his former name, Terence Trent D'Arby. Back then, Maitreya recalled, committees had to sign off on any music released.

"The Beatles could not have faced that criteria and come up with anything other than the most mediocre, conservative music," said Maitreya, who now lives in Italy.

Maitreya and the rap group Fine Arts Militia, featuring Chuck D, have released albums through Weed. Representatives of the groups declined to give specific sales figures.

John Beezer, president of Weed-creator Shared Media Licensing Inc. in Seattle, estimates that fewer than 100,000 tracks have been sold in the 18 months since the software went into use. Beezer said more than 7,000 artists have offered their songs through Weed, and the vast majority aren't signed with recording labels.

But even for unsigned bands, the potential to cheaply target the pool of music fans on file-swapping networks can be tantalizing.

Kevin Martin, vocalist for the 1990s band Candlebox, credits a file-sharing song promotion involving the Yoo-hoo drink brand with generating online interest and some sales for his new LA-based band, Kevin Martin and the Hiawatts.

"We're not doing 10,000 records a week," he said, "but to see yourself go from 15 records to 62, it's pretty exciting."
http://www.bizreport.com/news/8790/


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Billionaire Backs P2P Firm's Battle With Hollywood
Ashlee Vance

Technology entrepreneur, Dallas Mavericks owner, billionaire, blogger and sometime blowhard Mark Cuban has pledged to finance P2P software maker Grokster's legal war with the major record labels and movie studios.

The Supreme Court tomorrow will hear arguments surrounding Grokster and StreamCast's dispute with the media companies. Hollywood is hoping the high court will overturn two lower court decisions that said makers of decentralized P2P software cannot be held liable for users who trade copyrighted files. Cuban, who owns movie theaters and the rights to numerous TV shows and movies, has gone against his peers by saying P2P software should have a chance to thrive.

"We are a digital company that is platform agnostic," Cuban wrote on his blog (http:/ /www.blogmaverick.com/entry/1234000230037801/). "Bits are bits. We dont care how they are distributed, just that they are. We want our content to get to the customer in the way the customer wants to receive it, when they want to receive it, at a price that is of value to them. Simple business.

"Unless Grokster loses to MGM in front of the Supreme Court. If Grokster loses, technological innovation might not die, but it will have such a significant price tag associated with it, it will be the domain of the big corporations only."

Hollywood is not only trying to shut down P2P software makers, but it's also trying to overturn an old Supreme Court decision that made VCRs and the like legal. It's this particular threat against devices that could potentially lead to the infringement of content copyrights that has many technology advocates up in arms.

"It will be a sad day when American corporations start to hold their US digital innovations and inventions overseas to protect them from the RIAA (Recording Industry Association of America), moving important jobs overseas with them," Cuban wrote. "Thats what happens if the RIAA is able to convince the Supreme Court of the USA that rather than the truth, which is, Software doesnt steal content, people steal content, they convince them that if it can impact the music business, it should be outlawed because somehow it will.'

With that in mind, Cuban vowed to fund the EFF's (Electronic Frontier Foundation) defense of Grokster.

As always, Cuban was modest about his gesture and hatred of punctuation.

"This is the big content companies, against me. Mark Cuban and my little content company."

It's not entirely clear what Cuban will be paying for, since his grand move came just two days before the oral arguments - at publicity's height. Perhaps he'll be covering the Tuesday morning coffee and lunch of the EFF staffers involved. Here's hoping the funds are actually more substantial and cover some back costs.
http://www.theregister.co.uk/2005/03..._grokster_eff/


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A Supreme Court Showdown for File Sharing
Saul Hansell and Jeff Leeds

For someone whose business is under attack in the United States Supreme Court, Mark Gorton was remarkably serene last week, sprawled on a couch in his Manhattan office.

Mr. Gorton's company, the Lime Group, publishes LimeWire, one of the most popular software programs used to trade music, video and other files over the Internet.

Tomorrow, the Supreme Court will hear arguments in a case in which the recording and film industries seek to hold makers of file-sharing software liable for the illegal copying and distribution of copyrighted material online. The case is against other file-sharing services, Grokster and Morpheus, which won in lower courts, but Mr. Gorton said that if those rulings were overturned, it could make LimeWire vulnerable.

"If the Supreme Court says it is illegal to produce this software, LimeWire the company will cease to exist," Mr. Gorton said. "But LimeWire the software will continue to be on the Net no matter what we do in this business."

The case, M.G.M. v. Grokster, is in many ways the culmination of five years of escalating legal, technical and rhetorical attacks against file-sharing systems and their users by the music industry. It is being eagerly followed by a range of media and technology companies because the court may use this case to redefine the reach of copyright in the era of iPods and TiVo.

But no matter how the court rules, both music executives and file-sharing advocates like Mr. Gorton agree that it will probably always be possible for fans to find loads of free music with a few clicks of a mouse.

Still, the case will determine whether file sharing can continue to be promoted by companies like LimeWire and Sharman Networks, which makes Kazaa, that operate in public and earn profits from advertising and software sales, or whether the software will be written and distributed by shadowy players on the fringes of the law.

"I think this court decision is a game changer. It will dramatically affect behavior, and behavior will dramatically affect how music is sold and distributed and consumed," said Andrew Lack, chairman of Sony BMG Music Entertainment, which releases music by stars like Usher and Bruce Springsteen. "It will clarify the law and establish right from wrong."

If the music industry loses, it will likely redouble its efforts to sue individuals trading files and intensify its technical efforts to disrupt the networks. So far, those tactics have been modestly effective at best, and a loss in the Supreme Court may well erode the industry's control of copyrighted material further.

Yet, since the court can do little to alter the spread of technology or the interests of copyright owners to protect their material, many expect something resembling a permanent war.

"We are guerrillas fighting the despotic regime," said Alan Morris, the executive vice president of Sharman Networks, the Australian company behind Kazaa, once the leading file-sharing network and the recording industry's leading target, which is being sued by the music industry in both American and Australian courts. "They have some quite heavy guns, but we can see where they are firing from, " Mr. Morris said.

There are some who say that a court ruling, in any direction, may also help define the terms of a cease-fire. The end of litigation could rekindle the back-channel negotiations between some music labels and some file-sharing services to create ways for users to trade some files free while paying for others.

Some executives have discussed a plan in which users could download free, low-quality tracks with an offer to buy higher-quality versions.

The two biggest music companies, Universal Music Group, a unit of Vivendi Universal, and Sony BMG, for example, recently signed deals to provide music through Snocap, a software package intended to control the swapping of unauthorized songs.

Snocap also happens to be the creation of Shawn Fanning, the founder of Napster, the original file-sharing, or peer-to-peer, service. "Peer-to-peer is the way that people access content," said Mr. Fanning. "There is a void in the marketplace, there are people who are willing to pay for it."

Of course, getting people to pay anything is an enormous challenge. There are about 60 million people using file-sharing services in the United States, with roughly 8.5 million logged on at a time, said Eric Garland, chief of BigChampagne, which studies traffic on file-sharing networks.

While some surveys have suggested that file-sharing activity slowed in 2003, when the Recording Industry Association of America began to sue individual users for trading copyrighted songs, Mr. Garland said that the number of people logging on to file-sharing networks had risen steadily and that he expected the number to increase by 10 percent or more this year.

The music industry, meanwhile, is recovering from a long slump. It sold 814 million CD's, cassettes and units of music in other formats last year in the United States, up 2 percent, its first increase in five years, the recording industry association said. It also sold 140 million digital tracks in the United States, the association said. But the industry says it thinks it would have seen a bigger sales rebound had it not been for online piracy.

The recording industry is exploring ways to release new CD's with technology that will restrict copying. Sony BMG is expected to use such technology on at least half their new recordings in the United States by the end of this year.

Some independent record labels are taking a less confrontational stance and trying to tap into the popularity of file-sharing networks by selling their music on them, often alongside pirated versions of the same songs.

Kazaa has been pursuing that idea for several years through an affiliated company called Altnet, which allows labels to put authorized files of songs on its networks. These files are either offered for sale, or they are free for promotional purposes, often with technology that restricts their use to a certain time period.

Altnet is still small, with revenues of less than $1 million in 2004, but it has been used by some independent labels, including V2, the label of Richard Branson's Virgin Group.

V2 sells songs by its acts like the Stereophonics and Moby through Altnet for 99 cents each because file-sharing networks have eclipsed MTV and radio as the place fans discover new music, said Jeff Wooding, its director of marketing and new media. He said that the move would not stop piracy, but could be used to promote the bands' merchandise and concert tickets as well as earn something for download sales.

"No one's kidding themselves that we expect to convert a whole lot of users," Mr. Wooding said, but he added that he thought many file sharers would buy merchandise and concert tickets from bands they liked and that some might eventually purchase a CD.

Altnet is also experimenting with an advertising-driven format developed by Intent MediaWorks, which buys rights to songs from artists for distribution in a special file format. The first time a user tries to play the song, the file opens a Web page with an advertisement on it. Intent MediaWorks is also working on ways to insert audio commercials into the songs.

"The idea for the advertising model is to transform file-sharing networks into radio," said Lee Jaffe, president of Altnet, which is distributing Intent MediaWorks' files. "But unlike radio where artists and labels don't get paid, they will be able to share the revenue."

Major recording labels, however, have been very resistant to doing deals with Altnet and similar systems, fearing that such alliances might undercut their lawsuits against the file-sharing networks. They have demanded that the networks remove all the unauthorized songs before they do any business with them.

Shawn Fanning's Snocap system is an attempt to help file-sharing networks do just that. It creates a way for copyright owners to register the songs they own. The networks, using a technology called acoustic fingerprinting, can identify whether a file being downloaded is in a copyrighted registry. The copyright owner can choose to block the download, offer the song for sale or offer a limited-use version of the song as substitute.

Snocap, in addition to endorsements from Universal Music and Sony BMG, will also be used by Mashboxx, a new file-sharing service started by Wayne Russo, the former president of Grokster, which is based in Nevis, West Indies.

But it still faces some significant challenges. First, the company has not released a working version of the software, and many file-sharing advocates dismiss the concept as thoroughly unworkable.

"Snocap will fail miserably in the market," said Michael Weiss, chief executive of StreamCast networks, which makes Morpheus.

"If I was looking for a download, and I got some sort of truncated file with a message that says buy this or do that, I don't see why anybody would embrace that," he said. "If you wanted to buy music, you could go to the online stores that are doing a great job like iTunes."

Mr. Russo said that his approach did not need to win over all file-sharing users to make some money for him and the record companies.

"There are 2.5 billion music files traded every month," he said. "If we can capture 1 percent of that, 25 million files, and we convert 5 to 10 percent of those to paid, I am very happy."

Aside from these attempts to reach détente with the free file-sharing networks, the recording industry knows it also needs new products and new avenues for distribution.

It has, for instance, placed a hefty bet on DualDiscs, a new two-sided CD format that features music on one side and video on the other. "We are committed to giving consumers what they want, legitimately and in a way that fairly compensates those that work so hard to create content," said Zach Horowitz, president of Universal Music Group, which releases music by acts like U2 and 3 Doors Down.

"If we win the case," Mr. Horowitz said, "all the efforts we are making to launch compelling legitimate alternatives will gain traction. There will be no turning back the clock in terms of the countless ways we are making our music available to take advantage of the new technologies."
http://www.nytimes.com/2005/03/28/te...8grokster.html


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Canadian government plans tougher copyright law

Compromise Proposals Would Adopt UN Standards To Clamp Down On File Sharing Of Music, Video
Andrew Mayeda

The federal government plans to introduce changes to copyright law this spring that would toughen Canada's stance on swapping music, movies and other content on the Internet.

Yesterday, the government proposed amendments to the Copyright Act that would clamp down on peer-to-peer file sharing and make Internet service providers more accountable for the data flowing through their networks.

But it also backed away from a number of hawkish proposals tabled last May in an interim report on copyright reform.

Players on both sides of the issue praised yesterday's proposals, which were issued by Industry Canada and the Ministry of Canadian Heritage. The departments have been leading a review of the federal Copyright Act.

"Canada is one step closer to having a copyright law that will reflect the realities of the digital marketplace and allow the music industry a chance to prosper," said Graham Henderson, president of the Canadian Recording Industry Association, in a statement.

The association represents big music labels such as Warner Music Canada Ltd.

Technology law expert Michael Geist called the proposals a "pretty good compromise" between copyright holders, users and intermediaries such as ISPs.

"It certainly could have been far worse," said Mr. Geist, Canada research chair in Internet and e- commerce law at the University of Ottawa.

"It's good to see that on some critical issues, the government seems to have taken the concerns of the user community pretty seriously."

He said the government appears to have rejected some of the more draconian proposals put forward in a report last May by the Standing Committee on Canadian Heritage.

The music industry is pushing for stricter rules for Internet transfer of music files, which it says has significantly eroded CD sales.

The government proposes implementing a pair of UN treaties that offer broader protections for copyright holders.

Close to 50 countries, including the United States but not Canada, have ratified the "WIPO" treaties. Under the treaties, for example, copyright holders will gain exclusive control over the right to "make available" their works over the Internet.

Experts said yesterday this will likely outlaw the uploading of music files to the Internet. Last March, a Federal Court judged essentially ruled that uploading is not illegal.

The government also suggests compelling ISPs to notify customers accused of copyright infringement, as well as keep customer records when notice of infringement is given.

The proposal is less stern than expected, said Mr. Geist. Some were calling for a "notice and takedown" system in which ISPs would be forced to take down material upon receiving notice of infringement.

Under the current proposal, copyright holders would first have to obtain a court order to force ISPs to block content.

The government also softened its stance on changes affecting security researchers who find flaws in software and hardware, said David Fewer, legal counsel for the Canadian Internet Policy and Public Interest Clinic.

The clinic helped draft a letter submitted this month to the government by a group of IT security firms.

They were concerned that changes to the law would make it illegal for researchers to find flaws in software and hardware. The proposals could provide cover for individuals who expose flaws for research purposes, said Mr. Fewer.

But clearly a number of contentious points remain.

Mr. Henderson of CRIA said the proposals make it "absolutely crystal clear, once for and all, that file sharing is an infringement of copyright."

But Mr. Geist noted the government put off addressing the "private copying regime," a system of tariffs on CDs and other blank media that some say makes downloading legal in Canada.

The file-sharing issue will be reopened next month when the Federal Court hears CRIA's appeal of last March's case when a judge ruled that ISPs did not have to hand over personal information on 29 individuals whom CRIA accused of copyright infringement.

"Nobody has any misapprehension that this issue is over. It's going to be a long summer," said Mr. Fewer.
http://www.canada.com/ottawa/ottawac...7-dc239da989d4


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Brazil: Free Software's Biggest and Best Friend
Todd Benson

Since taking office two years ago, President Luiz Inácio Lula da Silva has turned Brazil into a tropical outpost of the free software movement.

Looking to save millions of dollars in royalties and licensing fees, Mr. da Silva has instructed government ministries and state-run companies to gradually switch from costly operating systems made by Microsoft and others to free operating systems, like Linux. On Mr. da Silva's watch, Brazil has also become the first country to require any company or research institute that receives government financing to develop software to license it as open-source, meaning the underlying software code must be free to all.

Now Brazil's government looks poised to take its free software campaign to the masses. And once again Microsoft may end up on the sidelines.

By the end of April, the government plans to roll out a much ballyhooed program called PC Conectado, or Connected PC, aimed at helping millions of low-income Brazilians buy their first computers.

And if the president's top technology adviser gets his way, the program may end up offering computers with only free software, including the operating system, handpicked by the government instead of giving consumers the option of paying more for, say, a basic edition of Microsoft Windows.

"For this program to be viable, it has to be with free software," said Sérgio Amadeu, president of Brazil's National Institute of Information Technology, the agency that oversees the government's technology initiatives. "We're not going to spend taxpayers' money on a program so that Microsoft can further consolidate its monopoly. It's the government's responsibility to ensure that there is competition, and that means giving alternative software platforms a chance to prosper."

Microsoft has offered to provide a simplified, discounted version of Windows for the program. Though a final decision on which software to install has been delayed several times, as has the program's rollout, Mr. Amadeu and some other government officials have publicly criticized Microsoft's proposal, calling the version's abilities too limited.

Still, Microsoft has not given up just yet. The company, which declined to make an executive available for an interview, said in a statement that it was still "working with the PC Conectado project to see if there's a way Microsoft can help."

Under the program, which is expected to offer tax incentives for computer makers to cut prices and a generous payment plan for consumers, the government hopes to offer desktops for around 1,400 reais ($509) or less. The machines will be comparable to those costing almost twice that outside the program.

Buyers will be able to pay in 24 installments of 50 to 60 reais, or about $18 to $21.80 a month, an amount affordable for many working poor. The country's top three fixed-line telephone companies - Telefónica of Spain; Tele Norte Leste Participações, or Telemar; and Brasil Telecom - have agreed to provide a dial-up Internet connection to participants for 7.50 reais, or less than $3, a month, allowing 15 hours of Web surfing.

The program aims at households and small-business owners earning three to seven times the minimum monthly wage, or about $284 to $662. The government says seven million qualify, and it hopes to reach a million of them by year-end.

That may seem ambitious in a developing country of 183 million people where only 10 percent of all households have Internet access and just 900,000 computers are sold legally each year. (Including black-market sales, the number is closer to four million, still a small fraction of the number sold in the United States last year, according to the International Data Corporation, a technology research firm.)

"We're well aware that we're talking about doubling the domestic market for personal computers," said Cezar Alvarez, the presidential aide in charge of the PC Conectado program. "But it's absolutely feasible."

Some analysts have questioned the effectiveness of such programs, noting that some similar projects in Asia have become bogged down in red tape and, in some cases, have ended up favoring the elite. In Malaysia, for instance, the government is introducing a second affordable-computer program after its first attempt failed because of poor planning and fraud - something Brazilian officials say they are working hard to prevent.

Others say the government should focus its technology initiatives elsewhere, especially in schools. Only 19 percent of Brazil's public schools have computers.

The government says it plans to complement the PC Conectado program with stepped-up efforts to put more computers into schools. It is also investing $74 million to open 1,000 community centers in poor neighborhoods by year-end with computers that run free software programs and offer free Internet access - supplementing similar programs by local governments and nongovernmental organizations.

The drive to bridge the digital divide has drawn widespread praise throughout the technology industry. But the preference for open-source software has been controversial, with critics inside and outside the government saying Mr. da Silva's administration is letting leftist ideology trump the laws of supply and demand.

"The government shouldn't be the one who decides what hardware and software will go into these computers," said Júlio Semeghini, a member of Congress from the opposition Social Democratic Party. "That's undemocratic."

The open-source route, however, has support beyond the da Silva administration. Walter Bender, the executive director of the Media Lab at the Massachusetts Institute of Technology, whose opinion was solicited by the Brazilian government, replied in a recent letter that "high-quality free software" has proved more effective in stimulating computer use among the poor than scaled-down versions of proprietary software.

Though he said he did not oppose giving consumers a choice, he concluded that "free software provides a basis for more widespread access, more powerful uses and a much stronger platform for long-term growth and development."

Whatever the government decides, most industry analysts agree that the program will probably help combat software piracy, which is widespread in Brazil.

And by wooing new consumers, "even if the program doesn't reach its goals, it's going to end up stimulating the computer and software markets," said Jorge Sukarie, president of the Brazilian Association of Software Companies. "It's not perfect, but it's certainly better than nothing."
http://www.nytimes.com/2005/03/29/te...ter.html?8hpib


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Blockbuster Drops Hostile Hollywood Bid

Leading U.S. movie rental chain Blockbuster Inc. dropped its nearly $1 billion hostile bid for Hollywood Entertainment Corp., citing difficulties in getting regulatory approval.

It paved the way for Hollywood's proposed merger with its smaller rival Movie Gallery Inc. which is expected to create the second-largest North America video retail company. That deal, which is still subject to shareholders' approval, has already been cleared by regulators.

Hollywood is second to Blockbuster in the U.S. movie rental business. Movie Gallery is No. 3.

Blockbuster said its tender offer, which values Hollywood shares at $14.50 in cash and stocks, expired at midnight and would not be renewed. All tendered shares and notes will be promptly returned to holders, Blockbuster said.

Hollywood has accepted an $850 million offer from Movie Gallery. The U.S. Federal Trade Commission has cleared that deal and is preparing to go to court to stop Blockbuster's bid because of antitrust concerns, sources close to the case told Reuters last week.

"Given the current circumstances, in our judgment it is not in Blockbuster's best interest to continue to pursue the acquisition," John Antioco, Blockbuster chairman and chief executive said in a statement.

Blockbuster cited Hollywood's recent public filings and the unlikelihood of obtaining regulatory clearance on an acceptable timetable for its decision. A Blockbuster spokesman said the company has no additional comments beyond the statement. Hollywood was not immediately available for comment.

Movie Gallery said in a statement that it expected to close the Hollywood transaction promptly after the Hollywood shareholder vote on April 22.

The combined company will have annual revenue of $2.6 billion and 4,500 stores in the United States, Canada and Mexico. Currently Hollywood is a distant second to Blockbuster, which has more than 9,000 stores in Americas.

Hollywood shares finished at $14.13 on Thursday, above the $13.25 offer from Movie Gallery. Blockbuster has offered $14.50 for every Hollywood share, including $11.50 in cash and $3.00 in Blockbuster common stock.

Mark Wattles, a former Hollywood Entertainment Corp. chief executive, has sought to buy up to half of Hollywood's stores to help win U.S. approval of a takeover by Blockbuster Inc. Wattles, who owns 9.6 percent of Hollywood's outstanding shares, resigned as CEO in February amid the bidding battle.
http://www.reuters.com/newsArticle.j...toryID=8004288


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Toshiba Ordered to Pay $465 Mln to Lexar

Toshiba Corp. has been ordered by a California jury to pay $84 million in punitive damages to Lexar Media Inc. for stealing trade secrets, taking Lexar's total award in the case to $465 million.

The award was a fraction of the $1 billion or more sought by Lexar, which called the award the biggest intellectual property victory ever in California courts. The total damages also dwarfed Lexar's market value of $251 million as of Wednesday's close.

Toshiba, the world's seventh-largest chip maker, suggested it would appeal the Thursday decision.

"Toshiba believes that the verdict rendered by the jury was in error, and we plan to pursue all available legal avenues to correct it," the Japanese company said in a statement.

It said it had no plans at the moment to revise its earnings forecasts for the year ending on March 31, although the total award is 10 percent larger than Toshiba's estimated net profit for the year of 45 billion yen ($423.2 million).

At issue in the case is NAND-type flash memory, which is used widely in digital cameras and photo-snapping mobile phones and has been Toshiba's cash cow in recent years.

Lexar, whose memory cards are used in consumer devices such as digital cameras and music players, claimed its secrets were stolen by a Toshiba executive who sat on Lexar's board.

"Toshiba invented NAND flash memory technologies and has been a pioneer throughout its development," the Tokyo-based company said.

Analysts in Japan said the financial impact on Toshiba would be manageable, even in the worst-case scenario.

"Toshiba had about 400 billion yen in cash and cash equivalent at the end of last year, and its flash memory business posts some 80 billion yen in operating profit (a year) ... I don't see any long-lasting impact," said Yuichi Ishida, analyst at Mizuho Investors Securities.

Lexar shares rocketed 99.3 percent on Thursday, while Toshiba shares closed Friday down 0.45 percent at 447 yen, extending a 3.2 percent slide the previous day.

Lexar also said it had a patent case pending against Toshiba and was seeking an injunction barring Toshiba from selling its memory products in the United States.

Lexar General Counsel Eric Whitaker said the injunction could include popular electronics made by the likes of Apple Computer Inc. as well as products by SanDisk Corp.

SanDisk spokeswoman Lori Barker said there were no grounds for an injunction against her company, which owns a factory jointly with Toshiba. Apple, which uses Toshiba flash memory in its iPod Shuffle, declined to comment.

Ishida at Mizuho said it would not be very difficult for Toshiba to find alternative markets if its flash products were banned in the United States, given strong global demand for the memory chips.

Lexar, which on Thursday reported a fourth-quarter loss of $63.3 million, was in danger of running out of cash this year without the award. CIBC World Markets analyst Daniel Gelbtuch said investors had been concerned mounting losses could force Lexar to seek bankruptcy protection.

"If they did not have this win, they would have gone bankrupt inside of four months," Gelbtuch said. "This is purely a cash-per-share increase in the stock price and it negates the notion that they are going to go bankrupt."

Gelbtuch upgraded the stock to "sector outperformer" from "sector underperformer."

Asked about the concerns, Lexar spokesman Jim Gustke said the company was revamping marketing and improving inventory management, aiming to "compete profitably in this market regardless of the outcome of the trial."

Wall Street analysts have said an appeal from Toshiba could delay the cash influx at a crucial time for Lexar.

Lexar could be forced to try to raise debt or equity while under pressure, according to JP Morgan analyst Paul Coster.

Coster said Lexar may be forced to take on debt or issue shares if Toshiba appeals and the funds are held in escrow.

"In either case turning to the capital markets could be tough ... Nonetheless, the legal payments could be bigger than we anticipated and Lexar probably lives to fight another day (or year)," Coster wrote in a note.

Analysts noted that Lexar also still relies on Samsung Electronics for its components. Rival SanDisk makes its own flash memory and therefore has more control over supply and pricing.

Still, a favorable result in the patent case could boost Lexar's revenue and perhaps help it forge partnerships with memory chip makers, such as Micron Technology or Advanced Micro Devices, analysts said. (Additional reporting by Kiyoshi Takenaka in Tokyo)
http://www.reuters.com/newsArticle.j...toryID=8002002


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New Sony CEO Likely to Boost Outsourcing-Analysts

As Sony Corp.'s new chief executive settles in with a mandate to shake up the struggling electronics company, analysts expect it to increase outsourcing, benefiting large, contract manufacturers.

Sony already outsources production of some of its electronics gear, such as cell phones and its PS2 video game consoles -- but the company is still largely vertically integrated, analysts said.

Analyst Flint Pulskamp of research firm IDC said Sony, which earlier this month promoted U.S. operations chief Howard Stringer to the top corporate spot, is most likely to expand outsourcing to the large companies with which it already does business.

Fitting that bill, he said, are Singapore-based Flextronics International Ltd., the world's largest contract electronics manufacturer and the maker of Sony-Ericsson phones, and Taiwan's Hon Hai Precision Industry, which makes the PS2.

Sony, which invented the Walkman, has been outmaneuvered in recent years in flat-panel TVs by rivals Sharp Corp. and Matsushita Electric Industrial Co. and lost its lead in the portable music industry to Apple Computer Inc. and its market-leading iPod player.

Sony is more than halfway through a three-year restructuring plan in which it aims to cut fixed costs by $3.15 billion by streamlining operations and cutting jobs, but profit margins remain razor-thin.

Piper Jaffray analyst Jesse Pichel said Sony's cost of producing each gizmo -- $14.5 billion in its latest quarter -- represents the company's potential market for outsourcing.

Pichel said the Japanese have generally been reluctant to outsource because of the cultural norms there for lifetime employment.

But analysts said Stringer, a Welsh-born former television journalist, will find it easier to make big shake-ups at Sony than a native Japanese CEO would.

"Stringer doesn't have a lot of the baggage or the cultural inhibitions that a Nobuyuki Idei did," Pulskamp said, referring to Sony's former chief executive.

Economics may well force Sony to deepen its relationship with the likes of Flextronics, Hon Hai and Taiwan-based Asustek Computer, which makes the company's laptop PCs.

"At some point, the benefits of going to China, in particular, are going to weigh on these firms, and they're going to look to outsource a lot more of their production," Pichel said.

If and when Sony increases its outsourcing, it would make sense to do so with companies with operations in China, where the annual salary for an electronics factory worker is about $1,500, much lower than in Japan.

So while Flextronics, Asustek, Hon Hai are the most obvious beneficiaries of any increased outsourcing at Sony, according to analysts, those companies themselves had better watch their backs.

"We're watching the emergence of these large vertically integrated companies in China that make everything from plastic moldings to finished laptops," said Gartner analyst Martin Reynolds. "These large Chinese manufacturers are going to squeeze companies like Flextronics."
http://www.reuters.com/newsArticle.j...toryID=7998882


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Lawmaker Seeks Black Box Privacy Guards
James Warden

Holmberg didn't know his new sedan came equipped with the long arm of the law. The dealer hadn't bothered to mention the "black box," a computer chip that stores information on speed and seat belt use.

The state senator believes his privacy was violated and is taking aim at black boxes.

"When I bought my car," he said, "I didn't realize I was also buying a highway patrolman to sit in the back seat."

The bill Holmberg is sponsoring - now up for Senate consideration after being approved Wednesday by the House - would require buyers to be told if their new car or truck is equipped with a black box. It would also prohibit the data from being used in court unless there is a court order. Subscription services such as OnStar, which can be used to track a vehicle's movements, would be exempt.

Its most vocal critics are auto manufacturers. For General Motors, said lobbyist Thomas Kelsch, it makes no sense to bar information from the computer chip from being used in court.

"What's the societal good that would result from the suppression of valuable crash data?" Kelsch asked.

But Holmberg, a Grand Forks Republican, again raises the privacy issue. He worries the data could be used to track driving habits or be used against a driver who has an accident.

"Most people don't realize these devices are in their vehicle, that the information recorded may be used against them and there's no sort of regulation about who owns that information," he said.

North Dakota is one of at least eight states considering black-box regulation this year, Bob Boerner, an official with the National Conference of State Legislatures, said Friday. Others are Connecticut, Massachusetts, Montana, New Jersey, New York, Virginia and West Virginia.

California has a law on the books requiring dealers and vehicle rental companies to inform drivers when a car has a black box. In New York, it is illegal for rental companies to use global positioning system technology to track drivers and use the data to charge extra fees or penalties.

Accident investigators argue that the privacy concerns are overblown.

"These guys are trying to roll back North Dakota courts to the Dark Ages," said Jim Harris, owner of Harris Technical Services, a Florida-based accident investigation company. "What are you going to do? Leave out videotapes?"

According to the National Highway Transportation Administration, about 15 percent of vehicles - or about 30 million cars and trucks - have black boxes. About 65 percent to 90 percent of 2004 cars and trucks have them, according to the NHTA.

Rusty Haight, director of the Collision Safety Institute, which researches crashes and trains accident investigators, said black boxes were introduced in cars along with air bags in the 1970s.

Air bag sensors already collected the information and it was a small step to allow researchers to see how well other systems were performing, Haight said.

North Dakota Highway Patrol Capt. Mark Bethke said crash investigators must have a warrant to access information from a recorder. He said the patrol collects such information less than once a month and has never used it in court.

John Buchanan, a Miami accident reconstruction expert, said investigators must compare what the recorder says to the physical evidence at an accident scene.

"I'm a big believer in the box," he said. "But you cannot just take a box, read what it says and say that's what happened."

Insurance companies already have limited access to some data.

State Farm requires its customers to help with investigations, including allowing insurance employees to look at their vehicles, said Dick Luedke, a spokesman for the Illinois-based insurer.

Progressive Insurance began a voluntary program last year in which the company gives drivers a chip similar to a black box that can be used to transmit data, said spokeswoman Shannon Radigan.

Progressive offers drivers the possibility of a break on their insurance rates based on when, how much and how fast they drive, she said. The average discount is between 12 percent and 15 percent, she said.

North Dakota auto dealers say they have not heard many complaints about black boxes. Sales people say customers rarely ask about them. And police say the devices are not common.

"They're just not very prevalent," said Fargo Sgt. Joel Vettel.
http://hosted.ap.org/dynamic/stories...TAM&SECTION=US


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Man Sells Device That Blocks Fox News
Emily Fredrix

It's not that Sam Kimery objects to the views expressed on Fox News. The creator of the "Fox Blocker" contends the channel is not news at all. Kimery figures he's sold about 100 of the little silver bits of metal that screw into the back of most televisions, allowing people to filter Fox News from their sets, since its August debut.

The Tulsa, Okla., resident also has received thousands of e-mails, both angry and complimentary - as well as a few death threats.

"Apparently the making of terroristic threats against those who don't share your views is a high art form among a certain core audience," said Kimery, 45.

Formerly a registered Republican, even a precinct captain, Kimery became an independent in the 1990s when he said the state party stopped taking input from its everyday members.

Kimery now contends Fox News' top-level management dictates a conservative journalistic bias, that inaccuracies are never retracted, and what winds up on the air is more opinion than news. "I might as well be reading tabloids out of the grocery store," he says. "Anything to get a rise out of the viewer and to reinforce certain retrograde notions."

A Fox spokeswoman at the station's New York headquarters said the channel's ratings speak for themselves. For the first three months of this year, Fox has been averaging 1.62 million viewers in prime-time, compared with CNN's 805,000, according to Nielsen Media Research.

Kimery's motives go deeper than preventing people from watching the channel, which he acknowledges can be done without the Blocker. But he likens his device to burning a draft card, a tangible example of disagreement.

And he's taking this message to the network's advertisers. After buying the $8.95 device online, would-be blockers are shown a letter that they can send to advertisers via the Fox Blocker site.

"The point is not to block the channel or block free speech but to raise awareness," said Kimery, who works in the tech industry.

Kimery doesn't use the device himself; his remote is programmed to only a half-dozen channels. Plus he occasionally feels the need to tune into Fox News for something "especially heinous."

Business could pick up since the blocker was alluded to in a recent episode of the ABC drama "Boston Legal." The show's original script mentioned Fox News, but ABC had the references removed.

The boisterous conversations on Fox News may be why the station is so popular, said Matthew Felling, media director for the Center for Media and Public Affairs, a nonprofit, nonpartisan media watchdog group. And despite a perception that Fox leans to the right, Felling said, that doesn't mean people who lean left should tune out.

"It's tough to engage in an argument when you're not participating in it," Felling said. "It's just one more layer in the wall that the right and the left are building in between each other."
http://hosted.ap.org/dynamic/stories...=ENTERTAINMENT


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Sharpton Complains to FCC About Rap Music
AP

The Rev. Al Sharpton, upset about violence in rap music, asked the Federal Communications Commission on Thursday to punish artists and radio stations connected with violent acts.

Artists connected to such acts should be denied airplay on radio and television for 90 days, he told reporters after meeting with FCC Chairman Kevin Martin and two other commissioners.

He also urged the agency to fine and review the licenses of radio stations "that encourage a pattern of this, including allowing employees to do on-the-air inciting of violence."

"The outrage of the pattern of violence that has occurred at radio stations requires some action," Sharpton said. "What has been absent is some kind of government move to stop these actions happening on federally regulated radio stations."

A spokesman for Martin declined to comment.

Andrew Jay Schwartzman, president of the Media Access Project, a public interest law firm, said Sharpton's suggestions could trample on free speech protections and may not fall under the regulatory jurisdiction of the FCC.

"They pose tremendous First Amendment problems," he said. "It's very hard to come up with a standard that works. The bottom line is this is not something the FCC was created or equipped to handle."

Sharpton has been especially vocal since a bitter feud broke out between artists 50 Cent and The Game last month. A member of The Game's crew was wounded during a shooting outside a New York hip-hop radio station while 50 Cent was on air criticizing The Game.

Grammy-winning hip-hop star Lil' Kim could face years in prison when she is sentenced in June after being convicted last week for lying about a shootout outside the same New York radio station.

Sharpton also met with Democratic FCC members Michael Copps and Jonathan Adelstein.

"We welcomed the opportunity to discuss media violence," Copps said. "The issue of violence in the media was one the commission ought to take more seriously."
http://hosted.ap.org/dynamic/stories...=ENTERTAINMENT


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New Web Site to Showcase Digital Works
AP

A new Web site backed by some of the Internet's leading thinkers promises to make it easier - and cheaper - for artists, scholars and other creative people to share their digital works. Ourmedia.org seeks to become a central repository for such items.

"They are (now) all kind of scattered, a lot on people's computers (or) hidden away on the Web in faraway crevices," said J.D. Lasica, a veteran journalist who co- founded the project. "We thought it was important to gather a lot of this stuff under one roof."

The site also addresses a chief obstacle to posting video and other large files to the Internet: The more popular an item gets, the more its owner has to pay for Web hosting services.

Ourmedia will offer hosting services for free, and the site pledges to retain home movies, photos, cartoons, software and any other digital work forever. The only exceptions are porn and items under someone else's copyright. More than a dozen volunteers worldwide will monitor.

For each file posted to Ourmedia, the owner must specify what people can do with it, choosing from among a half dozen or so licensing packages. Owners can claim full copyright protections if they want, though the project encourages sharing, Lasica said.

The Internet Archive, a nonprofit online repository, and Bryght, a Canadian publisher of open-source materials, are donating storage and bandwidth services.

Ourmedia's advisory board includes Internet Archive founder Brewster Kahle and Dan Gillmor, a pioneer in citizen journalism.
http://hosted.ap.org/dynamic/stories...CTION=BUSINESS


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Hard To Lower Pirate Flag While Legal Alternatives Still Lacking
Andrew Kantor

There's a fun little back and forth going on between Apple and a group of programmers. Apple runs the iTunes music service, where you can download any of a gazillion songs for a buck or so.

But those songs come with restrictions on where you can play them. So Jon Johansen, Cody Brocious, and crew (Johansen is the Norwegian who cracked the encryption on DVDs several years ago) created PyMusique — software that lets you access iTunes, pay for music, and download it without the built-in digital rights management (DRM) restrictions.

Apple responded by closing the "hole" PyMusique exploited, and requiring all iTunes users to upgrade to the latest version of the software.

Johansen and the PyMusique folks responded by "reopening the door" with a new version. (I am writing this on Wednesday. By the time you read this things may have changed.)

To be fair, the PyMusique group said they weren't interested in stripping the DRM, only in making iTunes available for Linux users. But the restrictions aren't in the songs — they are added by Apple's software. Johansen and crew simply decided not to add that feature.

Who can blame them? By adding restrictions to music, Apple is going against decades of an understanding between music makers and music buyers.

Imagine buying a music CD at the mall, bringing it home, and playing it on your stereo. Then you play it on your car's CD player driving to work. But when you get there and pop it into the little player on your desk, you hear a voice say, "We're sorry, but you are only authorized to play this disk on up to two CD players. You have now exceeded that. Thank you."

That's exactly how iTunes and most of the other legal online music service work. When you pay for and download a song, it comes with various built-in restrictions. Maybe you can only pay it while you're subscribed to the service. Maybe you're limited to playing it on certain machines. Maybe you can't copy it to other media (say, a CD to play in your car).

And people wonder why music piracy is so rampant.

It's not just "cheap people want something for free," although that's likely part of it. It is, instead, because the music industry, led by the Recording Industry Association of America (RIAA), forgot a key phrase of capitalism: What the traffic will bear.

Clearly the market didn't bear $15 CDs with one or two good songs. As soon as an alternative was available, people jumped. That it happened to be a free alternative only helped, and that it happened to be an illegal alternative didn't matter.

The industry was incredibly slow to catch up, but finally embraced — in a tentative, distant-cousin-at-the-wedding sort of way — services such as iTunes and Napster (v.2.0).

Both are doing well, but neither is doing as well as the peer-to-peer (P2P) networks, even though music from those is likely pirated, and downloaders are likely lawbreakers.

Those P2P services (I talked about them last week) are doing gangbusters for several reasons. Of course, there are always people who want something free. And there are always people who only want a handful of songs a year and don't want to bother installing software to get it.

But the biggest reason is this: The legal downloading services were started as alternatives to buying a CD. The mindset should have been that they're a legal alternative to P2P networks.

That's the competition now. P2P networks and software are simple to install and easy to use. They have a dedicated user base, and a huge "library" of downloadables.

You can be grabbing (in the worst sense of the word) music, movies, software, what- have-you in minutes. (Although you'd be a fool not to be sure your anti-virus software was up to date.)

And the music you download illegally comes restriction free.

"If there were any such service where you could download a song for a buck and do what you want with it, I'd pay for that in a second," said a friend of mine. But the idea of paying for something and then having to keep track of how and where you use it is too annoying — especially when Grokster beckons from the sidelines.

It's true that when you buy a CD you don't own the music — you own the disk and the right to play that music. No argument.

But, well, the folks at DRM Blog put it best: "I can basically do whatever I want with a CD. When I am done with said CD, I can give it to a friend and he can do with it as he pleases. This is the way it has been for 80 years. Phonographs, 8-tracks, cassettes and compact discs have all worked this way. You went to a store, you bought a piece of plastic, and you took it home."

The music industry seems clueless, or at best stuck in the 1980s. They seem unaware of what the traffic will actually bear. They are suing their users. (Yes, they're suing pirates. But those pirates are also the people who support their artists, buying everything from T-shirts to concert tickets, and yes, music.)

The RIAA's empty-headed, heavy-handed approach to business continues, and consumers will continue to get the shaft. Adding insult to injury, Orrin Hatch, the Utah senator who once suggested remotely destroying the computers of people suspected of pirating music (due process, schmue process) is now head of the Senate Judiciary Committee's Subcommittee on Intellectual Property.

Fox. Henhouse. Chomp.

Hatch's appointment, and his oft-demonstrated industry bias, means you can expect more restrictions on how you can use the music and movies you buy — a continued erosion of copyright at the expense of listeners and viewers, thanks to a Congress that seems to have lost track that they're supposed to be the representatives of the people.

The result won't be less piracy, it will be more.

Because that's what happens when consumers realize they're getting the shaft — they find ways around the system. That's why P2P networks have grown so much and so fast.

And if the music or movie industries think they'll come up with a technological solution to fix things, they've got their collective heads in the sand. Because every time — every time — some new scheme comes out to deny consumers their rights under current copyright law, some programmer finds a way around it.

Maybe it's the instruction to "hold down the Shift key." Or a small program you have to run. Or using a magic marker to draw on a CD. (These are all real examples.) Somehow, someone will find a way to break the copy protection.

This is a losing battle being fought. Unfortunately, it's a battle everyone is losing. Music sales are falling. Teenagers are facing jail. Music lovers are stuck with either restrictive licenses or taking the pirate's way out.

But until the RIAA wakes up — as well as their brethren at the Motion Picture Association of America (MPAA) — this is what we're stuck with.

Yo-ho-ho.

http://www.usatoday.com/tech/columni...5-kantor_x.htm


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Columbia Plans 2nd Master's in Journalism
Emma Daly

More than two years after Columbia University began an intense, even painful, debate on how to revamp the way journalists are trained, it plans a second one-year master's degree program to provide expertise in various subject areas.

The Graduate School of Journalism is adding a one-year Master of Arts program, the first new degree it has offered in 70 years, to its yearlong Master of Science, to give student journalists a chance to specialize in politics, business, the arts or science.

"There is no profession more important in the modern world than being a journalist," Lee C. Bollinger, the president of Columbia and a First Amendment lawyer whose father was a newspaper executive, said this week. "I felt that journalism education had not developed to the same point in terms of providing the richness of what a great university like Columbia can offer."

The contours of the new program represent something of a compromise. When Mr. Bollinger raised the prospect of a revamped journalism program in a speech in 2003, he envisioned a mandatory two-year master's degree program. But some critics worried that students would not be able to afford a second year at an institution where annual tuition and room and board run more than $50,000. Mr. Bollinger, who called for improving journalism education only weeks after taking office in June 2002, stirred controversy among the faculty and within the profession. But his appointment in September 2003 of Nicholas Lemann, the New Yorker writer, as dean of the journalism school, soothed colleagues and eased the path to the new program.

To assuage concerns about tuition costs, Mr. Lemann promised that financial aid would be available for most students and said the school would also help them find better jobs at higher salaries.

The university is helping to subsidize the two dozen students who will begin the new program this fall, he said last week, adding that early fund-raising efforts have already netted more than $20 million.

Mr. Lemann said the students in the new program would be drawn from those who had completed the journalism school's one-year master's program, those who held similar degrees from another university and working journalists who might not have a journalism degree. Each type of potential student would have to apply for admission to the new program.

There will be two compulsory courses, a history of journalism and another, taught by the dean, on evidence and inference, in which students will learn to find and interpret statistics, archives and legal documents.

The program will also feature four yearlong seminars, based on subjects taught elsewhere in the university but intended for journalists. These include arts and culture, economics and business, politics and science. The program plans to add other courses, including immersion courses in Arabic, Chinese, French, Russian and Spanish.

"We were very clear that what's involved here is not farming out students to different disciplines, to simply learn what you learn in any political science class," Mr. Bollinger said, "but, how do you create the materials and subject and form and shape of a deep, professional education for journalists?"

Both men acknowledged that it would take years before they could claim success for the new degree, which is expected to enroll 24 or 25 students for the class of 2006, rising to around 200 after a few years.
http://www.nytimes.com/2005/03/25/ed...25college.html


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Grokster and StreamCast Face The Music

The entertainment industry is taking its battle against illegal downloading to America’s Supreme Court. But attacking the technology behind file-sharing could stifle innovation without tackling the industry’s long-term problems

THE music business should have stuck by Thomas Edison’s technology if it wanted to avoid the threat of piracy. His wax cylinders could record a performance but could not be reproduced; that became possible only with the invention of the flat-disc record some years later. On Tuesday March 29th, America’s Supreme Court will begin to hear testimony in a case brought by the big entertainment companies that is intended to stop the illegal downloading of copyright-protected music and film. The industry’s target is the peer-to-peer (P2P) technology that allows the swapping of files directly over the internet. The defendants in the case are two firms that make file-sharing software: StreamCast Networks and Grokster.

The entertainment business has long been susceptible to copyright infringement—and it has usually blamed the electronics industry. The music industry first cried foul at the introduction of the cassette-tape recorder in the late 1960s. More recently, the digitisation of music has allowed “burning” of music tracks on to CDs with the help of a computer. The latest threat to the record companies is a copying technique of even greater speed, ease and scope. Every day some 4m Americans swap music files over the internet, according to figures from Pew, an independent research organisation. And now the swapping of new films online is gaining ground too, to the chagrin of the movie industry.

This comes at a particularly bad time for the music industry, which is struggling to reverse a long-term decline. According to the IFPI, a recording- industry umbrella group, worldwide music sales plunged in value by 22% in the five years to 2003—a drop of over $6 billion. In 2004, sales fell by 1.3%, though that decline looks less bad when revenue from legal digital downloads is added in. The music industry largely blames illegal file-sharers for its ills, noting that CD sales are dipping steeply in countries where broadband internet access is growing fast.

Some suggest that the latest attempt to curb illicit file-swapping—legal action against the technology that drives P2P networks—threatens the future of innovation. P2P software allows computers to talk to others running the same software without having to use intermediaries. Grokster and StreamCast argue that they are not able to control the use to which their software is put, whether it be searching, downloading or sharing.

In court, the two software firms will no doubt cite the case of Sony’s Betamax technology as a precedent. The home video-recording system, which was eventually superseded by VHS, faced a suit in 1984 in which Disney and Universal called for its ban. The entertainment firms feared that the ability to record on to video would allow considerable infringement of their copyright. America’s Supreme Court ruled that Sony was not liable because the equipment had “substantial” uses other than infringement, such as the recording of TV programmes for later viewing.

Similarly, the software produced by StreamCast and Grokster has significant non-infringing uses, such as sharing music that is not copyright-protected and internet-routed phone calls. In fact, some make the case that P2P technology could make the internet more robust and secure by avoiding the use of centralised servers, and that the entertainment companies’ lawsuit is thus harmful to the web as a whole.

Napster, the first and best-known of the file-sharing businesses, was killed off by the music industry in 2001. Because it used central servers and so had the ability to block users who broke copyright laws, a judge issued an injunction ordering Napster to shut its servers down. At the time, it boasted some 14m users. Since then, the industry has ramped up action against file-sharing and widened its attack by going after individual downloaders as well.

At present, some 8,000 individuals around the world face lawsuits for illegal file-sharing. The industry has backed up its legal moves with a publicity offensive aimed at convincing the public that unauthorised downloading is theft. As well as cinema- and TV-advertising campaigns, 45m instant messages have gone out to users of P2P services, warning them to stop putting copyrighted material on the internet. America’s Department of Justice has weighed in too, even suggesting that P2P services could be used to support terrorism. Others have muttered darkly that the technology is a conduit for illegal pornography.

There are some signs that these measures are working: surveys suggest that internet users are becoming more wary of illegal file-sharing, for instance. However, according to the IFPI’s own figures, the number of unauthorised music files on the web has grown in recent months after falling sharply in the first half of 2004 (see chart). The number of users is also up, with 8.6m offering illegal files compared with 6.2m a year ago.

The music business has employed other defensive measures. Apart from a round of mergers and cost-cutting over recent years, the industry has tried to embrace legal downloading. Napster itself was reborn as a legal downloading service. And in 2004, according to the IFPI, the number of legal download sites increased four-fold to 230 and the number of legal downloads to over 200m (a figure that could double in 2005, according to forecasts). Apple’s iTunes, the largest legal download catalogue, has over 1m songs available and handles over 1m downloads a day.

But even if the entertainment business manages to coax more users into paying for legal downloads and succeeds in court against Grokster and StreamCast, its problems are unlikely to go away. True, a Supreme Court ruling in the industry’s favour would put paid to other P2P services. But it is not clear that curbing illegal downloading will translate into extra sales for the music business. A rush into legal downloading would hardly be good for sales of CDs: some cannibalisation is inevitable. And perhaps the decline in global sales is indicative of a far greater problem for the music industry— consumers simply think that many of its products are just not worth paying for.
http://www.economist.com/agenda/disp...ory_id=3785847


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Cover Me: Introducing the Instant Tribute
Dan Crane

PAYING a visit to a French radio station earlier this month, Conor Oberst, the earnest balladeer beloved of soulful girls and music critics, favored his audience with a few live songs. In fine pop music tradition, he focused on tracks from his new release "I'm Wide Awake, It's Morning," which he was there to promote. But in an equally recognizable gesture, he also played a cover, a tribute to a musician he admired. Within a week, his version was posted on several music Web sites, where fans who recognized the sweetly nostalgic original could download it.

But nostalgia isn't what it used to be. The song he covered wasn't some well-polished chestnut from the annals of recording history. It was "Mushaboom," by the Canadian-born singer Leslie Feist, from her album "Let It Die," which hasn't even been around long enough to establish much of a presence of its own. Yet it's already inspiring variations on a theme.

For decades, rock bands have acknowledged their influences by reinterpreting the old guys' songs. It was a kind of Oedipal tribute: honor thy forebears by reinventing them, as, for example, Devo did in 1978 with its spasmodic update of the Rolling Stones' "(I Can't Get No) Satisfaction," from 1965.

Our post-postmodern era of mash-ups, music blogs, file sharing and near-instantaneous distribution, however, has given rise to a new phenomenon: a certain species of indie bands is covering their peers' brand-new songs - in those first heady days of release when the songs seem to be playing in every cafe and club, or even earlier, before they've made an impression at all. So acts like the Shins and Iron and Wine cover the Postal Service, who cover (and are covered by) the Flaming Lips, who cover the White Stripes, all on songs that were released within months of one another. In the process they bolster their careers, and deflate a bit of the preciousness from a genre that tends toward somber introspection.

The real-time cover has some history, not all of it pretty. In the early days of rock 'n' roll, some white bands covered black artists whose records couldn't get airplay - a white performer's version was said to "cover" any chance of success for the original release. Some songwriters were compensated (Little Richard famously called Pat Boone "the man who made me a millionaire"), but more often they were ignored while white artists got famous off their songs. As rock matured and race barriers broke down, covers became less loaded. In 1967, Jimi Hendrix opened a concert with a cover of the Beatles' "Sgt. Pepper's Lonely Hearts Club Band" just three days after the record came out. As Wayne Coyne, the eccentric leader of the Flaming Lips, imagines it, "It's like he's thinking, 'These are cool songs, I just want to play them!' "

What's different today is the instant gratification: a week after a cover is played, it's being passed around the Web, via file-sharing networks like LimeWire or cheeky music blogs like Fluxblog or Stereogum. Frequently, these are unlicensed live versions on which neither band makes money.

The lack of licensing might not sit well with lawyers, but a lot of musicians seem to think it's just fine. "I'm so excited that these songs have been thrown all over the Internet," says Babydaddy, bassist and co-songwriter for the Grammy-nominated glam-disco sensation the Scissor Sisters. "Bands will record versions of other people's songs and they don't want to go through the process of clearing things and the Internet is the perfect way to release them."

The Scissor Sisters recorded a version of Franz Ferdinand's edgy guitar-driven hit "Take Me Out" for BBC Radio 1 last summer. The group's cabaret-style cover, which sounds as if the original had been blended with a healthy shot of Elton John and then poured through a cocktail shaker, was released online, then as a B-side, with Franz Ferdinand's blessing. "We run into the Franz Ferdinand guys all the time," Babydaddy said, "and the last word was that they were really happy with it."

The Flaming Lips' version of the White Stripes' "Seven Nation Army," another instant cover that had a long life on the Internet, was released this month on a various- artists compilation CD, as part of the "Late Night Tales" series available on azulishop.com.

The electronic duo the Postal Service went one better: "Such Great Heights" an EP of new songs it released in 2003, included covers of those songs by two other bands. It even included the Shins' countrified version of "We Will Become Silhouettes," a Postal Service song that the Postal Service itself didn't get around to releasing, in its original form, until a month later. By that time, die-hard fans had already gotten used to the tribute version, imbuing the song itself with an almost instant history.

And because all three bands are on the Sub Pop label, the whole thing worked as a handy bit of in-house cross-marketing, introducing one band's music to another band's fans. "It almost seems like a huge percentage of the audience is there because of the cover we did," says the Shins' frontman, James Mercer, about recent live shows. "People yell that out so much."

Iron and Wine's cover of the title track strips down the ebullient head-bobbing original and transforms it into a moody whispered secret. That version made it onto the Grammy-winning soundtrack for the film "Garden State," which brought it a much wider audience than it would otherwise have had.

These days, when the Postal Service performs the song live, it's hard to say who's interpreting whom. "It's a very strange turn of events," says Ben Gibbard, the singer- lyricist half of the Postal Service. He is no stranger to strangeness: he lives in Seattle; the other member of the duo, Jimmy Tamborello, lives in Los Angeles; the two communicate, of course, via the United States Postal Service.

"I don't know if postmodern is necessarily the word," Mr. Gibbard added, "but it's a strange occurrence when I write a song with a guy who I barely know who lives 1,200 miles from me and then we get a guy in Miami to do a cover of it, and then I in turn am covering the version of the song that he covered."

More often it's a local affair. In the crowded Williamsburg, Brooklyn, music scene, for example, that kind of hall-of-mirrors effect arose early: in 2002, the repetitive noise-rockers Oneida and the art-punk trio the Liars each covered one of the other band's songs on a split EP titled "Atheists, Reconsider." Brian Chase, the drummer of the Yeah Yeah Yeahs (another Williamsburg band), calls the result his "favorite example of bands covering each other's stuff." In 2003, the Yeah Yeah Yeahs, for their part, released a bombastic, funky cover of a Liars song ("Mr. You're on Fire, Mr.").

TV on the Radio, winner of the 2004 Shortlist Music Prize, which recognizes up-and-coming indie bands, stitched itself into this hipster daisy chain last autumn by turning the Yeah Yeah Yeahs' ballad "Modern Romance" (released a year earlier) into a layered, rhythmic dirge. "We chose it because it's a really good song," says the band's vocalist, Tunde Adebimpe. "It's pretty much just saying: 'You know that song you wrote? I love it. I was singing it all day yesterday, but like this. Please don't sue me.' "

At worst, a few have grumbled - like Mr. Chase, who didn't think so highly of a Yeah Yeah Yeahs "tribute" album that was recently released. "Some of the MP3's are pretty dreadful," he says. And some purists whine that it's all just a cry for attention. To which Babydaddy of the Scissor Sisters has a ready response: "Of course it was an attention scheme," he says of the Franz Ferdinand cover. "We went on the radio to play and promote our album. That's the whole idea!"
http://www.nytimes.com/2005/03/27/ar...ic/27cran.html


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The Future of the 30-Second Spot
Lorne Manly

DEVOTEES of Home & Garden Television, sitting in the comfort of their living rooms on the 33rd floor of a Manhattan high-rise, probably could not care less about commercials for lawn mowers or snow blowers. If they have TiVo, they probably zap right through the ads; if not, they can just change channels.

Soon, however, viewers may no longer be assaulted by ads that all but demand to be ignored. Technology, cable and satellite companies are scrambling to offer advertisers the ability to learn enough about who you are and where you live so that the likes of Home Depot will be able to send a different, more suitable ad to an apartment dweller - say, an ad pushing a kitchen upgrade.

With the growing popularity of digital video recorders like TiVo, as well as video-on-demand, viewers are fine-tuning their relationships with television in ways that would have been unfathomable just a decade ago, watching shows when and how they want - not when some distant, towering network demands.

But the technology behind all that small-screen freedom cuts two ways. The same digital set-top boxes that turn your television into an ad- zapping, instant-gratification device also provide an opportunity for the advertising-dependent television business to rejuvenate and rejigger the time-honored 30-second spot.

The television commercial - a blunt instrument that often reaches as many disinterested people as desired ones - is beginning to behave like a smarter version of direct mail. Ads can be customized, not just by neighborhood, but ultimately by household and perhaps by viewing habits.

If you don't own a dog, you won't be bombarded by ads for Puppy Chow or Iams. If the technology determines that the man of the house has wrested control of the remote from his teenage daughters, he will not have to sit through feminine hygiene ads during the most popular network shows. And if someone watching a commercial for a Mercedes S.U.V. wants to go for a virtual test-drive, or set up a real one, all she will need to do is press a button on the remote.

To make that happen, a host of companies - including Invidi Technologies, Visible World, Navic Networks and OpenTV - are selling their technology and services to cable operators and satellite providers whose set-top boxes afford them direct access to viewers. While the companies' strategies may vary, their ultimate goal is the same: to make ads more relevant to the lives of viewers, so that they might just stick around and watch. Instead of commercials being an annoyance, they become information a viewer needs, perhaps even craves.

But this future will not come easily to an industry known for its reluctance to embrace change. It's also far from clear if typically passive viewers will want to interact with commercials. Privacy concerns loom, too, as advertisers could, in theory, come to know more about a viewer's habits than the viewer may be comfortable with.

For their part, marketers worry that a golden opportunity could be blown if cable and satellite operators keep the new technologies to themselves rather than share them with the networks, which control the bulk of advertising time.

"I hold the purse strings, and I need critical mass," said Jerry Dow, managing director for worldwide advertising and promotion at United Airlines. "If you, the cable operator, are not going to give it to me, I'm going to spend my money elsewhere."

IN every industry, there is a common unit of trade, a shared form of communication. "The 30-second ad is the lingua franca of the global advertising business," said David Verklin, the chief executive of Carat Americas, one of the major media services firms.

The television business did not start out that way. In the medium's early years, ad agencies often created the programming for their clients, resulting in shows like "Texaco Star Theater" and "Kraft Television Theater." Sponsors could plaster their messages into the programs, scatter them during the breaks or just run muted, tasteful nods to their products at the beginning and the end of the shows.

But the networks soon learned that they could make more money selling chunks of time to a number of marketers than by handing the full hour to a single sponsor. At the same time, sponsors were becoming harder to find as programming costs rose and Washington began scrutinizing their dual roles after the quiz show scandals in the late 1950's.

As the medium evolved and advertisers honed their skills at creating entertaining, persuasive television commercials, the industry embraced the 30-second ad. And for more than 40 years, the form has dominated the business.

While company mascots may come and go - then return in a warm bath of nostalgia - and deft camera work and computer-generated images dazzle the eye, the format has remained surprisingly static.

"The advertising business is still largely the way it was when television first started to take hold," said Tom Hagopian, senior vice president and general manager for programming and advertising at OpenTV. "One ad goes to everyone and the ad is relatively passive."

Marketers recognize the need to tailor their messages to different, more finely calibrated audiences. But the lure of a relatively cost-effective way to reach millions of people quickly has kept them devoted to the medium. Last year, advertisers spent more than $70 billion on television, according to Nielsen Monitor-Plus. About $45 billion of that total landed in the coffers of the broadcast networks and their affiliates, even though viewers are spending more and more hours watching the growing number of niche cable networks.

But marketers' passion for the buckshot approach is waning. While the remote control has been with us for half a century, new technologies are giving people increasing power to shape and schedule their television viewing. A new study by Arbitron and Edison Media Research found that about 43 million Americans time-shift, using either their VCR's or the rapidly proliferating digital video recorders to watch shows when they want.

Commercials play little part in this reconfigured landscape. About 6.5 million people own or rent DVR's or TiVo, and that number is expected to rise as cable operators and satellite providers aggressively market the technology to their subscribers. Some studies put the percentage of people who skip past ads at above 90 percent.

Internet advertising, meanwhile, having recovered from the industry's burst bubble, has become more enticing to marketers. They appreciate the ability to pinpoint their audience and to get instant feedback about how well their message has resonated.

"Time is running out," said Eric Schmitt, senior analyst at Forrester Research and the author of a recent report called "What Next for TV Advertising?" "At some point, it's going to be impossible not to acknowledge that the medium is overvalued as an advertising vehicle."

Mr. Schmitt says he expects that by 2007, time-shifting and ad-skipping will begin putting considerable pressure on the prices that television networks can charge for commercial time.

The pain can already be felt. Dozens of big marketers have expressed their frustration with the existing model of television advertising. For its recent reintroduction of Pepsi One, the Pepsi-Cola Company is shunning television completely. While spending on network television has risen in absolute terms, its market share of all advertising expenditures slipped from 2001 to 2004, according to TNS Media Intelligence.

"Clearly, there is a clamoring for proof that their dollars are working harder and better than before," said Tim Hanlon, senior vice president and director of emerging contacts at the Starcom MediaVest Group, one of the country's largest media-buying firms.

The technological dislocations have inspired a flurry of product placements, a return in some ways to the early days of television. Sears for example, pays substantial sums to integrate its Kenmore appliances and Craftsman tools into the action on "Extreme Makeover: Home Edition" on ABC, hoping that the message of uplift in the show translates into good feelings - not to mention sales - for its products. And the major media-buying firms have set up their own entertainment wings to create programming from scratch, the better to embed their clients' products into the heart of a show.

But there is little evidence that product placement has bolstered sales. If anything, measuring its success is even more difficult than gauging that of a 30-second ad. And few companies can afford an entire season of "American Idol" the way Coca-Cola can.

So traditional commercials remain important to both advertisers and networks, making the need to keep viewers from skipping past them all the greater. "If the ad message is more relevant, not just to the programming but to the viewer's mind-set, there's a greater receptivity," Mr. Hanlon said.

IN the last few years, dozens of advertisers have conducted experiments with cable operators and satellite providers to try to discover that elusive relevance. In introducing its offshoot airline, Ted, United Airlines worked last year with Comcast and Visible World to send different versions of its ad to Comcast subscribers with digital set-top boxes. To promote flights to Las Vegas, viewers in Des Plaines, Ill., were greeted with the following message: "Viva Des Plaines. Doesn't quite have the same ring to it. Let's go to Vegas. Des Plaines, say hello to Ted." Crystal Lake also got its own personalized message, as did many other suburbs in the Chicago area.

"We wanted to give Ted a more approachable, friendlier feel," said United's Mr. Dow.

He said he was pleased with the results. "In the traditional way, we craft message, send message, measure message, rinse and repeat," he said. But now an advertiser can almost instantly change its ad, based on changes in its business; United, for example, could have swapped in an ad for a different destination if its Las Vegas flights were already full.

Comcast, the country's largest cable operator, used Visible World's software and expertise to enhance its own targeted ad program, which allows advertisers to home in on specific geographical areas and add a customized message in the last few seconds of an ad, according to Charlie Thurston, president of Comcast Spotlight, the cable giant's ad sales division. The company plans a larger test this summer in Miami with OpenTV.

Visible World's offering also allows advertisers to customize an ad. The Bermuda Department of Tourism, for example, could tinker with the music, the images, the package's cost, even the age of the frolicking vacationers - all tailored to the network being watched or how many days are left in the sale. An ad on the Food Network could play up the trip's dining choices while one on the History Channel could, naturally, touch on the island's history.

A commercial for the Nissan Murano, showing a husband and a wife going antique shopping only to come away with a vintage jukebox channeling Deep Purple's "Smoke on the Water," can become more personalized with locations near the viewers' home superimposed onto the ad. "Now all of a sudden I can relate to this," said Seth Haberman, president and chief executive of Visible World.

To keep viewers interested, cable operators and satellite providers are also tinkering with interactive advertising. EchoStar's Dish Network worked with OpenTV and the Turner Media Group to create a promotion that started this month for the 2006 Mercedes M-Class. As the 30-second commercial runs on cable channels, a prompt appears on the screen, asking viewers if they would like to learn more. An affirmative response takes viewers to an interactive channel on the Dish Network, where they can ask for a brochure, set up a dealer appointment and register for a M-Class road rally near them. Or if the mood strikes them, they can watch a 90-second video of the vehicle's interior and exterior on Turner's CatalogTV, one of its home-shopping networks.

Dish has also done similar but simpler ads for Meineke and American Express, working with Navic, said Susan Arnold, vice president for programming and interactive television at Dish. The Navic technology allows viewers to take action at the end of the commercial. Time Warner, the country's second-largest cable operator, has tested it in its Honolulu and Albany systems.

"The 30-second ad pretty much becomes a navigational tool at that point," said Chet Kanojia, chief technology officer of Navic.

A visit to Invidi's headquarters in Princeton, N.J., offers another glimpse of where targeted advertising is headed. There, executives and engineers are trying to perfect a system that goes beyond using existing census and available marketing data to divine the age and the sex of the audience by their television viewing habits.

Bruce Anderson, Invidi's chief operating officer and chief technology officer, said that the software could even help determine who controls the remote in a household. While there are no guarantees of complete accuracy, Mr. Anderson calls it "pretty accurate guesswork." Men, as anecdotal evidence attests, tend to change channels much more quickly than women, he said.

Invidi executives argue that this level of data will help cable overcome a discrepancy in the marketplace: broadcast television's disproportionate share of advertising dollars. Knowing enough about the demographics of their system's viewers, they can package enough 18- to 49-year-old women or 18- to 34-year-old men across many cable networks to provide the instantaneous reach an individual broadcast network can, and satisfy advertisers' demand for scale. And when that happens, the cable and satellite operators will, theoretically, be able to charge higher rates.

The technology also allows commercials to be swapped into shows taped on the DVR, in case viewers get to the program days or weeks later. "When you watch it on Thursday, the commercials you see will be fresh," said David M. Downey, chief executive and president of Invidi.

Without any live tests under its belt, Invidi lags behind competitors like Visible World, OpenTV and Navic. But Time Warner Cable expects to use Invidi's software in one of its markets, possibly Green Bay, Wis., or Charlotte, N.C., later this year, said Larry Fischer, president of Time Warner Cable's media sales division.

As with any new technology and a bunch of true-believing media entrepreneurs, a word - or more - of caution is necessary. "It sounds great," said Alan Wurtzel, president of research at NBC Universal, "but I just think a lot of time what can sound great on paper, in the crucible of everyday life doesn't always pan out."

For starters, grafting the software companies' applications into a cable operator's set-up isn't easy. Cable companies are also trying to accommodate video-on-demand, DVR's, and even phone service over cable modem lines, in markets that may have a half-dozen or more different set-top boxes, according to Paul Woidke, vice president for technology at Comcast Spotlight.

AND then there are the privacy concerns. Yes, marketers already know quite a bit about you, as the avalanche of direct mail attests. But receiving personalized messages through your television somehow seems more intrusive.

"The ability to address advertising inevitably smacks of Big Brother the first time you hear of it," said Craig Moffett, an analyst with Sanford C. Bernstein. It serves as a reminder that the cable operator could theoretically monitor what you are watching at any given time. "There's a lot of people watching a lot of things they'd rather not be known," Mr. Moffett added.

The software companies as well as the distribution outlets say that private information will remain just that.

Interactivity may also be ahead of its time. Focus groups showed little interest in buying items the stars of the shows may be wearing or in drilling down for more information on a new show, Mr. Wurtzel of NBC Universal said. "It flies in the face of how people watch television," he said, "which is essentially a passive medium."

And lastly, the fact that the technology companies have entered the battle for the future of television advertising on the side of the cable and satellite operators could hinder the widespread adoption of their wares. The companies may have had little choice; the set-top boxes that are the facilitators for all these applications belong to those operators. But the cable operators, in particular, want to use the advent of addressable advertising as way to win what they see as a more equitable split of advertising dollars. And they are in no mood to share.

For now, advertisers and their agencies show little inclination to overhaul the ingrained ways they buy advertising for a local cable market that accounts for about 8 percent of television spending, according to Mr. Moffett of Sanford C. Bernstein. He, Mr. Dow of United and Mr. Hanlon of Starcom MediaVest all suggested separately that national networks, particularly the cable ones, sell these targeted ads across the country. In return, the cable and satellite operators would get a chunk of the revenue.

If not, online and other media will gobble up television's share, they warn. "Unless the ad sales folks and distribution people get together in a harmonized conversation, it will be very challenging for advertisers to step up," Mr. Hanlon said. "While they rearrange deck chairs on the Titanic, advertisers may be building another boat."
http://www.nytimes.com/2005/03/27/bu...ney/27dvr.html


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Censorship

Under New Chief, F.C.C. Considers Widening Its Reach
Stephen Labaton

The television and radio industries are about to come under renewed attack over sex, violence and profanity in their programming, both in Congress and at the Federal Communications Commission.

Leading lawmakers and the new leader of the F.C.C. have proposed a broad expansion of indecency rules, which were significantly toughened just last year. They are also looking for significant increases in the size of fines and new procedures that could jeopardize the licenses of stations that repeatedly violate the rules.

Some senior lawmakers, including Senator Ted Stevens, the Alaskan Republican who is the leader of the Commerce Committee, as well as Kevin J. Martin, the new chairman of the commission, have suggested it may be time to extend the indecency and profanity rules to cable and satellite television providers, which now account for viewership in 85 percent of the nation's homes. And organizations opposing what they consider indecent programming have joined forces with consumer groups that have been trying to tighten regulation over the cable industry and force it to offer consumers less expensive packages of fewer stations, known as à la carte services.

Some of the anti-indecency groups see à la carte services as a way of helping consumers block out programming they consider indecent. "We are at a rare moment when there seems to be bipartisan energy on both sides of the political aisle and both sides of the ideological divide," said L. Brent Bozell, president of the Parents Television Council, a leading advocacy organization that officials say has been responsible for the vast majority of complaints against the broadcasters.

Mr. Martin and the senior Democrat on the commission, Michael J. Copps, have consistently been among the most aggressive members of the agency on indecency issues. President Bush is expected shortly to announce the appointment of two new members to the five-person commission. Those appointments will determine whether the views of Mr. Martin and Mr. Copps on indecency issues will prevail at the agency.

Last year, the agency proposed fines of nearly $8 million in 12 cases involving television or radio stations. By contrast, in 2003, the agency proposed about $440,000 in three radio cases.

The number of complaints has also risen sharply, to more than 1.4 million last year, compared with 111 in 2000. Commission officials say that the number of complaints is misleading, because most of them come from the Parents Television Council. But Mr. Bozell disputes that, saying that the agency has no way of accurately tracking the source of the complaints.

Lawyers for cable companies say any effort to impose indecency standards on paid programming would violate the First Amendment.

Meanwhile, broadcasters have been slow to respond to the new climate. The networks and affiliates have filed papers with the commission seeking a rehearing on the three major indecency cases: the Janet Jackson incident at the Super Bowl, Bono's use of a profanity at the Golden Globe Awards and a racy episode of "Married by America."

But the agency has sat on those appeals, and may not issue rulings for months or longer. As a practical matter, the inaction by the commission has prevented the networks from taking the matter to court.

And for now, at least, the courts are widely viewed as the last hope for the broadcasters.

"The courts really are the only avenue of relief," said Kurt A. Wimmer, a lawyer at Covington & Burling in Washington, which represents a number of broadcasters in disputes with the commission. "The commission and Congress are locked in a political spiral that provides no avenue of relief."

Michael K. Powell, the former chairman of the commission, came under heavy criticism by broadcasters, civil liberties groups and producers for taking a hard line on indecency cases; Mr. Martin and Mr. Copps have taken an even harder line. They have argued in a number of cases that the commission erred by either not finding violations or not imposing tough enough sanctions.

Mr. Martin's views on the limited constitutional protections of broadcasters is summed up in a letter he sent to Mr. Bozell in December 2003 in which he complained that the agency was interpreting the indecency rules too narrowly.

"Certainly broadcasters and cable operators have significant First Amendment rights, but these rights are not without boundaries," he wrote. "They are limited by law. They also should be limited by good taste."

He emphasized that view when he dissented from a decision by the commission in an indecency case over an episode of the "Keen Eddie" show. In that case, decided last November, the agency did not to penalize Fox for an episode in which three men hired a prostitute to get semen from a horse for the artificial insemination of another horse.

"This order involves a television program that the majority admits 'contains references of a sexual nature that were broadcast at a time of day when children were likely to be in the audience,' " he wrote in that opinion. "Yet the majority concludes that the program, in which a prostitute is hired to sexually arouse a horse by removing her blouse and to 'extract' semen from the horse, is not indecent because the prostitute is 'never seen actually touching' the horse. Despite my colleagues' assurance that there appeared to be a safe distance between the prostitute and the horse, I remain uncomfortable. I respectfully dissent."

Mr. Martin's views appear to have broad support in Congress. Last month, the House of Representatives overwhelmingly approved a bill that would raise the amount the commission could fine a station to $500,000, from $32,500.

The bill, proposed by Representative Fred Upton, a Michigan Republican who is chairman of the Energy and Commerce Subcommittee on Telecommunications and the Internet, was adopted by a vote of 389 to 38. The legislation also requires the commission to hold a hearing to consider revoking the broadcast license of any station that has three indecency violations.

In the Senate, meanwhile, a number of similar measures have been introduced. One bill introduced earlier this month would increase the maximum fine to $500,000 and permit the commission to double fines for egregious incidents, such as when the indecent material was scripted.

The legislation would also require the commission to study the V-chip, which some senators say has not been effective in blocking undesired programs, and would force the broadcasters to double the amount of children's programming they offer, to six hours rather than three.

The bill is sponsored by Senators John D. Rockefeller IV, Democrat of West Virginia, and Kay Bailey Hutchison, Republican of Texas.

"I would welcome voluntary actions by the industry to address both indecency and gratuitous violence, but they aren't stepping up to the plate, and that's why Congress cannot wait any longer to protect our communities and our families," Mr. Rockefeller said when he introduced the measure. "If the industry won't protect our children from gratuitous violence and indecency, then we must act."
http://www.nytimes.com/2005/03/28/bu...28decency.html


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Will Cable Quell the Competition?
Michael Grebb

After listening to oral arguments in the controversial Grokster case Tuesday, the U.S. Supreme Court stayed firmly in tech territory as it considered whether cable operators should be forced to open up their broadband data pipes to competition.

The case in question pits the National Cable & Telecommunications Association and the Federal Communications Commission against internet service provider Brand X Internet of Santa Monica, California. The outcome of the case could determine whether consumers can someday choose among different ISPs when receiving broadband access over cable lines.

Cable operators have resisted the concept of "open access" for years, arguing that it would unfairly saddle the industry with new regulations and create potential technical problems.

Critics argue that the industry simply doesn't want to face competition from new broadband ISPs riding its wires.

"More broadly, (the Brand X case) will determine whether a wide variety of innovative voice, video and data services become available, or whether internet users will be limited to only those services their cable company provides," said Dave Baker, vice president for law and public policy at EarthLink, a longtime advocate of open access.

The case largely hinges on arcane regulatory definitions.

Service over traditional telephone lines is considered a "telecommunications service" subject to common-carrier regulations that require telcos to provide access to third-party ISPs.

But in 2002, the FCC defined cable-modem service as an "information service," a designation that allows a cable operator to make itself the exclusive internet access provider over its own cable lines. The vast majority of cable operators have done just that.

The definitions stem from the 1996 Telecommunications Act, which broadly defined the two categories but deferred to the FCC on how to apply them to specific cases.

Brand X -- supported by the wider ISP community and consumer groups -- wants the court to affirm an October 2003 decision by the 9th U.S. Circuit Court of Appeals, which favored Brand X when it found that cable-modem service is partly a telecommunications service.

Shortly after that decision, the government and the NCTA appealed to the Supreme Court.

During oral arguments Tuesday, several justices probed in detail into the supposed logic of the two regulatory classifications, often questioning why cable operators should be treated differently than telcos.

"The question is whether you're still offering a telecommunications service to the public," said Justice Antonin Scalia.

Thomas Hungar, deputy solicitor general in the U.S. Justice Department, cited the different regulatory histories for cable operators and telcos, and pointed out that phone companies -- unlike cable operators -- offer telecommunications services on a stand-alone basis.

NCTA's lawyer, Paul Cappuccio, argued that cable-modem service involves both telecommunications and data services in a bundled offering, which in turn makes it a "separate product" worthy of its own classification.

"We view it as two ingredients forming a product that is a distinct product," he said, arguing that the court should defer to the FCC on such definitional matters.

Brand X's attorney, Thomas Goldstein, said the cable industry's argument "becomes completely circular" if taken to its logical conclusion: Any bundled service can therefore be classified as something different by virtue of its bundled nature.

He said that under such logic, retailers could circumvent laws against selling cigarettes to minors by simply bundling cigarettes with other products and calling it a "smoking service."

Furthermore, Goldstein said such reasoning allows companies to bundle offerings in an effort to "self-deregulate."

After oral arguments, observers said it was unclear how the court might rule.

"It's very hard to read," said NCTA lawyer Neal Goldberg. "I don't think today's oral argument moved the needle one way or the other."

Randolph May, senior fellow and director of communications studies at the Progress & Freedom Foundation, said it was "puzzling" that justices didn't ask more questions about whether the FCC was best suited to tackle the definitional questions so central to the case.

"The cable industry and the FCC have to be a bit concerned that there wasn't more discussion about deference," he said.

But Goldberg cautioned against reading too much into the absence of questions on deference.

"I think that was really laid out in the briefs ad nauseam," he said.

Consumer advocates, who support opening cable wires to competition, said they were pleased that some justices seemed perplexed about the FCC's classification of cable-modem service as an information service.

"The FCC wanted to play a shell game and misdefine basic internet connectivity," said Kenneth DeGraff, policy advocate at Consumers Union.

A final decision in the Brand X case is expected before the Supreme Court recesses in June.
http://www.wired.com/news/politics/0,1283,67064,00.html


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A Service That Aims to Make Cold Calls a Bit Warmer
Daniel Terdiman

As a longtime salesman, Jim Fowler knows how difficult it is to make a cold call. In one instance, it took Mr. Fowler a month of daily e-mail messages and phone calls to a major airline before reaching the right person to hear his pitch for the analytics software that he was selling.

The idea of circumventing the drudgery of finding potential clients helped inspire Mr. Fowler and several colleagues to start Jigsaw Data. The company, based in San Mateo, Calif., is a marketplace of business contacts that are all contributed by and, perhaps more important, vetted by the members. Jigsaw then provides the online organizing infrastructure.

"The power of Jigsaw is that we have thousands of people that collect and maintain the data," Mr. Fowler said. "It's the concept of many people all bringing small pieces of the puzzle, and we assemble them for the benefit of the community."

Each contact, the company has decided, is valued at one dollar of its membership fee. Every month, the service's members pay $25 for access to 25 contacts or, alternatively, the member can contribute 25 contacts. Other members can challenge a contact if they believe it to be invalid, but if the contact lasts 30 days without a successful challenge, the originating member is granted another contact from the pool.

The first question Mr. Fowler is often asked is why anyone would give away valuable contacts for just a dollar. The question gives him an opening for one of his favorite lines: One person's trash is another person's treasure.

To do their jobs, sales agents need constant access to fresh contacts. The problem with the traditional business contacts market, Mr. Fowler said, is that access to existing databases from companies like Hoover's, Harte-Hanks and Dun & Bradstreet can cost thousands of dollars a year and some are frequently out of date. Jigsaw is trying to undercut those heavyweights, and by a mile.

"It makes sense," said Kent Allen, a financial analyst in San Francisco. "They've got a little bit of that Netflix model. A lot of salespeople don't mind spending $25 a month, even if it's just for one bit of information that they might have had to spend a couple of hours getting otherwise."

For now, the company makes its money from members' monthly $25 fees, but it hopes to supplement that with advertising. Mr. Fowler said that while the company reserved the right to resell the contacts, to do so would "kill the goose that is laying the golden egg."

Jigsaw is unusual in that its marketplace is devoted exclusively to business contacts; the company's closest competition comes from online social networking services like Ryze.com and LinkedIn, whose members connect electronically, often to make new business-related contacts.

Kirkland Jue, a member who recently used the service to get a contact at an Alaskan company where he wanted to do business, raved about Jigsaw.

"I couldn't get the e-mail of the C.I.O.," said Mr. Jue, a sales executive at Fiberlink Communications in San Francisco. "No one was allowed to give me his address. So I said, let me check Jigsaw. It's a company in Alaska, for God's sake. Not only did it have his e-mail, it had his direct dial. It kind of blew me away."

Jigsaw currently has about 5,000 active users and a database of 441,000 contacts from nearly 45,000 companies. The database is growing by 3,000 contacts a day, Mr. Fowler said.

The vetting process is central to Jigsaw's system, which attempts to bolster its shared data by letting anyone challenge a contact for any reason. If the challenge stands - meaning the contributor grants that the contact is faulty or does not respond- the challenger receives two new contacts.

The system also tries to prevent inconsistent information by penalizing and sometimes banning those who submit too many spurious contacts or whose challenges are frequently overturned.

"There's some very natural self-policing mechanisms that also reinforce the constant level of quality," says Jeff Crowe, a partner at Norwest Ventures, which, along with El Dorado Ventures, financed Jigsaw with more than $5 million. "So the fact that the users are motivated to keep up the quality level is a very powerful concept."

One approach Jigsaw has taken is paying members with cash for heavy contributions. The company just conducted its first cash distribution and gave out more than $15,000 to some of its most prolific contributors. The Top 10 contributors each received $800, Mr. Fowler says.

"Are they getting their members to do the work for them?" says Michael Danzinger, an account executive at RAE Internet in New York and one of those Top 10 contributors. "They are, but that's where the value for the person adding it comes from. They're getting that value back. No one's forcing me to add anything."

Mr. Fowler maintains that Jigsaw goes out of its way not to intrude on the privacy of the listed contacts. For example, people listed in the database can set preferences on how they want to be contacted.

"At first, there was a bit of a shock factor that I was in there," said Olin Reams, in Larkspur, Calif., the director of sales for Mindjet, who wrote instructions that he should be contacted by e-mail and not by cellphone. "I don't mind being visible. I just don't want to be deluged with calls that aren't appropriate."

Still, Mr. Jue said that sometimes such instructions did not mean much, especially to people who were exceedingly eager to make a sale.

"It's sort of like someone puts up one of those street cones in front of you and you go around it," he said.
http://www.nytimes.com/2005/03/28/te.../28jigsaw.html