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Old 02-11-06, 08:13 AM   #1
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Default Peer-To-Peer News - The Week In Review - November 4th, '06

"No offense meriting penal sanction has been committed." – Judge Paz Aldecoa

"It’s like Hitler’s playlist, but it’s not, because it was actually Fanny Brice’s playlist." – Jody Rosen

"We get an opportunity to produce this stuff because they make enough money selling beer that it’s worth their while to do it. I mean, we know that’s the game. I’m not suggesting we’re going to beam it out to the heavens, man, and whoever gets it, great. If they’re not making their money, we ain’t doing our show." – Jon Stewart

"The association said when newspaper Web sites are taken into account, the number of readers its members reach is up very sharply…but…it could be decades before Internet revenues exceed those from the printed editions of major newspapers." – Katharine Q. Seelye

"So they've raped them. They've raped their whole business model, and no one's got the time or energy to think about their business." – Peter Jenner

"The touch-screen gizmos seem strangely attracted to Republican candidates. One voter needed assistance from an election official, and even then, needed three tries to convince the machine that he wanted to vote for Democrat Jim Davis in the gubernatorial race, not his Republican opponent Charlie Crist." – Thomas C. Greene

"Algorithms are small but beautiful." – Richard M. Karp

"The Vista EULA is horrendous." – Scott Granneman

"Criminals travel on the road. Therefore let's have a rule which says no one should get on the road without first checking at the police station. Would you do that? Of course you wouldn't. ... The important thing is not to overreact." – Nitin Desai

"I will be 83 years old on December 12 and I've decided to retire while I'm still young." – Bob Barker

"Happy, well-fed, well-educated, hopeful people do not become suicide bombers and neither do they elect fear-mongerers." – Terry Hancock

November 4th, '06

Viva La Revolucion!

Spanish Court Dismisses Music File-Sharing Case

A Spanish judge has dismissed a case against a man who shared music files on the Internet, saying he committed no crime because his aim was not to make money.

In a ruling made public Thursday, Judge Paz Aldecoa of No. 3 Penal Court in the northern city of Santander said that there was ``no talk of money or any other compensation beyond the sharing of material available among various users.''

``No offense meriting penal sanction has been committed,'' the ruling said.

The state prosecutor's office and two music distribution associations had sought a two-year sentence against the 40-year-old man, whose identity the court asked not to be revealed.

The prosecution accused the man of violating copyright laws by downloading albums from Internet file-sharing systems and then offered them to others through e-mail and chat rooms.

But the judge said a guilty verdict ``would imply the criminalization of socially accepted and widely practiced behavior in which the aim is in no way to make money illicitly, but rather to obtain copies for private use.''

Promusicae, an entity representing the Spanish music industry said in a statement that it would appeal judge Aldecoa's ruling.

Antonio Guisasola, president of Promusicae said that peer-to-peer downloading of music and movies was ``in any case illegal and in set circumstances could be considered a crime.''

The national news agency said it was the first time a judge had made such a ruling in Spain but this could not be independently confirmed.

Justice Minister Juan Fernando Lopez Aguilar had said he expected the ruling would be appealed. He added that while the area of copied artistic material for private use had yet to be properly defined in legal terms, artists' rights must be protected as much as possible.

``Certain attacks must be taken seriously, especially those for lucrative ends,'' he said.

Copying Own CDs 'Should Be Legal'

A think-tank has called for outdated copyright laws to be rewritten to take account of new ways people listen to music, watch films and read books.

The Institute for Public Policy Research (IPPR) is calling for a "private right to copy".

It would decriminalise millions of Britons who break the law each year by copying their CDs onto music players.

Making copies of CDs and DVDs for personal use would have little impact on copyright holders, the IPPR argues.

Copyright issues have, in the past, been steered too much by the music industry, the report said.

Public respect

IPPR deputy director Dr Ian Kearns said: "When it comes to protecting the interests of copyright holders, the emphasis the music industry has put on tackling illegal distribution and not prosecuting for personal copying, is right.

"But it is not the music industry's job to decide what rights consumers have that is the job of government."

According to research from the National Consumer Council, more than half of British consumers are infringing copyright law by copying CDs onto their computers, iPods or other MP3 players.

Report author Kay Withers said: "The idea of all-rights reserved doesn't make sense for the digital era and it doesn't make sense to have a law that everyone breaks. To give the IP regime legitimacy it must command public respect."

Intellectual property laws are currently being reviewed by the government.

Chancellor Gordon Brown has asked chairman Sir Andrew Gowers to report his findings back ahead of the pre-budget report in November.

The IPPR is hoping to influence this with its report, entitled Public Innovation: Intellectual property in a digital age.

Its key recommendation is that any policy regarding Intellectual Property policy should recognise that knowledge is a public resource first and a private asset second.

Social glue

The so-called knowledge economy is growing fast as the traditional manufacturing of goods is replaced by more intangible assets.

With it is a growing paradox in which intellectual property is both a commercial and cultural resource.

"The internet offers unprecedented opportunities to share ideas and content," the report says.

"Knowledge must, therefore, perform the roles of both commodity and social glue, both private property and public domain," it adds.

The report looks at how Digital Rights Management (DRM) technologies - which restrict the sharing of music or other intellectual property - are affecting attempts to preserve electronic content.

It argues that the British Library should be given a DRM-free copy of any new digital work and that libraries should be able to take more than one copy of digital work.

Ms Withers said: "We charge the British Library as being the collective memory of the nation and increasingly it has to archive digital content.

"More and more academic journals are delivered digitally but copyright laws aren't designed to deal with digital content."

She said there was often a conflict between DRM and accessibility technologies which needs to be addressed.

"Someone with poor sight may use a screen reader technology and may have to change the format of the content to use it but some DRM technology isn't sophisticated enought to take this kind of thing into account," she said.

The report also calls for the government to reject calls from the UK music industry to extend the copyright term for sound recording beyond the current 50 years.

Release the Music
Nov 13, 2006 from 06:00 PM to 10:00 PM

Register Now Ticket Type Free

Event Details: Should the Term of Copyright Protection on Sound Recordings Stay at 50 Years or Be Extended?

This question has been hanging in the air for the last couple of years, with the music industry lobbying government for an extension on the grounds that the royalties they earn from old recordings are essential to bringing new acts to the stage and supporting ageing musicians. They believe that copyright term on sound recordings should be the same length as the copyright in the composition, which currently stands at life plus 70 years.

On the other hand, copyright reformers argue that term should remain the same in order to protect the public domain and to free the huge number of old recordings which are no longer commercially viable and therefore not being released by the record labels. They also argue that there is a greater economic benefit to allowing works to pass into the public domain after 50 years so that new works can be made from them and new businesses that specialise in niche markets can flourish.

This question of term extension, along with many others, is now being considered by Andrew Gowers in his Review of Intellectual Property which was commissioned by the Treasury and is due to report before the end of the year.

The Open Rights Group believes that term extension is such an important issue that it deserves focused and rigourous discussion, so we've invited people from number of backgrounds to give us their thoughts and opinions.

We would be delighted if you could join us - the event is free to all, but places are limited so book now!


6.00pm - Registration.
6.30pm - Keynote by Professor Jonathan Zittrain, Chair in Internet Governance and Regulation at Oxford University.
7.30pm - Panel Discussion, moderated by John Howkins, RSA & Adelphi Charter; guests include Caroline Wilson, University of Southampton, Faculty of Law; others TBC.
8.30pm - DJ set by The Chaps, playing a pre-1955 public domain set.
10.00pm - Close.

If you sign up, but find you are not able to come, please do let us know so we can release your seat to someone else.

Napster Launches 'Free Download of the Day'
Rick Broida

Online music service Napster is giving away MP3s again--sort of. Starting yesterday, music fans can download a free (and legal) MP3 every day.

The first week of free downloads will feature music from Sanctuary, including a track from Iron Maiden's newest hit album, as well as Independent Online Distribution Alliance (IODA) artists, including "Nature of the Experiment" from newbie indie rockers Tokyo Police Club and "Bread on the Table" from Grammy-nominated country singer Tom Wurth. Featured downloads will be archived and available for seven days on a dedicated history page.

Okay, so no freebies from anyone you've actually heard of, but I think this is a clever way for Napster to drive traffic. And there are no strings attached--just head to the site and download the daily tune. Of course, you can also stream any song in Napster's library (up to three times). —

AnalogWhole Is Here!

AnalogWhole is a Windows application that allows you to consolidate all your music into iTunes as MP3 files. Any music file that is playable in Windows Media Player can be re-recorded as an MP3 file. Just tell AnalogWhole where your music library is, and it will automatically re-record the file as an MP3 file. In addition, it will add the converted song to iTunes for you.

Convert all those WMA or WAV files you have that won’t play on your iPod into MP3 files that will!

The way AnalogWhole works is pretty straightforward. Almost all PC soundcards have the ability to simualtaneously play music out one channel while recording music on another channel. The standard Windows audio mixer component allows the output channel to be routed back into the soundcard input channel. AnalogWhole uses the COM interface to Windows Media Player to play the music file and while it is playing, it records it and encodes it as an MP3 file. All tagging info (i.e. artist, song title, album et cetera) is transferred to the MP3 file as well.

Click the download tab above to get started.

Hack Attack: One-Click DVD Rips
Adam Pash

I love a good DVD as much as the next guy, but the whole optical media world has been on my shitlist lately. I'm sick of renting or Netflix-ing a DVD, getting an hour into it, then hitting the scratchety-skip zone that freezes up my DVD player and leaves me unable to finish my stories.

My solution to this problem is to rip every DVD I rent to my hard drive as soon as I get it. In my experience, a rip smooths over those un-renderable sections of the DVD without issue, so when I'm ready to watch the ripped DVD, it's certain to be scratch and skip-free. Since I've got no time to sit around clicking through dialogs to rip my DVDs, I've put together my very own one-click DVD ripping solution.

Check out the automated DVD rip action here:

Okay, so it's a pretty boring video, but the one-click rip is pretty handy. The AutoHotkey automation works on any Windows PC, but it's particularly useful on your home-brewed Windows DVR.

Note on file format: This method doesn't rip DVD's to DivX or some other more highly compressed format, because I want to navigate using the default menus like it's a real DVD (especially important for several episodes of a TV show on a single DVD). This method's resulting VIDEO_TS folder can be played by any software DVD player, including Lifehacker favorite, the free media Swiss Army knife that is VLC media player, or any number of packaged DVD software apps like WinDVD. Also, if you ever decide you want to turn the rip back into a physical DVD, it'll be in the perfect format for quick and easy burning.
Download and set up DVD Shrink

The first thing you'll need to do is download and install DVD Shrink (you can download it at Softpedia here). Be sure to let DVD Shrink install to your default Program Files directory, since the automated script below counts on finding DVD Shrink there. Once it's installed, you'll need to go through a trial run of ripping a DVD with DVD Shrink to get an idea of the process involved and to get your preferred settings all sussed out.

First, put a DVD in your computer and run DVD Shrink. Hit the Open Disc button or select File -> Open Disc. DVD Shrink will take a minute or two to analyze the disc and then you'll see the DVD structure in the right pane and the compression settings on the left. For our purposes, we're going to keep all of this at the default settings (so video compression remains set to "Automatic").

Next hit the Backup! button or go to File -> Backup.... In the Backup DVD pop-up, you should tell DVD Shrink where you want your DVD rips saved (i.e., the target folder). You should use something like C:\DVDs\DVD Name (though, naturally, DVD Name should be replaced by the name of your to-be-ripped DVD). The VIDEO_TS and AUDIO_TS folders (which can be played with your software DVD player) for the DVD will be saved in this directory. Setting this default now is important, because when the automated rip runs, it will use the folder path up to the last folder (i.e., C:\DVDs), creating a new folder with a name you provide (normally the name of the DVD). Hit OK and the backup will begin. At this point, cancel the rip so you can try it with your fancy new one-click rip (be sure to delete any files that may have already been ripped).

The one-click DVD rip

So now's where my best friend in the entire Windows world, AutoHotkey, comes into play. I've put together a script that automates every step I've covered above into one handy executable. It works like this: You load your DVD, then double-click the Automatic DVD Rip executable. You'll be prompted to enter the name of the DVD (make sure it's a unique name each time). Once you hit enter, the rest of the process will take care of itself. If you're an AutoHotkey-er interested at looking at the innards of the script, you can download the source script here.

If you'd rather just get straight to the ripping, I've got several executable (.exe) scripts available for download depending on your DVD drive name. For example, on my two Windows boxes, the DVD player is the E: drive on one and D: on the other. I'm putting out D:, E:, and F: scripts, but if your drive is mounted to a different letter, let me know and I can easily upload another to accommodate (or just make a few tweaks to the source script above and compile it yourself - might sound daunting, but it's AutoHotkey - almost anyone could do it!). Download the D:, E:, and F: executables below:

Automatic DVD rip D-Drive.exe
Automatic DVD rip E-Drive.exe
Automatic DVD rip F-Drive.exe

As is, creating DVD backups doesn't get much more simple than DVD Shrink. However, I love the one-click solution on my home-brewed DVR, since I can assign the execution to a button on my remote. That means I can put in a DVD, hit the rip button, enter the title, and then go back to watching TV. The DVD rip script keeps the process running from step to step, minimizing DVD Shrink whenever possible so the rip mostly takes place in the background. That said, I still plan on using the one-click script on my main computer, as well.

Additionally, if you've got a copy of Nero, DVD Shrink integrates nicely with Nero for burning new DVD backups if that's your goal. My script isn't streamlined for burning a backup disc, but it could definitely be used for that purpose, especially with a few more tweaks to my AHK script.

I've only be able to test the script on a couple of my home computers and a friend's, so if you give it a try and find a glaring error, let me know and I'll fix things up. Otherwise, welcome to the world of quick and easy DVD backups and skip-free DVD watching.

Blockbuster Tries New Online Rental Incentive
Caroline McCarthy

A correction was made to this story. Read below for details.

update Blockbuster has introduced a feature to its online rental service, giving subscribers the option of returning DVDs to stores rather than solely through the mail.

Subscribers to any Blockbuster online rental plan can use the new "Total Access" feature. When a DVD rented online is returned to a Blockbuster store, the online system immediately gears up the next movie in the subscriber's queue for shipment, thus cutting down on the lag time associated with mail.

As an added incentive, each time customers return an online rental to the store, they can get a free in-store rental. The bonus in-store rentals are, however, still subject to due dates and other stipulations associated with regular in-store rentals, and must be returned to the store from which they were obtained.

Blockbuster, once the dominant force in the movie rental business, has been faced with up-and-coming competition, such as online rental Netflix, video-on-demand services and digital downloads. Blockbuster's own online rental service was launched more than two years ago, but it has remained a step behind the Web-only Netflix, which has also made inroads into video-on-demand and has shown signs of interest in digital-download technology.

Last month, it was widely rumored that Blockbuster had opted to discontinue a test run of a $5.99-per-month plan to match Netflix's least expensive subscription option. The company has since stated that this was not the case.

How the MPAA Knows Where Movies are Pirated

I’ve posted a story about the MPAA’s piracy stats, and that NY is the pirate capital of the world. In the post I said that it was hard to track down the source of CAM releases, but that was a mistake.

Although I’m familiar with the watermarks that are put in DVD’s, I never realized that theater releases are marked as well (see picture for the “dot pattern”).

However, sometimes release groups find a way to remove these watermarks. An example can be found in the NFO of the Mission Impossible III release by SaGa. In the NFO SaGa thanks ORC, for helping them out with “de-dotting” the release.

Here’s an interesting email I received from a reader who actually worked for an anti-piracy company. Some good info, and useful tips and tricks that “might” keep pirates under the radar .

Thought I’d let you know how the authorities are able to track down where CAM, TS, TC, SCR, DVD SCR, etc. copies are from. In all cases, the individual copies are watermarked and then kept in a database for later comparison. These watermarks are developed and instituted either by the companies responsible for the film (i.e. Kodak) or the prints (i.e. Deluxe, Technicolor). Each has a different method, some more effective than others.

Here is a Wikipedia article about them:

Generally the CAP codes are more for film elements (i.e. CAM, TS, TC releases). For the disc and tape copies (i.e. SCR, DVD SCR) there is usually some form of watermarking combined with a time stamp or individual code of some sort.

These types of protection sometimes work and sometimes don’t. A lot of groups have experience with obfuscating them and (usually successfully) hiding where they got their copy from.

Fortunately most of the companies focusing on anti-piracy are not actively trying to target the groups themselves, leaving that task to the DOJ or FBI to handle. Because of this, most of the media attention and an overwhelming amount of the resources are dedicated to people who are not close to the scene at all, so a lot of these anti-piracy methods don’t really work very effectively.

Most of the attention is actually on users and first propagators on BitTorrent and eDonkey, so I’d actually recommend using various forms of protection such as PeerGuardian and generally staying on private trackers or at least the less popular ones (NTI being a good example). Also safe is jumping on hugely popular torrents once they reach critical mass. There are simply not enough resources for anti-piracy companies to track what 5000 seeders and 8000 leechers are doing all at once and gather data that will be usable in a court of law.

Another reader pointed me at the new anti-piracy watermark system that Philips has started to rollout. Philips successfully equipped over 1300 cinemas with their new system called “Cinefence”. CineFence watermarks are believed to be harder to erase by pirates, and contain the time, place and date of the recorded Film. Forensic marking of digital Films is now a mandatory requirement, as specified in the Digital Cinema System Specification.

MySpace to Use 'Audio Fingerprinting'

MySpace.com will use "audio fingerprinting" technology to block users from uploading copyright music to the social networking site, the company said Monday.

MySpace, which is owned by Rupert Murdoch's News Corp., said it will review all music files uploaded by community members to their online profiles. The files will be run through a music database from Gracenote Inc.

"MySpace is staunchly committed to protecting artists' rights, whether those artists are on major labels or are independent acts," said Chris DeWolfe, MySpace chief executive and co-founder.

The company said users who repeatedly attempt to upload copyright music files will be permanently barred from the site.

Online sites such as MySpace and YouTube have come under fire from major record labels who have sued in some cases to prevent copyright music from being included as the soundtrack to a user-generated content.

Several record labels recently announced licensing deals with YouTube, which has chosen to share ad revenue with record labels rather than filter music itself.

The challenge of policing its users' music choices is just one issue facing MySpace, which has skyrocketed in popularity over the past year.

The social networking site must address concerns that it will morph from a user-controlled site to a corporate tool that News Corp. uses to push the company's movies and TV shows. MySpace also has been grappling with frequent spam attacks and has had to take steps to limit invitations from bogus "friends" sent to thousands of users at a time.

Is the DMCA Coming Down Under? New Copyright Bill on Fast-Track in Australia

As a result of a Free Trade Agreement between Australia and the U.S. that came into force in 2005, Australia is required to rewrite its current, relatively flexible, technological protection measure law by 1 January 2007, to make it more like the DMCA. A serious policy debate on how to frame a DRM law that does the least damage to consumers, scientific research, technological innovation and competition has been underway in Australia for several years. In February, a landmark Australian parliamentary committee report with consumer and technology-friendly recommendations for Australia’s rewrite process also pointed the way for other countries seeking a sensible response to the U.S. effort to export its unbalanced DMCA regime through recent free trade agreements. But many of the insights from that policy debate could be lost if the 219 page Copyright Amendment Bill, currently being fast-tracked through Australia’s Parliament, is passed. Apart from rewriting Australia’s current TPM law, the Bill would also make a number of sweeping changes to Australian copyright law, including introducing new criminal penalties.

After the jump we explain what’s in the Bill and what concerned Australians can do.

The Bill makes Australia's TPM law more like the DMCA. After the AUSFTA it was inevitable that there would be some movement in that direction. But what's surprising is that the final version of the bill released on October 19 differs in a key respect from the Exposure Draft issued a month ago. The first version linked the scope of legal protection for DRM to copyright infringement. That’s good policy. It’s also consistent with current Australian law and the key recommendation of the February 2006 Australian House of Representatives’ Legal and Constitutional Affairs Committee report on TPM exceptions. The new version does not make that crucial connection, and therefore creates a broader TPM ban.

While the new version’s TPM ban is broader, the Bill does contain two carve-outs: First, there’s no legal protection for region-coding access control technologies on video games and DVDs. That is likely to avoid some of the potentially anti-competitive impacts of geographic market segmentation via TPMs – a practice that involves no copyright right. The carve-out is presumably designed to preserve the 2005 Australian High Court ruling in the Sony v. Stevens PlayStation modchip case, but unfortunately, does so in the narrowest possible way. Second, there’s an attempt to exclude misuses of TPM provisions on embodied computer programs like the printer cartridge and garage door opener cases invoking the DMCA.

How bad is the last minute change in language? Even Australia's top legal minds are unsure of the precise impact. Unless the bill is delayed there will be no opportunity to assess that before the highly complex bill is pushed to a speedy vote.

But that’s not the only problem with the bill. It also creates new criminal penalties for copyright infringement. It introduces new summary and strict liability offences and criminal penalties for non-commercial infringement. These rules would apply to children as young as 14, and could make everyday Australians criminals for uploading lip-synched videos to YouTube and other commonplace activities.

While expanding penalties, the bill also rolls back copyright exceptions. The good news is that it creates new exceptions for time and space shifting that were recommended in this year’s Fair Use inquiry. The bad news is that because of muddy drafting it's not clear that the Bill will actually legalize space shifting of music to portable music players The Bill also narrows the current "fair dealing" exception for study and research involving copying of literary, dramatic and musical works. It creates a new parody exception, but frames it in a murky way that invites lawsuits.

There’s further analysis of the bill’s far-reaching impacts in this op-ed from Professor Brian Fitzgerald and at Kim Weatherall’s excellent blog.

The bill is currently before the Australian Senate Standing Committee on Legal and Constitutional Affairs, which is due to issue its report on November 10. A public hearing will take place on November 7.

The deadline for making formal submissions has now closed, but concerned Australian citizens can still:

- Email or call your MP and express your concern that this complex bill is being rushed through the Parliamentary process without adequate opportunity for debate and an assessment of the impact of the proposed changes on Australian consumers, families, educators and the scientific community. You should ask your MP to stop the introduction of any new criminal provisions and any changes not directly required by the AUSFTA until there has been adequate time for informed public debate. (Only the trade agreement's DRM provisions are required to be in place by January 1, 2007).

MPs contact details are here.

- If your state's Senators are on the Senate Standing Committee for Legal and Constitutional Affairs, email or call them to express your concerns and ask them to record your views in the Committee's report, then reiterate your request to hold back new criminal provisions and other proposed changes that are not directly required by the free trade agreement until there's been an appropriate assessment of their impact.

The Committee members for this inquiry are Senators Payne (Chair), Ludwig, Crossin, Kirk, Trood, Brandis, Scullion and Bartlett.

Contact Details for all Senators are available at here.

Music Publishers Say Kazaa Deal Reached

The music publishing industry reached a tentative deal with operators of the Kazaa file-sharing network over claims of copyright infringement, an industry group said.

Publishers pursuing a class-action suit against Kazaa informed U.S. District Court on Monday that the peer-to-peer network had agreed to pay "a substantial sum" under the agreement, the National Music Publishers' Association said in a statement.

The amount of the settlement was not disclosed. It is subject to final approval by the association board.

The settlement "will be another key milestone of the ongoing transformation of the digital music marketplace to one that will allow legal services to thrive," NMPA President and Chief Executive David Israelite said in the statement.

Phil Armstrong, a spokesman for Sharman Networks Ltd., which owns and distributes Kazaa, said he was not familiar with the lawsuit and declined to comment.

Sharman Networks announced in July that it had settled copyright infringement lawsuits with music labels and movie studios, agreeing to redesign its software to block customers from downloading protected music and movies and to pay more than $115 million in penalties.

The agreements are among a wave of legal settlements between file-sharing networks and the entertainment industry since the Supreme Court ruled last year that technology companies caught encouraging customers to steal music and movies over the Internet could be sued.

Last month, a federal judge ruled against StreamCast Inc., the distributor of the Morpheus online file-sharing software, finding the firm encouraged computer users to share music, movies and other copyright works without permission.

2 Sued for Downloading Over 1,000 Songs
Jim Fitzgerald

Patricia Santangelo wouldn't concede in her fight with record companies that accused her of pirating songs over the Internet. Now the companies are hoping for an easier tussle against her kids.

Five record companies, represented by the Recording Industry Association of America, filed a lawsuit in federal court in White Plains on Wednesday against Santangelo's son and daughter.

It said Michelle Santangelo, 20, has acknowledged downloading songs on the family computer and that her brother, Robert, 16, had been implicated in statements his best friend made. It accuses the two of downloading and distributing over 1,000 songs, including "Pretty Fly (For a White Guy)" by the Offspring, "MMMBop" by Hanson and "Beat It" by Michael Jackson.

"In short, each of the defendants participated in the substantial violations of plaintiffs' copyrights at issue and then concealed their involvement, standing idly by as Patricia Santangelo repeatedly protested their innocence and chastised plaintiffs for filing allegedly frivolous litigation," the complaint said.

The Santangelos' lawyer, Jordan Glass, disputed the recording industry's allegations and said he was at Michelle Santangelo's deposition and does not recall her "admitting or acknowledging downloading."

Patricia Santangelo, who a federal judge called "an Internet illiterate parent," drew attention last year when she denied downloading songs and refused to settle with the recording industry, which she said demanded $7,500 to keep her name out of a lawsuit for illegally downloading music.

Defenders of Internet freedom helped pay for her attorney. She proclaimed her innocence on TV. But the question remained whether her children had done it. Santangelo said she had no knowledge of them downloading and, if they did, the blame lay with computer programs, not with her or the children.

The industry is requesting an injunction, unspecified damages for each download and court costs.

The record companies have sued thousands of people, including many minors, for allegedly pirating music through file-sharing computer networks, most of which have been forced out of business.

Rockmart Woman Ordered to Pay $6,000 for Downloading, Sharing Music

A federal judge has ordered a Rockmart woman to pay $6,350 in fines to five major recording companies for Internet file-sharing.

Judge Harold L. Murphy, Rome, granted summary judgment Monday in favor of Maverick, Sony BMG, Atlantic, Capitol and Arista, recording companies that claimed in a civil suit that Carma Walls illegally downloaded and shared eight songs they own.

The civil judgment fines Walls $6,000 in statutory damages, an amount representing $750 in statutory damages for each of the eight copyrighted sound recordings listed in the complaint; plus $350 in costs associated with filing the lawsuit.

Lawyers for the recording companies asked for summary judgment Sept 8. Murphy granted their request after Walls' attorney refused to answer the request.

EFF and 10 Zen Monkeys vs. Michael Crook and DMCA
Jeff Diehl

Social griefing a la Jason Fortuny and Michael Crook may have finally been taken too far.

The Electronic Frontier Foundation is representing 10 Zen Monkeys in a civil lawsuit against griefer Michael Crook for abusing the DMCA and violating our free speech rights.

In September, we published an article about Crook when he mimicked Jason Fortuny by trolling CraigsList and sex-baiting guys into giving him private information which he then revealed on his site (now offline), craigslist-perverts.org. He apparently did not like what we had to say. In a brash and hypocritical (though not at all surprising) move, Crook filed a bullshit DMCA take-down notice with our then-ISP, knowing that the “safe harbor” provision would compel the ISP to take immediate action, even before proof of copyright ownership was examined.

I was personally given an ultimatum to remove the material cited in the notice (a TV screen capture of Crook’s appearance on Fox News Channel), or have my account canceled. Needless to say, Crook did not own the rights to the image, and even if he did, there’s a little thing called “fair use” in the context of critical commentary.

Appalled that he was able to so easily, and without any onus of proof, jeopardize my standing with my ISP, I immediately set about moving the site to local San Francisco ISP Laughing Squid, owned by my old pal, Scott Beale — his services are more expensive, but I knew Scott would understand and respect free speech at least to the point of asking me for details before threatening to pull the plug on my site.

The first thing I did after migrating 10 Zen Monkeys was re-insert the image of Crook into the offending article and, sure enough, within 24 hours he had sent another DMCA take-down notice to Laughing Squid’s upstream provider. I’m sure he was emboldened by his success at forcing me to relocate my website once, and was trying for a repeat. But this time, Scott indeed called me to get the story. He was as angry as I was, and said I should contact the Electronic Frontier Foundation. (As an ISP, Scott hadn’t seen this particular abuse before, and was concerned — it showed just how easy it is under the current DMCA provisions to intimidate a website, for any reason whatsoever.)

“This is yet another case of someone intentionally misusing copyright law to try to shut down legitimate debate on an issue of public interest,” said EFF Staff Attorney Jason Schultz. “Crook certainly doesn’t own the copyright to the news footage — Fox News does.”

The “safe harbor” provision of the law is meant to shield service providers from liability for any copyright violations that might be committed on their clients’ websites. It basically states that, upon being notified by letter or email that there is content in violation of copyright, they can avoid any legal consequences by immediately removing it. (The reason the “safe harbor” is even necessary is because of the draconian copyright “protections” built into the DMCA — ones which sacrifice fair use among other things.) But since the take-down notice doesn’t require a court order, or any type of judicial scrutiny, it means that shady individuals or organizations can easily use the law to stifle free speech.

“Crook has used a bogus copyright claim as a pretext to squelch free speech,” said EFF Staff Attorney Corynne McSherry. “Unfortunately, it is easy to abuse DMCA takedown provisions and most internet speakers don’t have the ability to fight back.”

I removed the original image in the Crook article and instead linked to a similar image residing on someone else’s server (Crook is widely reviled on the internet, so it’s not difficult to find materials criticizing him on Google).

Surprise! Crook didn’t like that either, and on October 24th, he filed yet again, this time thinking that the DMCA could be used to intimidate an ISP for a site that links to content that doesn’t reside on their servers!

Crook seems to have a particularly malicious interpretation of the DMCA. He has declared on his blog his own campaign to serve take-down notices on sites he doesn’t like, regardless of whether he owns the copyright on the material in question. From his blog:

One site has gone completely down. It currently routes to a “Suspended” page. This site has remained down because the webmaster hasn’t responded to the complaint. I can’t be responsible for that.

None of this is surprising from someone who has devoted so much time and energy finding others in a compromised state — whether it’s horny men online, or wounded soldiers — and then systematically hurting them further, for nothing more than a fleeting, self-defeating publicity.

Until now, the instances of social griefing made famous by Jason Fortuny and aped by Michael Crook have brought up mostly privacy issues. In the case of Crook’s abuse of DMCA, we see the same childish, ill-intentioned publicity-seeking, but that’s not to say there’s no difference between Fortuny and Crook. Fortuny has never tried to stop anyone from saying anything about him — in fact, he seems to enjoy the direct negative criticisms he’s received. Crook, on the other hand, is clearly operating on a level of complexity that is far beyond his capacities — he wants to be notorious, but then uses unrelated, legalistic (though illegal!) manipulations to silence those who speak out against him. Despite his comical claim to the title of copyright defender, he is creating a real chilling effect on free speech.

Some of the targets of Crook’s DMCA exploits have self-censored, in part because to give him attention is a reward he doesn’t deserve, but also because they don’t understand their rights and cannot afford to fight. The takedown provision of this law is bad for publishers and anyone who cares about free speech, and Crook has clearly demonstrated a reason why. He has also stupidly underestimated the resolve of this publication; we hope to set an example of what can be done when First Amendment rights are fully understood, nurtured, and worn into battle

YouTube Is Purging Copyrighted Clips
Noam Cohen

Hitting the financial jackpot, it appears, may have created some headaches for YouTube, the wildly popular video-sharing Web site that has agreed to be bought by Google for $1.65 billion in stock.

The site late last week began purging copyrighted material from Comedy Central, including clips from YouTube stalwarts like “The Daily Show With Jon Stewart,” “The Colbert Report” and “South Park.”

The action was “a result of third-party notification by Comedy Central,” according to one such e-mail message sent to a YouTube user, Jeff Reifman, who broke the news on the Web site NewsCloud.

A week earlier, nearly 30,000 clips of TV shows, movies and music videos were taken down after the Japanese Society for Rights of Authors, Composers and Publishers cited copyright infringement.

YouTube did not respond to repeated messages left over the weekend.

The situation is tricky for a network like Comedy Central, part of Viacom. Its audience is young and technologically sophisticated, and Comedy Central stars in the past have used YouTube and clip services to interact with their audience.

Stephen Colbert of “The Colbert Report,” for example, gained great attention for his mocking speech before President Bush at the White House Correspondents Dinner, which became one of the most-viewed clips at YouTube before C-Span, which broadcast the event, ordered it taken down.

In an interview with Wired magazine in September 2005, Mr. Stewart explained his view: “We get an opportunity to produce this stuff because they make enough money selling beer that it’s worth their while to do it. I mean, we know that’s the game. I’m not suggesting we’re going to beam it out to the heavens, man, and whoever gets it, great. If they’re not making their money, we ain’t doing our show.”

Ohio Company Utube.com Sues YouTube

A company that shut down its Web site because it was overwhelmed by millions of people looking for YouTube has sued the online video-sharing portal.

Universal Tube & Rollform Equipment Corp. said the cost of hosting its Web site - utube.com - has grown significantly in the last two months. "We've had to move our site five times in an effort to stay ahead of the youtube.com visitors," said Ralph Girkins, Universal Tube's president.

The lawsuit, filed this week in U.S. District Court, asks that YouTube Inc. stop using the youtube.com or pay Universal Tube's cost for creating a new domain. It did not specify damages.

Universal Tube, which sells used machines that make tubes, has said it has lost business because customers have had trouble accessing its site.

"We were there first by 10 years," Girkins said.

The confusion took off a couple of months ago, Girkins said. The company, with just 17 employees, got 68 million hits on its site in August, making it one of the most popular manufacturing Web sites.

The site shut down in early October just before Google Inc. announced plans to buy YouTube for $1.65 billion. It took several days before it was back up.

A YouTube spokeswoman did not return a message seeking comment Wednesday.

Universal Tube, based in suburban Perrysburg and founded in 1985, has about $12 million in annual sales.

Girkins has said the company was looking to sell the Web address and find a new home for its Web site.

YouTube Takes Down Comedy Central Clips Based on DMCA Claims

I received a couple of emails from YouTube this afternoon (see below) notifying me that a third party (probably attorneys for Comedy Central) had made a DMCA request to take down Colbert Report and Daily Show clips. If you visit YouTube, all Daily Show, Colbert Report and South Park clips now show “This video has been removed due to terms of use violation.”

For a long time, Comedy Central has passively allowed the sharing of online clips of its shows—because let’s face it, it’s helped them generate the kind of water cooler talk that has made them a ton of money. In this Wired Interview , Jon Stewart and Daily Show Executive Producer even encouraged viewers to watch the show on the Internet:

Karlin: If people want to take the show in various forms, I’d say go. But when you’re a part of something successful and meaningful, the rule book says don’t try to analyze it too much or dissect it. You shouldn’t say: “I really want to know what fans think. I really want to understand how people are digesting our show.” Because that is one of those things that you truly have no control over. The one thing that you have control over is the content of the show. But how people are reacting to it, how it’s being shared, how it’s being discussed, all that other stuff, is absolutely beyond your ability to control.

Stewart: I’m surprised people don’t have cables coming out of their asses, because that’s going to be a new thing. You’re just going to get it directly fed into you. I look at systems like the Internet as a convenience. I look at it as the same as cable or anything else. Everything is geared toward more individualized consumption. Getting it off the Internet is no different than getting it off TV.

But apparently, all good things come to an end when there is money and attorneys involved. I assume the only online clips that will remain will have to qualify under fair use – probably short clips, with social or political importance.

With Google purchasing YouTube, ComedyCentral figured there was now an opportunity aka profit center to target. And they’ve assumably made these DMCA requests to YouTube.

So assumably, with less interesting content, YouTube is a lot less interesting now and perhaps not worth the billion dollars Google paid for it – though they knew exactly what they were getting into. It’s even possible that Apple or Viacom pushed ComedyCentral to take this step since they earn revenue from the shows.

Here is a copy of one of the emails I received:


Dear Member:

This is to notify you that we have removed or disabled access to the following material as a result of a third-party notification by Comedy Central claiming that this material is infringing:

Stephen Colbert Interviews Steve Wozniak: http://www.youtube.com/watch?v=k-whFuN0S0M

Please Note: Repeat incidents of copyright infringement will result in the deletion of your account and all videos uploaded to that account. In order to avoid future strikes against your account, please delete any videos to which you do not own the rights, and refrain from uploading additional videos that infringe on the copyrights of others. For more information about YouTube’s copyright policy, please read the Copyright Tips guide.

If you elect to send us a counter notice, to be effective it must be a written communication provided to our designated agent that includes substantially the following (please consult your legal counsel or see 17 U.S.C. Section 512(g)(3) to confirm these requirements):

(A) A physical or electronic signature of the subscriber.

(B) Identification of the material that has been removed or to which access has been disabled and the location at which the material appeared before it was removed or access to it was disabled.

(C) A statement under penalty of perjury that the subscriber has a good faith belief that the material was removed or disabled as a result of mistake or misidentification of the material to be removed or disabled.

(D) The subscriber’s name, address, and telephone number, and a statement that the subscriber consents to the jurisdiction of Federal District Court for the judicial district in which the address is located, or if the subscriberis address is outside of the United States, for any judicial district in which the service provider may be found, and that the subscriber will accept service of process from the person who provided notification under subsection©(1)(C) or an agent of such person.

Such written notice should be sent to our designated agent as follows:

DMCA Complaints
YouTube, Inc.
1000 Cherry Ave.
Second Floor
San Bruno, CA 94066
Email: copyright@youtube.com

Please note that under Section 512(f) of the Copyright Act, any person who knowingly materially misrepresents that material or activity was removed or disabled by mistake or misidentification may be subject to liability.

YouTube, Inc.


Comedy Central Clips Back on YouTube
Nate Anderson

Comedy Central clips aren't leaving YouTube for good. Viacom, Comedy Central's corporate parent, has confirmed that it wants to find some way to keep the clips available, and has apparently given the green light for YouTube to put the material back up. No deal between the two firms has yet been done, but it sounds like one is imminent.

Last week, the company asked YouTube to pull many copyrighted clips of The Daily Show, The Colbert Report, and other Comedy Central properties, and many of them were taken down. Numerous short clips did remain available on the site, fueling speculation that Viacom was only concerned about longer clips.

YouTube fans responded immediately... using YouTube. One man posted a two-minute clip called "Why did Comedy Central assert copyrights now?" in which he wondered why Comedy Central had waited so long to act, and why they had chosen to do so now.

Viacom told multiple media outlets yesterday in a statement that it was interested in finding a workable business model for making clips available on the Internet, so one can only assume that some sort of revenue-sharing deal is in the works like those that YouTube signed with several music labels. Last week's takedown notices may have represented legitimate concern about giving away too much content at once, or they might have been a bargaining device designed to show YouTube exactly how upset its users would be if all Comedy Central content was pulled.

For now, at least, the clips are back—even the long ones, so get your Colbert fix on before Viacom has another change of heart.


While our own searches showed that a huge array of Comedy Central content was still available on YouTube (including long clips of eight minutes or more), not all of the clips are available. It's not clear what criteria was used for the takedown requests, but some videos still remain down. Viacom and YouTube may be exploring a deal together, but their discussions have clearly not led to a total reinstatement of Comedy Central content.

Microsoft Toughens Anti-Piracy Actions

Microsoft Corp. said Monday it has filed more than 50 lawsuits and other legal actions worldwide against people it says sold pirated copies of its software using online auction sites such as eBay.

The legal actions are the latest in a broad effort Microsoft has taken to curb widespread piracy of programs including the Windows operating system and Office suite. The moves come as Microsoft is seeing the market for its software become more saturated, leaving the company eager to add revenue by curbing illegal distribution.

Microsoft also is gearing up to release new versions of Windows and Office, which remain Microsoft's biggest cash cows despite the company's many other lines of business.

The legal actions were being filed Friday, Monday and Tuesday in the United States, Germany, France, the United Kingdom, Korea, Poland and several other countries.

Matt Lundy, a senior attorney with Microsoft's antipiracy group, said Microsoft works with auction sites including eBay to remove listings for software it believes is pirated, and only takes legal action if the merchants continue to sell the software after that.

EBay Inc. spokesman Hani Durzy said he couldn't comment specifically on these cases because he hadn't seen the particulars. But in general, he said, eBay works closely with Microsoft and others to remove listings for products that are believed to be pirated.

Still, legal actions aren't uncommon for the world's largest software maker. Between July 1 and Sept. 30, Microsoft took legal action about 275 times against various groups it believed were dealing in counterfeit software.

Revision to Windows Vista Retail Licensing Terms
Nick White

I’m very pleased to let you know you this morning (or afternoon, or evening, depending on where you are when you read this) that the Windows division has revised the retail license terms for Windows Vista in a significant way. Namely, the terms regarding license-to-device assignment of the retail product (including Home Basic, Home Premium, Business and Ultimate) now read as follows:

You may uninstall the software and install it on another device for your use. You may not do so to share this license between devices.

You can find the newly-revised retail license terms here, as I’m sure you’ll want to read them for yourself.

Our intention behind the original terms was genuinely geared toward combating piracy; however, it’s become clear to us that those original terms were perceived as adversely affecting an important group of customers: PC and hardware enthusiasts. You who comprise the enthusiast market are vital to us for several reasons, not least of all because of the support you’ve provided us throughout the development of Windows Vista. We respect the time and expense you go to in customizing, building and rebuilding your hardware and we heard you that the previous terms were seen as an impediment to that -- it’s for that reason we’ve made this change. I hope that this change provides the flexibility you need, and gives you more reason to be excited about the upcoming retail release of our new operating system.

Surprises Inside Microsoft Vista's EULA
Scott Granneman

Scott Granneman takes a look at some big surprises in Microsoft's Vista EULA that limit what security professionals and others can do with the forthcoming operating system.

It's Autumn in St. Louis, my favorite time of year in Missouri. Coats are getting progressively thicker as the temperature drops, trees are changing their leaves in a final show of brilliant color before their skeletons show, and darkness is starting to scare away the sun a bit earlier every day. Every Thursday night this Autumn you'll find me teaching the latest iteration of a wonderful course at Washington University in St. Louis titled "Technology in Our Changing Society". Once a week my students and I examine a different issue about the point at which technology and social change intersect, and our discussions are as fulfilling as they are knotty. I can't tell you how many times this semester I've heard someone say, "This is a really complicated issue, and I'm not sure yet what I think."

I respect and understand completely what they're saying. After all, when you're wrestling with issues around free speech, biotechnology, identity online, or virtual property, discussions tend to operate in shades of grey instead of black and white. Sometimes issues are a bit more cut and dried, and a student will utter a bon mot that perfectly encapsulates an issue. A long time ago, a high school kid who wasn't that great of a student told the class, after a long discussion about governments and politics, "Well, here's what I've learned: socialism is fair but doesn't really work, while capitalism isn't fair but does work mostly." Not too bad for a 9th grader. More recently, I had the adults in "Technology in Our Changing Society" read both the Windows XP EULA and the GNU General Public License. When I asked them what they thought, one woman said, "The EULA sounds like it was written by a team of lawyers who want to tell me what I can't do, and the GPL sounds like it was written by a human being who wants me to know what I can do." Nice.

The next version of Windows is just around the corner, so the next time we discuss software licensing in my course, the EULA for Vista will be front and center. You can read the Microsoft Vista EULA yourself by going to the official Find License Terms for Software Licensed from Microsoft page and searching for Vista. I know many of you have never bothered to read the EULA - who really wants to, after all? - but take a few minutes and get yourself a copy and read it. I'll wait.

Back? It's bad, ain't it? Real bad. I mean, previous EULAs weren't anything great - either as reading material or in terms of rights granted to end users - but the Vista EULA is horrendous.

Court to Weigh Microsoft, AT&T Dispute

The Supreme Court said Friday it would intervene in a patent dispute between giants Microsoft Corp. and AT&T Corp. over Windows programs distributed overseas. An appeals court ruled that Microsoft had infringed on an AT&T patent for a type of speech-coding technology.

The outcome could be worth more than $1 billion to Microsoft if the justices find that the lower court ruling improperly extended U.S. patent protections to overseas transactions, said Dennis Crouch, a visiting law professor at Boston University.

"Almost every patent infringement lawsuit against Microsoft asks for damages for U.S. sales as well as foreign export sales," Crouch said. Microsoft has acknowledged its liability for domestic sales.

Microsoft lawyers claimed the ruling by the U.S. Court of Appeals for the Federal Circuit in favor of AT&T "threatens to impose massive liability on U.S. software companies" and could prompt companies to move their research facilities out of the country.

Solicitor General Paul Clement, invited by the court to offer his views, urged justices to take the case. AT&T's remedy "lies in obtaining and enforcing foreign patents, not in attempting to extend United States patent law to overseas activities," Clement said.

AT&T lawyers said that the ruling only protected its patent, which covers a program with a "speech codec" that digitizes speech. "Congress's congressional authority is to protect the rights of U.S. inventors, not U.S. infringers," they said. AT&T Corp. is a subsidiary of AT&T Inc.

Congress extended the reach of patent protections after the Supreme Court ruled against the holder of a patent on a shrimp deveining machine who complained that a manufacturer shipped component parts overseas to avoid U.S. patent law.

The high court had earlier refused to consider a separate case stemming from a jury's decision that Microsoft should pay $521 million for infringing patents held by Eolas Technologies Inc. and the University of California. Microsoft challenged a ruling that the award should be based on worldwide sales rather than domestic sales.

Chief Justice John Roberts took no part in the court's decision to hear the case. The court offered no explanation, but Roberts' most recent financial disclosure shows that he owns between $100,000 and $250,000 in Microsoft stock.

The case is Microsoft Corp. v. AT&T Corp., 05-1056.

New U.S. System to Review Software Patents

American companies General Electric, IBM,, Microsoft and Hewlett-Packard have joined with the New York Law School and the U.S. Patent and Trademark Office (USPTO) to inaugarate a new system of peer review for software patents.

The four companies, plus Red Hat, the world's biggest listed open source software business, are the lead sponsors behind the Community Patent Review project.

The one-year pilot program will begin in early 2007 and focus on published but not-yet-granted patent applications relating to computer software. Scientists and engineers will be able to submit prior art to patent examiners at the USPTO using an online system. All Community Patent review project documents will be available on the internet for public comment.

"High-quality patents increase certainty around intellectual property rights, reducing contention and freeing resources to focus on innovation," said David Kappos, vice president of IP law at IBM.

Red Hat chief patent counsel Adam Avrunin said finding references that show the subject matter of a patent application is already known, especially in the software field, is often troublesome for examiners at the Patent Office who have a duty to grant patents only to inventive technologies.

The Community Patent Review will "enable examiners to have access to the best technical information experts to enhance the quality of issued patents," said Kaz Kazenske, a senior director in Microsoft's IP team and former deputy commissioner of the USPTO.

But some patent applicants are worried about the new system. They wonder if examiners will be overloaded with information that it makes it harder, not easier, for examiners to reach a decision. If so, this could actually increase patent pendency for software-related applications, which now stands at around four years.

"These are all valid concerns," said Marc Ehrlich, group IP counsel in IBM's microelectronics division. But he said that many companies are backing the project.

In addition to the five lead sponsors, Intel, International Characters, Out-of-the-Box Computing and Oracle have already agreed to allow some of their patent applications to be reviewed as a part of the initiative.

John Doll, the USPTO's Commissioner of Patents, told MIP that the initiative had received strong backing from industry and academia.

"It's been a tremendous help in being able to attract people who are so willing to work with us," he said.

Ehrlich said that officials in other IP offices, including the EPO and JPO, will be watching the initiative closely.

"There's concrete interest, which is good news for us because when they are ready the software will already be in place," he said.

Google Donates $30,000 to CC
Candace Lombardi

Google has donated $30,000 to Creative Commons, the open licensing organization.

The charitable corporation has essentially created a new method for the licensing and sharing of intellectual property.

Creative Commons (CC) empowers creators of original content with licensing alternatives that allow them to retain copyright protection while permitting free use of their content under certain circumstances. In this way, artists, scientists and others are able to gain visibility in the wider world while protecting their content.

CC has developed licensing support for audio and video this year, in addition to its licensing support for images and text, according to Google's Code blog.

Content creators can choose from a range of options, and unknowns are not the only ones to use a CC license. Pearl Jam, for example, used a CC "Attribution Non-commercial No Derivatives" license so that people could legally copy, share and distribute the band's "Life Wasted" single.

The donation comes at a time when Google has been heavily criticized, and sued, for possible copyright violations over its Google Book Search project.

Circulation Plunges at Major Newspapers
Katharine Q. Seelye

Circulation at the nation’s largest newspapers plunged over the last six months, according to figures released today. The decline, one of the steepest on record, adds to the woes of a mature industry beset by layoffs and the possible sale of some of its flagships.

Overall, average daily circulation for 770 newspapers was 2.8 percent lower in the six-month period ending Sept. 30 than in the comparable period last year, the Audit Bureau of Circulations reported. Circulation for 619 Sunday papers fell by 3.4 percent.

But some papers fared much worse. The Los Angeles Times lost 8 percent of its daily circulation, and 6 percent on Sunday. The Boston Globe, owned by The New York Times Company, lost 6.7 percent of its daily circulation and almost 10 percent on Sunday.

The New York Times, one of the few major papers whose circulation held steady over the last few reporting periods, did not emerge unscathed this time: its daily and Sunday circulation each fell 3.5 percent. The Washington Post suffered similar declines.

The Wall Street Journal’s new Weekend Edition, just over a year old, lost 6.7 of its circulation from a year ago.

Both The Los Angeles Times and The Boston Globe have been in the news lately as potential owners expressed interest in buying them. The Los Angeles paper is owned by the Tribune Company, which is entertaining offers from private equity firms to sell some of its properties, or perhaps even the whole company. Jack Welch, the former president of General Electric, has expressed interest in buying The Globe.

The Philadelphia Inquirer, which changed hands earlier this year and where the new owner is in the middle of difficult contract negotiations with the paper’s unions, lost 7.6 percent of its daily circulation and 4.5 percent on Sunday.

Newspaper circulation has been in a long, slow decline for decades. But the pace of loss seems accelerated now, as the industry tries to adjust to the steady migration of readers and advertisers to the Internet.

Newspaper executives attribute some of the latest losses to intentional cutbacks in the number of copies that are paid for in bulk by third parties, for example to be distributed to hotel guests. These count as paid circulation but are of less interest to advertisers than copies paid for directly by readers.

Though the industry has felt consecutive declines over the last five years, the Newspaper Association of America said that the figures for the latest period were “the largest variance year over year” of which it was aware.

Still, the association said, when newspaper Web sites are taken into account, the number of readers its members reach is up very sharply. Revenues from Web sites are rising quickly as well, but they account for only a small portion of overall revenues, and it could be decades before Internet revenues exceed those from the printed editions of major newspapers.

One of the few large papers to substantially increase its circulation in the latest report was The New York Post, which managed to squeak past its rival, The Daily News, by about 10,000 copies, and trumpeted the news today on a giant billboard in Times Square.

In fact, both New York tabloids reported increases in circulation, with the Post up by 5.13 percent and the Daily News by 1 percent.

Col Allan, editor of The Post, said his paper was doing well because it has a better sense of what readers want and a sense of humor. He said the Post’s circulation figures were firmer than those of other papers in New York because it sells fewer copies in bulk to third-party sponsors.

Hartford Launches Program Offering Free Wireless Access

Some city residents are getting wired.

Hartford announced Friday that it is launching a $1 million pilot program to test a free municipal wireless network in two city neighborhoods.

The idea is to give lower-income families access to information on education, health care and jobs.

In addition to free wireless access, the city will offer 900 refurbished, wireless-ready computers for $150 each.

"Hartford is on the wrong side of the digital divide," said Hartford Mayor Eddie Perez. "We all know that in employment today, jobs continue to be tied into the Internet. So many jobs require online access, both to find out about them and to get access to them."

The pilot program will serve downtown and the Blue Hills neighborhood. About 5,000 homes and 75,000 people, including more than 50,000 commuters who work downtown, will be able to use it.

The mayor's staff estimates that only about 25 percent of city households have a working computer with Internet access, compared with 70 percent of suburban homes.

The new broadband wireless network, developed with help from IBM, uses a technology called Wi-Fi, or wireless fidelity.

Users will get free unlimited access through March, after which only the first 20 hours a month will be free. After that, residents can buy unlimited access for $12 to $17 a month. Commuters who work in Hartford won't get free access but can buy it for the same price as city residents.

The first phase of the program will last about a year, and Perez said he hopes to expand to the entire city within three years. The project will cost an estimated $5.8 million, some of which may be offset by usage fees and advertising.

As the network gets bigger, the city will offer more computers and in-depth computer classes at public libraries. People who buy the reduced-price computers will need to attend 45-minute training sessions.

More than 300 publicly operated networks nationwide are either up and running or in the planning phase.

Municipal Report: Bogus Experts, Bogus Concern

Faking interest in broadband deployment to maximize revenue

Editorial: The Reason Foundation is yet another free-market think tank that believes that eliminating government oversight in the broadband sector will result in broadband utopia. Their editorials and position papers insist they are concerned with "optimizing broadband deployment" in this country, but the real agenda is simply maximizing revenue. With that in mind, they've issued this compact, which attacks municipal broadband and offers up the free-marketeers guide to a better broadband tomorrow.

"As scholars and analysts specializing in broadband policy, we recently convened online to examine the issue," the group notes. "Empirical research and economic rationale guided our deliberations," the group insists. The only problem is that the crew of "scholars and analysts" assembled to tackle the nuanced debate over muni-broadband all share the same ideology, and all in one way or another are on the payroll of incumbent telecom providers.

Signees for the free market manifesto include gentlemen such as the Heartland Institute's Joseph Bast, whose organization rails against what it calls the "junk science" that health officials aim at the tobacco industry. Also signing off on the manifesto is Sonia Arrison, an employee of the telco-funded Pacific Research Institute, whose pro-incumbent editorials appear frequently in papers and websites across the nation without her ties to industry clearly illuminated.

While these financial ties obviously do not invalidate the group's positions, the suggestion that the group, and groups like them, are concerned with broadband "deployment" should be insulting to those interested in honest debate over this nation's telecom infrastructure. The Reason Foundation and the compact's signees are concerned with one thing: maximum possible revenue for their clients.

Their focus is not to increase broadband deployment. That would require offering broadband services to rural portions of America, where their employer's ROI would be dubious and stock prices would suffer. Whether you can get DSL in the remotest regions of your Ohio suburb is the very last thing on the mind of individuals such as Joseph Bast and Sonia Arrison, or organizations such as the Heartland Institute.

The group's suggestions for "maximizing deployment", include the elimination of all "unnecessary regulations", telecom taxes or fees (though as discussed many of these are phony and imposed by the providers themselves), as well as ensuring that municipalities are "prohibited from investing in, managing or operating broadband infrastructure and services."

But wait: wouldn't banning towns and cities from offering broadband be regulation? And wouldn't it be "un-necessary regulation" considering companies like AT&T have discovered they can simply compete in the muni-wireless sector? Strange how such rabid fans of a free-market aren't interested in allowing market darwinism to play out.

The reality is that these groups only truly oppose regulation when it runs contrary to the interests of their corporate financiers and their own portfolios. Many of these groups would find regulations preventing the dumping of toxic chemicals into river water equally "unnecessary" if the price was right. We'd likewise see expert statistics suggesting mutant frogs are a boon to the local ecosystem.

While there are certainly flaws with many municipal broadband models, these are decisions that should be made by the communities themselves, not subjective analysts on the payroll of major telecom providers. Fans of a free market should be eager to see the organic free-market at work. If these municipal broadband operations are such a flawed idea: let them fail.

While incumbent providers have every right to declare an area unprofitable, they should not have the right to then ban these communities from wiring themselves. These broadband black holes were created by the providers. They should either fill them or get out of the way, taking their cadre of subjective experts with them.

The country's largest corporations currently control both sides of the debate over this nation's broadband policies. They freely voice their opinions via press release (and now blogs) on one hand, then pose as objective experts and even fake consumer groups to support these policies on the other.

What should be a meaningful dialog over this nation's broadband infrastructure has devolved into a dishonest stage-show where legitimate consumer concerns (such as rural broadband deployment) are increasingly marginalized.

FCC Rebukes Logan, Says Continental Can Offer WiFi
Peter J. Howe

A two-year effort by Logan International Airport officials to shut down private alternatives to the airport's $8-a-day wireless Internet service was decisively rejected yesterday by federal regulators, who blasted airport officials for raising bogus legal and technological arguments.

The Federal Communications Commission unanimously sided with Continental Airlines Inc. in a challenge Continental brought. The FCC ruled the airline has a clear right to offer WiFi access in its Terminal C lounge, and the Massachusetts Port Authority, which runs Logan, had no authority to order Continental to shut it off.

Massport activated its own WiFi service in 2004.

"Today we strike a victory for the WiFi revolution in the cradle of the American Revolution," FCC commissioner Jonathan S. Adelstein said in a prepared statement. Evoking more Revolutionary War symbols, he added: "The WiFi movement embodies the spirit of American freedom, and in our action we say 'Don't tread on me.' "

The FCC rejected Massport's claims that letting airlines provide WiFi service in their lounges could jam airline and public-safety radio systems.

Commissioner Michael J. Copps , in a separate statement, said: "The record is clear -- in fact, uncontested -- that allowing multiple WiFi operators in the airport will cause no interference to the safety-of-life communications that the airport authority conducts on its dedicated, separate, and licensed public safety channels."

"We are disappointed in the ruling," Massport spokeswoman Danny Levy said, "but [are] reviewing it carefully and weighing our options moving forward." Levy had no further comment.

The FCC action appears to open the door for other airlines to offer WiFi at Logan. In addition to Continental, T-Mobile USA was ordered by Massport to shut down a WiFi service it offered in American's Terminal B. Delta Air Lines was threatened by Massport with legal action if it offered WiFi in Terminal A.

Continental's challenge drew more than 2,000 statements of support from passengers. Top airline, consumer electronics, and telecommunications groups also weighed in against Massport, as did Partners HealthCare System, the Boston hospital giant. It said the Massport policy could have established a dangerous precedent for landlords forcing tenants to buy landlord-controlled WiFi service.

In its 25-page ruling, the FCC shredded all of Massport's legal arguments for why it should be able to regulate WiFi, which uses the same kind of unlicensed airwaves as cordless phones and baby monitors. The FCC faulted Massport for "erroneous characterizations" of fundamental federal rules and said "Massport misreads . . . and misconstrues the applicable regulatory framework."

A Continental spokesman, Dave Messing, called the ruling "a resounding victory to the airline and to consumers." Although T-Mobile was ordered to remove WiFi gear from the American lounge, Continental has been able to keep its Logan WiFi service during the appeal, Messing said.

Electronics Giants Team for Wireless HD
May Wong

The world's leading electronics makers have teamed up to develop a wireless technology to carry high-definition video and eliminate some of the cable spaghetti that links televisions with set-top boxes and other equipment.

Seven companies were to announce Tuesday that they formed the WirelessHD Consortium to free high-definition TVs from the tangle of cables connected to cable or satellite boxes, gaming consoles, DVD players, or even camcorders and other portable multimedia gadgets.

The companies are LG Electronics Inc., Matsushita Electric Industrial Co., known for its Panasonic brand, NEC Corp., Samsung Electronics Co. Ltd., Sony Corp., and Toshiba Corp., as well as SiBEAM Inc. a wireless technology startup.

Industry analysts predicted the first products to carry the WirelessHD technology won't hit the market until at least 2008.

But unlike the challenges other emerging wireless formats face in gaining market traction, "the fact that WirelessHD has the backing of all the major electronics companies gives it a leg up," said Brian O'Rourke, a senior analyst at research firm In-Stat/MDR.

The format is designed to work within ranges of up to 32 feet - and within the same room - using the 60-gigahertz radio frequency band, said John Marshall, chairman of WirelessHD.

It will transmit high-definition video that has not been compressed digitally so users should experience the same image quality they currently get with wired HD-capable video connectors.

The WirelessHD group has been working quietly for more than a year and aims to have the technical specifications completed next spring. It intends to integrate the technology into HDTVs and a range of other audio-video equipment, as well as make it compatible with other wireless and wired video formats, Marshall said.

The consortium also expects adapters will be made so consumers with older model DVD players or set-top boxes can have the option of wireless connectivity with their HDTV sets, he said.

"In the last few years, the number of digital devices has really just amplified, and consumers are looking for a way to simply manage this A-V network," Marshall said. "This can get rid of both the spaghetti in the front and back of the television."

Transmitting HD video seamlessly and wirelessly requires a large amount of radio bandwidth and poses technical issues involving picture quality and interference.

Though WirelessHD hasn't released full details of how its technology will work, the consortium claims it will deliver high-definition video at multi-gigabit data rates - faster than any other radio technology in development.

Making a wireless technology affordable enough for manufacturers - and their customers - could be yet another obstacle.

A few chip-maker startups, such as Radiospire Networks Inc., Tzero Technologies and Pulse-LINK Inc., are using a different radio technology to develop products to stream high-definition video wirelessly, O'Rourke said, but the adapter-like devices expected to use their wireless chips will likely cost several hundred dollars.

"WirelessHD says it is targeting a low-cost solution, but we'll have to see," O'Rourke said. "Adding a couple of bucks (to the manufacturing cost) is a lot of money already."

China Looking to Stop Internet Addiction

China's government wants to develop technology to stop children from becoming addicted to the Internet, a news report said Friday.

Chinese officials encourage Internet use for education and business but express growing worry about its effect on children and the possibility that it could be addictive. Chinese psychologists are looking into the possibility that heavy Internet users suffer a form of addiction, and a handful of clinics have opened to wean patients off compulsive Web use.

Parliament is considering a measure to "encourage research and development of technologies to prevent minors from becoming Internet addicts," the official Xinhua News Agency reported.

It said the proposed measure - an amendment to a law on protection of minors - would encourage research into such things as software that stops online gaming at a fixed time.

The measure also would ban minors from Internet cafes, bars and commercial dance halls, Xinhua said.

China has the world's second-biggest population of Internet users after the United States, with 123 million people online. But the government tries to regulate what Web surfers can see, barring access to material deemed subversive or obscene.

Google, Others Defend China Operations
Derek Gatopoulos

Internet search leader Google and other major U.S. technology companies insisted Tuesday that their products benefit Chinese citizens despite government restrictions and warnings that online censorship is spreading.

Providing some information is better than giving none at all, the companies said, but human rights groups warned that heavy filtering of Web content is increasing in developing countries - with some using China as a model.

China denied it censored Internet sites at all, saying criminal investigations are unrelated to freedom of expression.

Human rights groups have sharply criticized Google Inc., Yahoo Inc., and Microsoft Corp., along with technology provider Cisco Systems Inc., accusing them of helping the Chinese government restrict information and crack down on dissidents.

"We concluded that we would prefer to provide as much information to the Chinese people as we could through the Google search engines, in spite of the fact that we also are self-censoring material which the China government tells us we are not to exhibit," said Vint Cerf, a Google vice president.

Fred Tipson, senior policy official at Microsoft, said state vigilance in China appeared to be strengthening.

"It is a point at which point you decide the Chinese people are worse off for having this service in their country," he said.

"We have to discuss at what point censorship or persecution of bloggers has reached a point, or monitoring email has reached a point ... where it's simply unacceptable to continue to do business there. We try to define those levels and the trends are not good at the moment. And not just in China."

Amnesty International said it was planning to deliver a petition on Internet freedom to organizers of the U.N.-organized Internet Governance Forum in Athens, where the remarks were made Tuesday.

Rights groups and related agencies warned that online censorship is spreading globally among repressive governments.

"The combination of non-democratic regimes and commercial filtering technology is especially worrying," said Ron Deibert, a political science professor at the University of Toronto and a member of the Open Net Initiative that monitors filtering globally.

The group has labeled China as employing "pervasive" filtering, as well as Iran, Syria, Tunisia, Uzbekistan, Burma, and Vietnam.

"We have also seen an increase in offensive forms of filtering which attack servers. ... This was observed targeting opposition groups before election time in countries including Belarus and Kyrgystan," Deibert said.

Censorship is a key focus at this week's inaugural Internet Governance Forum, which ends Thursday. Other main issues are related to security of online networks and diversity of the Internet as Web growth is predicted to shift to China, India and developing countries.

Julien Pain of the group Reporters Without Borders said Web censors were gaining strength in many of those growth countries and that their main target was not dissidents but keeping information from the general population.

"Internet censorship is really spreading around the world," he said. "Ten years ago, the Internet was not important for an African dictator. ... Now China is a model for these countries and their model is spreading around the world."

Yang Xiaokun, a Chinese government representative at the Athens forum, denied all censorship allegations made by major human rights groups.

"We do not have restrictions at all," he said. "Some people say that there are journalists in China that have been arrested. We have hundreds of journalists in China, very few have been arrested. But there are criminals in all societies and we have to arrest them. But these are legal problems. It has nothing to do with freedom of expression."

Microsoft Considers China Policy
Darren Waters

A senior executive for Microsoft has said the firm could pull out of non-democratic countries such as China.

Fred Tipson, senior policy counsel for the computer giant, said concerns over the repressive regime might force it to reconsider its business in China.

"Things are getting bad... and perhaps we have to look again at our presence there," he told a conference in Athens.

"We have to decide if the persecuting of bloggers reaches a point that it's unacceptable to do business there."

"We try to define those levels and the trends are not good there at the moment. It's a moving target."

Selling to China

Earlier in the day, speaking at the Internet Governance Forum, Mr Tipson had defended the work Microsoft was doing in China.

At a session about openness he denied that some big businesses were "colluding" with certain governments.

He was joined in the debate by Art Reilly, senior director at Cisco Systems.

As the only two representatives of major business sat on the panel, they were the focus of accusations from some delegates that the companies were not doing all they could to enable freedom of expression.

Cisco was attacked at the forum for selling equipment to police in China, while Microsoft has been criticised for allegedly censoring blogs in the country.

Mr Tipson said: "We are maximising access to information to users in governments that Amnesty is targeting for its criticism.

"It's those users we have to keep our focus on."

Mr Reilly, senior director of strategic technology policy at Cisco was asked if the firm had any ethical problems with an alleged sale of router equipment to the Chinese police.

Human rights activists are concerned that the technology is being misused by some governments to track the online activities of people and to filter dissident comment.

He said: "We do not sell a different product in one country to another.

"It is essential that there are security and network management capabilities in a network that enable the free flow of information - it is the same technology used by parents and libraries to prevent children from accessing pornography for example."

He added: "We are not colluding with any country to do any specific filtering."

He said that he was not familiar with the sale of "any product to any particular entity in China".

Mr Tipson said it was a condition of companies to abide by the local laws in countries with whom they do business.

Mr Reilly said that here had been a "substantial increase in use and ability for information to flow in China" since Cisco entered the Chinese market in 1994.

There are now 120 million people online in China, up from 80,000 in 1994.

Advancing human rights

"The economic value in the internet is driving growth and development in educational opportunities [in China]," said Mr Tipson.

"Openness is often too segmented too narrowly into a discussion around freedom of speech," he added.

Mr Tipson said it was "critical not to portray the internet as a threat to governments".

"The internet is transforming the political culture of China. There is no question about it."

Fellow panellist, Anriette Esterhuysen, executive director of professional body APC, said: "I don't think we should make corporations responsible for securing our freedoms."

She said governments should be enforcing ethical policies on companies that are doing business with foreign governments.

There was also a feeling expressed by some that the internet was making progress as a tool for advancing human rights.

Andrew Puddephatt, who has worked for various human rights organisations, said: "Where access exists you can definitely get information and ideas on the net that you cannot get on conventional media. That is progress."

Aggregating Blogs in Greece Could Get You Sued
Article in english about the BlogMe.gr case.

The administrator of Blogme.gr, a Greek blog aggregation website had his house raided, his hard drive seized and was himself arrested by the Greek cybercrime division last week, after having been served with a libel lawsuit without prior notice, because a public figure was offended by a satirical blog that was linked to by his site. The outraged response by Greek bloggers was immediate and unprecedented, reaching in the hundreds of posts within two days of the raid. The developing story coincides with the Internet Governance Forum being hosted in Athens this week, to be attended by Internet luminaries, entrepreneurs and activists like Vint Cerf, Bob Kahn and Joi Ito and featuring panels on Openness and Freedom of Expression.

On a related note, Amnesty International recently put out a "Call to Bloggers", to stand up for Internet freedom ahead of the IGF, while a representative of Reporters without Frontiers (RSF) will also be on hand to attend the meeting. RSF recently published it's 5th Annual Worldwide Press Freedom Index, which ranks Greece 32nd among 168 places, leading other EU15 members such as France and Italy, as well as the US, but lagging behind such countries as Namibia, Bolivia and Bosnia - Herzegovina.

Prior successes of the Greek cybercrime division include the arrest of Swedish programmer Rick Downes on charges of spreading spam via handshake. Greece also made international headlines four years ago because of the shortsighted and highly controversial electronic games ban. The government was forced by public outcry, both at home and abroad -as well as the intervention of the European Commission- to amend the law and later suspend and deprecate it as unconstitutional.

FinReactor and EliteTorrents
Thomas Mennecke

The BitTorrent community has made the world a lot smaller. No matter what part of the world a BitTorrent user resides, millions are connected by a virtually identical protocol. This not only applies to the end user, but the tracker administrators that help make the community possible.

The exact number of the BitTorrent population has been difficult to zero in; however it’s generally agreed by examining the DHT (Distributed Hash Table) that at least 5-6 million individuals are regularly swarming files. A file request in North America may gather pieces from just about anywhere in the world; and likewise a file request from Australia may swarm with dozens of global locations.

In order to facilitate this massive transfer of files, a centralized index or tracker must coordinate the transfer of torrent files. These torrent files then tell the client which locations, based on the IP address, the file segments are located. From there, the client begins the swarm and within hours, or days, the requested file will trickle its way home.

There’ve been plenty of efforts designed to disrupt this flow of information. Most notably, indexing and tracking sites such as SuprNova, LokiTorrent, and ThePirateBay were forced offline. All but ThePirateBay were permanently eradicated.

In the United States, the renowned BitTorrent tracker EliteTorrents.com was raided by the FBI and US Customs in May of 2005. It was the last BitTorrent tracker operating in the United States. Although not as widely traveled as ThePirateBay or Suprnova, news surrounding this event was just as impressive.

On October 17, 2006, EliteTorrents administrator Grant Stanley plead guilty to a “two count felony information charging conspiracy to commit copyright infringement and criminal copyright infringement in violation of the Family Entertainment Copyright Act.”

This is the first conviction in the United States directly related to P2P and file-sharing. As part of his punishment, Mr. Stanley is to spend the next 5 months incarcerated, followed by an additional 5 months of home detention. On top of that, he is to spend an additional 3 years of supervised release, and in all likelihood stay far away from anything to do with BitTorrent. Finally, Mr. Stanley is to pay a $3,000.00 fine.

Yesterday, another substantial BitTorrent verdict was rendered. This time, the decision was against 21 operators and administrators of the Finnish BitTorrent tracker, Finreactor.

“21 operators of the Finreactor peer-to-peer-network were convicted yesterday by the district court of Turku in Finland,” an IFPI press release reads. “Fourteen operators were convicted for copyright offences and seven for aiding for copyright offences. The operators were in charge of the technical operation of the system as well as the user control.”

Although technologically very similar, if not identical, in every aspect to EliteTorrents, the punishment rendered is worlds apart. Unlike Mr. Grant who has a very bleak outlook for the next five months, those convicted in Finland have a considerably more optimistic, albeit more expensive, prospect.

The 21 individuals convicted have been ordered to pay a €566,000, or $720,630. (US) fine - divided by 21 individuals, that’s still $34,000 each. Compared to Mr. Stanley, the Finish crew got off light.

The BitTorrent network may bond very different peoples and cultures; however the laws of the outside world hold no such similarities. Mr. Stanley will pay a significantly less fine than his Finish BitTorrent brethren; however at the very least the convicted Finreactor administrators and operators won’t have to spend any time in prison.

Fewer Eggs, More Baskets in the Incubator
Joe Nocera

A few weeks ago, Google announced that it planned to install a large solar energy system on the roof of its headquarters in Mountain View, Calif. “Green tech” is all the rage right now in Silicon Valley, with venture money pouring into environmental start-ups, and hip technology companies falling all over themselves to show their earth-friendly bona fides.

But that’s not why the Google announcement caught my eye. No, what intrigued me was the company that was building its solar system: EI Solutions, a division of Energy Innovations. And Energy Innovations is — are you sitting down for this? — an Idealab company.

Idealab? The original “Internet incubator” founded in the mid-1990s by the charismatic, hyperkinetic Bill Gross? The one that flew so high during the Internet bubble — with companies like eToys and Eve.com and PetSmart.com — only to crash and burn once boom turned to bust? The one that was sued in 2002 by some of its most high-profile investors, including T. Rowe Price, which asserted that its money had been misused and wanted it back? Yes, that Idealab.

We haven’t heard much about Internet incubators lately — and with good reason. Many of them no longer exist. Several that went public during the boom, like CMGI, now sport anemic stock prices, and aren’t really incubators anymore. The essential business model of an incubator — that a company could exist purely to create start-up companies — is now viewed largely as bubble folly.

But Mr. Gross and Idealab, it turns out, are still very much with us. Idealab is still a company that exists to create start-ups, most of which begin life as a glimmer in Mr. Gross’s fertile brain. The companies it starts aren’t always about the Internet anymore, though some are. Mr. Gross has started a company that is making an affordable 3-D printer, which it hopes to bring to market next year. Another Idealab company sells proprietary robotics technology to supermarkets and toy companies. Yet a third, Spin.com, is an Internet search engine in which advertisers pay only if customers take an action, rather than simply click to a site. (Mr. Gross is the inventor of the “paid search” idea that Google went on to perfect.)

When you visit Idealab now, you still walk into the kind of cool, wide-open office in Old Town Pasadena that screams dot-com. But the new Idealab also has a machine shop. Most of all, Idealab and its founder have a seriousness of purpose, a sense of mission and a humility that were once largely lacking. Which perhaps explains why, though it’s still too early to say for sure, Idealab is an incubator that may actually wind up succeeding.

“You gotta see these pictures,” Mr. Gross said, his voice rising happily. “They just came in this morning.”

We were deep into a lengthy interview, and now, finally, he was getting excited — the way I remember him pretty much all the time during the bubble. For much of the interview, we had been talking about the bad times after the bust arrived. His tone had been somber, grim even, as he recalled the painful past.

But this — this was fun! The pictures had been sent, via e-mail, from China. China is where the Energy Innovations solar devices are to be manufactured. And the pictures showed several Energy Innovations executives, alongside a handful of Chinese workers, actually making the first of its solar products — using a radical new approach to solar energy that Mr. Gross hopes will finally give solar the economics it needs to become a viable energy source.

“Right now,” he explained, “a kilowatt of electricity generated from coal costs 9 cents. For solar, it’s 27 cents before government rebates, which cuts it in half. We are trying to get it below 9 cents, without any rebates. We’re halfway there.” The product itself is like no solar panel you’ve ever seen — tons of little mirrors that move with the sun and concentrate its power, allowing solar power to be generated much less expensively than it is now. It is an amazing feat of engineering ingenuity.

As Mr. Gross tells it now, Idealab was never originally intended to be only about Internet companies. But in the 1990s, it was so easy to start an Internet company that it became the path of least resistance. Idealab began churning out a company a month with a kind of indiscriminate glee. And the companies themselves took off like rockets — eToys had a $7.8 billion market capitalization on its first day as a public company — allowing Mr. Gross, and those around him, to believe they could do no wrong.

We all know now that the bubble ended in March 2000, but it took Mr. Gross much longer than that to face reality. Idealab had raised $1 billion from investors in anticipation of an initial public offering, and had wildly expanded its operations. Even as the stocks in its public companies were collapsing — eToys, you’ll recall, eventually collapsed — Mr. Gross kept hoping against hope that it would turn around.

Finally, at the beginning of 2001, he could no longer avoid the truth. There would be no public offering. Shockingly, despite having raised all that money, Idealab was down to about $40 million in cash. With its extravagant spending habits, Idealab would be out of cash in two months unless it started changing. Belatedly, it shut down struggling companies, and closed its branch offices. Mr. Gross had to lay off more than half Idealab’s staff.

There was a lot of soul-searching, and anguish over the mistakes he had made. But not for a moment did Mr. Gross think about liquidating Idealab. One of his greatest strengths — and greatest weaknesses — is his eternal optimism. That is what led him to foolishly start so many companies during the boom, but it is also what allowed him to carry on during the hard times. He never lost his belief that his model of company-creation could work — if, that is, he could learn to bring his own frenetic idea-generating brain under control.

So, no longer would Idealab start a company a month. “We needed a much higher bar for the kind of companies we would create,” he said. “We needed to have protectable intellectual property. Our companies had to be in growing industries, with high margins — and protectable margins. That was something we never used to think about. EToys had great customer service, but it had no protectable intellectual property. Anybody could do it.”

And finally, Mr. Gross said, the companies he wanted to start had to be able to make a real difference in the world. You could argue, I suppose, that to make such a grandiose statement suggests that Mr. Gross and his colleagues were still afflicted with at least some of the hubris of the bubble days. But Mr. Gross argues that building a company requires so much effort, and entails heartbreak, that it just didn’t seem to be worth it unless Idealab companies were going to do something that mattered.

One of the first companies to emerge from this new focus was Energy Innovations. As I listened to Mr. Gross talk about it, I realized that it probably saved Idealab. Mr. Gross has long had a passion for solar energy, and because he is an engineer — a graduate of CalTech — he deeply understood the issues involved. For the first time in Idealab’s history, he made himself the company’s chief executive, and the company began to consume the majority of his time and energy.

Which, of course, meant that he wasn’t spending nearly as much time pursuing all the other ideas that poured out of his head — Energy Innovations mattered too much to him, and he didn’t want to be distracted. He also needed to figure out how to keep it up and running when Idealab had zero ability to raise money. Thanks in part to the bust, and in part to the lawsuit, which was finally settled in 2004, Idealab had to hobble along with cash it could generate on its own. “We sold a small company to AOL,” he recalled. “Another to eBay. $6 million here. $10 million there.”

Then some of his older companies began to recover, especially Overture.com, the original paid search engine. Idealab began selling some of its stock, and by 2004, when Yahoo bought Overture for $1.6 billion, it had generated some $300 million for Idealab. Suddenly, things were looking up again.

Today, Idealab has just under $100 million, which gives Mr. Gross plenty of running room now that the company’s costs are under control. More than that, though, venture capitalists are investing again in Idealab companies. Energy Innovations has raised $50 million in outside capital, and when I spoke to Erik Straser of the venture firm Mohr Davidow Ventures, which is the lead outside investor, he couldn’t have sounded more excited about the company’s prospects — or about Bill Gross. “Bill is one of the best idea generators I’ve ever seen,” he said. “But he also has an understanding of his strengths and weaknesses. People can grow and learn, even people as highly intelligent as Bill.”

Howard Morgan, an Idealab director and longtime friend of Mr. Gross, said: “He’s become humbler. There is no question about it. He realizes that there are limitations to what he can accomplish.”

Mr. Gross prefers journalism that offers lessons to readers, and as our interview drew to a close he struggled to find one. He talked about being more rigorous when ideas popped into his head, about the ups and downs of entrepreneurship, about being willing to persevere with an idea that you believed in. But none struck him as satisfactory.

Later, though, as we walked back to his office from dinner, he said: “We have a lot more wisdom now. I wish we hadn’t had to go through what we did to acquire that wisdom. But maybe that was the only way.”

Web Breakthrough 'Could Bring Cheap Calls For All'
Jonathan Richards and Holden Frith

The price of phone calls is set to fall dramatically thanks to a groundbreaking development that will enable any regular phone to make calls using the internet.

Charges are expected to drop by as much as quarter from early next year, and when the system is more established it will cost the same to call Australia and Aberdeen.

The breakthrough depends on a technology called ENUM, which converts any phone number into an internet address. Other phones can then find and connect to this number in the same way that a browser finds a website.

This removes a major barrier to the mainstream use of internet phone calls. In the past, web-based systems have been unable to find the numbers they require, a job normally performed by the telephone exchange.

"Eventually there will be no concept of international calls and the need for mobile roaming could disappear entirely," David Groom, vice president of the Amdocs telecoms consultancy, said. "Calls will become free as part of and internet connection."

If, as expected, Department of Trade and Industry approves the roll-out for early 2007, a majority of calls will be made via the internet within five years, analysts say.

Domestic mobile calls are also likely to be affected as wi-fi hotspots become more widespread, enabling phones to send calls via the internet while on the move. The whole of Norwich, large sections of the City of London, and 99 per cent of Cornwall are already wi-fi zones.

Skype, one of the most popular systems among consumers, only supports true web-based calls between registered customers, who must use headsets and computers to conduct the call.

A facility called SkypeOut lets people call standard telephone users, but this diverts calls to the existing telephone network for the ‘last mile’ of each call, between the local exchange and the home, and incurs charges for doing so.

ENUM allows users to sidestep the exchanges – and the phone companies – entirely. "You won’t need to use telephone companies to find the person you’re calling anymore," said Jay Daly, a consultant with Nominet, the .uk domain name registry, who has worked with an industry group developing ENUM. "It’s the equivalent of opening Skype up to everyone."

"We are still some years from being able to do away with ordinary phone networks but this technology is a huge step in that direction," he added.

Many obstacles remain, and Mr Groom said that it would take some time before a system of registering numbers is adopted. "Because the use of telephone numbers is regulated both globally and within each country, the process of creating and delegating these domains requires the involvement and approval of regulatory bodies," he said.

Phone users may also have to put up with some of the risks and inconveniences of the internet. "It’s not without problems," Mark Main, senior analyst in broadband services at Ovum, said. "There are privacy and security issues. Spam, for instance, could now be directed at phone numbers."

"But there will be a significant reduction in the cost of voice calls, perhaps 25 per cent," he added. "You'll soon just pay for a bundle of broadband access and voice calls will be part of that."

So far the technology has been introduced only in Germany and Austria, but British phone companies are expected to start using it from early next year, as soon as the industry reaches a consensus on how it should be implemented.

Initially, ENUM will be used mainly by existing phone companies to reduce the cost of carrying customers’ calls, but in time individual use of the technology will bring other benefits.

Customers will be able to sign up for a "number for life", that will follow them from home to home throughout the world. The system also allows calls to become more sophisticated. For instance, if there is no answer at a landline, the caller could choose to be redirected to a mobile number or e-mail inbox.

Japan's Softbank Mobile a Victim of its Popularity as Customers Rush to Switch From Rivals

TOKYO Japanese mobile phone carrier Softbank Mobile Corp., which slashed its prices last week to undercut rivals, said it had to stop taking new applications Sunday because it was flooded by new customers wanting to switch to its service.

It is a bitter victory for Softbank, which had rolled out the aggressive price cuts in a last-ditch effort to score on last Tuesday's arrival in Japan of number portability — a system that lets people keep the same numbers when they switch carriers.

It is expected to bring big changes to Japan's mobile phone market.

Softbank, which bought British carrier Vodafone's mobile business in Japan earlier this year and is run by technology mogul Masayoshi Son, had been looking for ways to catch up with larger competitors like NTT DoCoMo and KDDI Corp.

Softbank stopped accepting new customers shortly after noon Sunday when its computer system couldn't handle the load, the company said in a news release. It apologized to customers and promised to resume taking switch-over business when it readies the system for increased volume.

The company did say how many customers had tried to enroll.

It was the second time in two days that Softbank had to suspend taking switch-over customers.

On Saturday, it suspended applications for fear the huge number would paralyze its computer system, Kyodo News agency reported.

The system was temporarily resumed Sunday before being shut down again, Kyodo said.

The new fee system unveiled by Softbank features free calls and instant messages between subscribers, and lowers basic monthly fees, in some cases by 70 percent.

Softbank will also underprice any bargain offer by competitors within 24 hours, ensuring that its monthly service charges will always be 200 yen (US$1.69; €1.34) cheaper than those of its rivals.

Tokyo-based Softbank, which leads Japan as a broadband services provider and owns a 41 percent stake in Yahoo! Japan, has been going all-out to shake off the image — from the carrier's Vodafone days — that it offers only unfashionable, bulky handsets.

Softbank has promised 15 new handset models in 64 colors by the end of the year, with some phones as thin as a coin.

The phones will come with an easy link to the Yahoo! Japan mobile portal, allowing people to access Web-based information for free instead of having to pay content providers.

Softbank's other businesses include Internet Protocol telephoning, online gaming, electronic stock trading, Net broadcasting, and an investment arm. It also owns the Fukuoka Softbank Hawks professional baseball team.

Cell Phone Takes Security to New Heights
Yuri Kageyama

A new mobile phone in Japan takes security pretty seriously: It can recognize its owner, automatically locks when the person gets too far away from it and can be found via satellite navigation if it goes missing.

The P903i from NTT DoCoMo, Japan's top mobile carrier, comes with a small black card about the size of a movie-ticket stub. The card works as a security key by connecting wirelessly with the cell phone.

If an owner keeps the card in a bag or pocket, the phone recognizes when the card moves too far away and locks automatically to prevent someone from making a call. The user can choose to have the phone lock when it is 26 feet, 66 feet or 130 feet away.

People who lose their security cards can punch in a password to unlock the phone. But they will have to buy a new card to set the lock again.

The extra security is handy because, like other recent Japanese phones, the P903i can be used as a credit card or a prepaid cash card.

Of course, the new security feature won't prevent snoops from getting information from the phone - reading personal e-mails, say - if it is within the set distance of the security key.

To guard against such intruders, users can activate the phone's facial identification feature.

Here's how that works. Owners must first take at least three photos of themselves with the phone's camera. Up to 10 can be shot, in various situations - with and without glasses, with and without makeup, indoors and outdoors.

Then, if the facial-recognition feature is turned on, before accessing the handset a user has to take a picture of himself with the camera. The phone analyzes features such as distance between the eyes and unlocks if the image matches the stored data.

A separate function recognizes whether the eyes are blinking - in case someone tries to show the owner's photo to gain fraudulent entry. Not only that, a four-letter password can be added to this process, to guard against an identical twin getting unauthorized access.

"Security is increasingly a key function for mobile phones as they become loaded with more sophisticated features," said NTT DoCoMo spokeswoman Mamiko Tanaka. "Handset makers are all competing to come up with interesting ways to strengthen security."

Should the P903i get lost, the user can track it with its onboard Global Positioning System. After entering the phone number into a Web site, the owner will see a map showing the phone's rough location - directions via GPS can be off by several hundred feet.

Pricing for the phone, which is manufactured by Matsushita Electric Industrial Co. and planned for sale in the next few months, has not yet been announced. Using the GPS service to look for a missing phone will cost $2.50 a pop.

Businesses Seek Protection on Legal Front
Stephen LaBaton

Frustrated with laws and regulations that have made companies and accounting firms more open to lawsuits from investors and the government, corporate America — with the encouragement of the Bush administration — is preparing to fight back.

Now that corruption cases like Enron and WorldCom are falling out of the news, two influential industry groups with close ties to administration officials are hoping to swing the regulatory pendulum in the opposite direction. The groups are drafting proposals to provide broad new protections to corporations and accounting firms from criminal cases brought by federal and state prosecutors as well as a stronger shield against civil lawsuits from investors.

Although the details are still being worked out, the groups’ proposals aim to limit the liability of accounting firms for the work they do on behalf of clients, to force prosecutors to target individual wrongdoers rather than entire companies, and to scale back shareholder lawsuits.

The groups hope to reduce what they see as some burdens imposed by the Sarbanes-Oxley Act, landmark post-Enron legislation adopted in 2002. The law, which placed significant new auditing and governance requirements on companies, gave broad discretion for interpretation to the Securities and Exchange Commission. The groups are also interested in rolling back rules and policies that have been on the books for decades.

To alleviate concerns that the new Congress may not adopt the proposals — regardless of which party holds power in the legislative branch next year — many are being tailored so that they could be adopted through rulemaking by the S.E.C. and enforcement policy changes at the Justice Department.

The proposals will begin to be laid out in public shortly after Election Day, members of the groups said in recent interviews. One of the committees was formed by the United States Chamber of Commerce and until recently was headed by Robert K. Steel.

Mr. Steel was sworn in last Friday as the new Treasury undersecretary for domestic finance, and he is the senior official in the department who will be formulating the Treasury’s views on the issues being studied by the two groups.

The second committee was formed by the Harvard Law professor Hal S. Scott, along with R. Glenn Hubbard, a former chairman of the Council of Economic Advisers for President Bush, and John L. Thornton, a former president of Goldman Sachs, where he worked with Treasury Secretary Henry M. Paulson Jr.

That group has colloquially become known around Washington as the Paulson Committee because the relatively new Treasury secretary issued an encouraging statement when it was formed last month. But administration officials said Friday that he was not playing a role in the group’s deliberations.

Its members include Donald L. Evans, a former commerce secretary who remains a close friend of President Bush; Samuel A. DiPiazza Jr., chief executive of PricewaterhouseCoopers, the accounting giant; Robert R. Glauber, former chairman and chief executive of the National Association of Securities Dealers, the private group that oversees the securities industry; and the chief executives of DuPont, Office Depot and the CIT Group.

Jennifer Zuccarelli, a spokeswoman at the Treasury Department, said on Friday that no decision had been made about which recommendations would be supported by the administration.

“While the department always wants to hear new ideas from academic and industry thought leaders, especially to encourage the strength of the U.S. capital markets, Treasury is not a member of these committees and is not collaborating on any findings,” Ms. Zuccarelli said.

But another official and committee members noted that Mr. Paulson had recently pressed the groups in private discussions to complete their work so it could be rolled out quickly after the November elections.

Moreover, committee members say that they expect many of their recommendations will be used as part of an overall administration effort to limit what they see as overzealous state prosecutions by such figures as the New York State attorney general Elliot Spitzer and abusive class action lawsuits by investors. The groups will also attempt to lower what they see as the excessive costs associated with the Sarbanes-Oxley Act.

Their critics, however, see the effort as part of a plan to cater to the most well-heeled constituents of the administration and insulate politically connected companies from prosecution at the expense of investors.

One consideration in drafting the proposals has been the chain of events at Arthur Andersen, the accounting firm that was convicted in 2002 of obstruction of justice for shredding Enron-related documents; the conviction was overturned in 2005 by the Supreme Court. The proposals being drafted would aim to limit the liability of auditing firms and include a policy shift to make it harder for prosecutors to bring cases against individuals and companies.

Even though Arthur Andersen played a prominent role in various corporate scandals, some business and legal experts have criticized the decision by the Bush administration to bring a criminal case that had the effect of shutting the firm down.

The proposed policies would emphasize the prosecution of culpable individuals rather than corporations and auditing firms. That shift could prove difficult for prosecutors because it is often harder to find sufficient evidence to show that specific people at a company were the ones who knowingly violated a law.

One proposal would recommend that the Justice Department sharply curtail its policy of forcing companies under investigation to withhold paying the legal fees of executives suspected of violating the law. Another one would require some investor lawsuits to be handled by arbitration panels, which are traditionally friendlier to defendants.

In an interview last week with Bloomberg News, Mr. Paulson repeated his criticism of the Sarbanes-Oxley law. While it had done some good, he said, it had contributed to “an atmosphere that has made it more burdensome for companies to operate.”

Mr. Paulson also repeated a line from his first speech, given at Columbia Business School last August, where he said, “Often the pendulum swings too far and we need to go through a period of readjustment.”

Some experts see Mr. Paulson’s complaint as a step backward.

“This is an escalation of the culture war against regulation,” said James D. Cox, a securities and corporate law professor at Duke Law School. He said many of the proposals, if adopted, “would be a dark day for investors.”

Professor Cox, who has studied 600 class action lawsuits over the last decade, said it was difficult to find “abusive or malicious” cases, particularly in light of new laws and court decisions that had made it more difficult to file such suits.

The number of securities class action lawsuits has dropped substantially in each of the last two years, he noted, arguing that the impact of the proposals from the business groups would be that “very few people would be prosecuted.”

People involved in the committees said that the timing of the proposals was being dictated by the political calendar: closely following Election Day and as far away as possible from the 2008 elections.

Mr. Hubbard, who is now dean of Columbia Business School, said the committee he helps lead would focus on the lack of proper economic foundation for a number of regulations. Most changes will be proposed through regulation, he said, because “the current political environment is simply not ripe for legislation.”

But the politics of changing the rules do not break cleanly along party lines. While some prominent Democrats would surely attack the pro-business efforts, there are others who in the past have been sympathetic.

People involved in the committees’ work said that their objective was to improve the attractiveness of American capital-raising markets by scaling back rules whose costs outweigh their benefits.

“We think the legal liability issues are the most serious ones,” said Professor Scott, the director of the committee singled out by Mr. Paulson. “Companies don’t want to use our markets because of what they see as the substantial, and in their view excessive, liability.”

Committee officials disputed the notion that they were simply catering to powerful business interests seeking to benefit from loosening regulations that could wind up hurting investors.

“It’s unfortunate to the extent that this has been politicized,” said Robert E. Litan, a former Justice Department official and senior fellow at the Brookings Institution who is overseeing the committee’s legal liability subgroup. “The objectives are clearly not to gut such reforms as Sarbanes-Oxley. I’m for cost-effective regulation.”

The main Sarbanes-Oxley provision that both committees are focusing on is a part that is commonly called Section 404, which requires audits of companies’ internal financial controls. Some business experts praise this section as having made companies more transparent and better managed, but many smaller companies call the section too costly and unnecessary.

Members of the two committees said that they had reached a consensus that Section 404, along with greater threat of investor lawsuits and government prosecutions, had discouraged foreign companies from issuing new stock on exchanges in the United States in recent months.

The committee members said that an increase in stock offerings abroad was evidence that the American liability system and tougher auditing standards were taking a toll on the competitiveness of American markets. But others see different reasons for the trend and few links to liability and accounting rules.

Bill Daley, a former commerce secretary in the Clinton administration who is the co-chairman of the Chamber of Commerce group, expects proposed changes to liability standards for accounting firms and corporations to draw the most flak. But he said that the changes affecting accounting firms are of paramount importance to prevent the further decline in competition. Only four major firms were left after Andersen’s collapse.

Another contentious issue concerns a proposal to eliminate the use of a broadly written and long-established anti-fraud rule, known as Rule 10b-5, that allows shareholders to sue companies for fraud. The change could be accomplished by a vote of the S.E.C.

John C. Coffee, a professor of securities law at Columbia Law School and an adviser to the Paulson Committee, said that he had recommended that the S.E.C. adopt the exception to Rule 10b-5 so that only the commission could bring such lawsuits against corporations.

But other securities law experts warned that such a move would extinguish a fundamental check on corporate malfeasance.

“It would be a shocking turning back to say only the commission can bring fraud cases,” said Harvey J. Goldschmid, a former S.E.C. commissioner and law professor at Columbia University. “Private enforcement is a necessary supplement to the work that the S.E.C. does. It is also a safety valve against the potential capture of the agency by industry.”

Federal Government Routinely Loses Computers Containing Sensitive Personal Information on Americans
Jack Date and Pierre Thomas Report:

The federal government has routinely lost computers containing massive amounts of sensitive personal information, according to a new report by the House Committee on Government Reform.

Every one of the 19 departments and agencies audited reported at least one loss of personally identifiable information since 2003. Overall, the U.S. government gets a D+ for computer security.

The report shows more than 800 incidents, including the loss of hundreds of laptop computers and flash drives containing personal information about millions of Americans.

Many of the incidents involve "employee carelessness, contractor misconduct, and third party thefts," the report says.

The Department of the Treasury, which includes the IRS, reported 340 separate incidents, the most of any department or agency. According to the report, the Treasury Department "could not report the number of individuals impacted, whether notification of individuals had occurred, or whether incident-specific remedial efforts were undertaken."

The Department of Transportation reported only one minor incident to the Committee, but a Freedom of Information Act request uncovered a series of data breaches that compromised information affecting 133,000 people. The Department of Transportation also lost nearly 400 laptop computers, the report said.

The Defense Department reported 43 incidents, including the loss of the personal information of 30,000 recruiting prospects after a laptop fell off a motorcycle belonging to a Navy recruiter. A thumb drive lost in March of this year contained records on more than 200,000 enlisted Marines.

Some of the losses had been previously reported, such as the massive loss of data from the theft of a Department of Veterans Affairs official's laptop. But the report says few of the incidents it describes have been reported publicly.

Banks Facing Fines Over ID Thefts

Several leading banks may be facing unlimited fines over allegations that they dumped confidential customer account details in bin bags on streets.

The information watchdog, Richard Thomas, told the Times that he had received "highly disturbing evidence".

He is investigating alleged lapses by the Royal Bank of Scotland, Halifax, HSBC, Natwest and Post Office, it said.

The British Bankers Association said it was normal practice to dispose of confidential information securely.

It said this was done using specialist rubbish collection teams.

Mr Thomas told the newspaper he is considering enforcement action which could result in unlimited fines.

He said banks advised people to be careful with personal information and to do things such as shred everything because of identity theft was a "growing problem".

"If the banks themselves are being careless with the information, that seems to me to be wholly unacceptable," he said.

Mr Thomas said among the findings in bin bags were bank statements, loan applications which had been turned down and paying-in slips.

It comes after BBC investigators found customer names, addresses and account details when rifling through discarded rubbish.

The team, from BBC One's Watchdog, warned that the information could be used by criminals to steal clients' identities.

Mr Thomas said he would look into their findings, the team said.

Hackers Penetrate Water System Computers
Richard Esposito

A foreign hacker who penetrated security at a water filtering plant near Harrisburg, Pa., is under investigation by the FBI for planting malicious software capable of affecting the plant's water treatment operations, ABC News has learned.

The hacker tried to covertly use the computer system as its own distribution system for e-mails or pirated software, officials told ABC.

"The concern was high because it is a computer that controls an important infrastructure system, and if, for some reason, it caused it to fail, it would have disrupted service," said Special Agent Jerri Williams of the FBI's Philadelphia field office.

The Columbus Day weekend intrusion is the fourth recorded cyber-attack on a U.S. water supply in the past four years, according to the records of WaterISAC, an industry information sharing and analysis center with members from among more than 1,000 drinking water and wastewater systems in the United States.

The hacker operating on the Internet tapped into an employee's laptop and then used an employee's remote access as the point of entry and installed a virus and spyware in the water plant computer system. Following the intrusion, the plant changed all passwords to the system and eliminated home access to the system.

"This is very common...computer hackers try to gain control of systems to use them as a resource to distribute e-mails, pirated software. It does not appear that this particular computer was hacked into for any other reason," said Special Agent Williams.

In one of three past attacks cited by WaterISAC, hackers used a Korea-based telecom to launch a denial of service attack on one water supply. In a second, they penetrated a top-level data control and acquisition system on a California irrigation district wastewater treatment plant. And in a third, they announced their entry into the computer system with a message, "I enter in your server like you in Iraq."

"We are seeing an increase in reporting," said WaterISAC Executive Director Diane Van De Hei. Prior to Sept. 11, 2001, most of the incidents were managed locally, she said.

WaterISAC was established in December 2002. The private sector group uses "push" e-mail technology to distribute information from the Department of Homeland Security, EPA and other government agencies to more than 10,000 clients in the water utility sector.

According to a 2006 Computer Crime and Security Survey by the San Francisco-based Computer Security Institute, 52 percent of 616 survey respondents reported unauthorized use of their computer systems in the past 12 months.

Rage against the machine

Diebold Struggles to Bounce Back From the Controversy Surrounding its Voting Machines.
Barney Gimbel

Here's a five-step plan guaranteed to make an obscure company absolutely notorious.

First get into a business you don't understand, selling to customers who barely understand it either. Then roll out your product without adequate testing. Don't hire enough skilled people. When people notice problems, deny, obfuscate and ignore. Finally, blame your critics when it all blows up in your face.

With missteps like those, it would be hard to succeed in the gumball business. But when your product is the hardware and software of democracy itself, that kind of performance gets you called not just incompetent but evil - an enemy of democracy. And that is what has happened to Diebold Inc. (Charts) of Canton, Ohio, since it got into the elections business in 2001.

The move seemed like a good idea at the time. The $3 billion public company, whose core products are ATMs, bank vaults and security systems, had just sold 186,000 voting machines to Brazil, where they delivered a quick and clean count in the 2000 presidential elections.

Surely, Diebold reasoned, it could duplicate this success closer to home. "We thought if we got this right," says Thomas Swidarski, the company's CEO and president, "then we could do it across the globe."

But faster than you can say hanging chad, things went wrong. In early 2003, activists found a version of Diebold's secret software on the Internet. The code had so many security flaws that one group would later post a video of a chimpanzee changing votes.
Weeks later, Diebold's then-CEO Walden O'Dell famously wrote to fellow Bush supporters in a fundraising letter that he was committed to "help Ohio deliver its electoral votes to the President." It didn't take long for political activists, many of them already suspicious of the new voting technology, to begin diving through the company's dumpsters and picketing its shareholder meetings.

Though other voting-machine companies have also had their difficulties, it is "the dreaded Diebold," as one blogger on DailyKos refers to it, that stirs up the likes of Michael Moore. "The reason Diebold gets so much heat," says activist Bev Harris, author of "Black Box Voting: Ballot Tampering in the 21st Century," "is not because they're any worse than their competitors. It's because we got more information on them early on."

The drumbeat of bad news has never stopped. This year, researchers have found more security flaws, and another version of the software was leaked. In Maryland, Diebold allegedly knew that some of its machines had defective motherboards but did not replace them for a year. Both candidates for governor there advised their supporters to vote via absentee ballot rather than use Diebold machines.

Rolling Stone published an article alleging that Diebold helped deliver Georgia to the GOP (Diebold calls the story "fiction"). The company is an unwitting star in a new HBO documentary called "Hacking Democracy." Oh, and the SEC is investigating accounting irregularities.

Deep in a corporate nightmare, Diebold is wondering how to shake itself awake. After all, this is a 147-year-old company once headed by Eliot Ness, the storied crime fighter. Internally there is little doubt that the company rues the day it stepped out of its comfort zone and into the maw of electoral politics.

Selling political equipment to politicians is an ugly business - and thanks to lawsuits, lobbying expenses and public relations consultants, the profit margins have been stingy too. (The voting division, which accounts for just 5 percent of the $3 billion company's revenue, only started making money last year.)

But after a close look at Diebold and its operations, it's hard to see the company as evil. Naive? Yes. Ignorant? Sure. Stupid? Sometimes. "We didn't know a whole lot about the elections business when we went into it, "admits Swidarski. "Here we are, a bunch of banking folks thinking making voting machines would be similar to making ATMs. We've learned some pretty painful lessons."

A history of success

A cow, a lantern, and a straw-filled barn made Charles Diebold (pronounced DEE-bold) a household name in the banking world. It was the night of Oct. 8, 1871, when, as legend has it, the Great Chicago Fire started in Mrs. O'Leary's cowshed. When 878 Diebold safes survived with their contents unharmed, business took off.

Canton became known as "Little Germany," thanks to the thousands of immigrants who flocked to work in the Diebold factories. (German immigrants arriving in New York reportedly only had to say "Diebold" for directions to Canton-bound trains.)

By the beginning of the 20th century, the company was making jails, trapdoors for gallows, and padded cells for asylums. During World War II it made armor plating for tanks and airplanes. Then, in the 1960s, the company bet its future on a speculative technology: automated teller machines.

Diebold quickly became a global market leader. But it stayed intensely Midwestern, content to manufacture its machines locally and allow companies like IBM (Charts) to distribute them overseas.

In the mid-1990s, however, when rival NCR (Charts) passed it to become the market leader, Diebold changed tactics and took control of its worldwide distribution (today its share is 30 percent). The company began buying up suppliers around the world, including a Brazilian ATM maker, Procomp Amazonia, in October 1999.

Entering the political sphere

Around the same time, the Brazilian government was looking to fully automate its election system. Procomp got the $106 million contract - Diebold's largest ever - to make 186,000 identical electronic voting machines for the 2000 presidential election.

At the exact same time that Florida's officials were haggling over butterfly ballots, Brazil's were congratulating themselves on a clean and tidy result.

Emboldened by Diebold's success in Brazil, CEO Walden O'Dell set out to ensure that the company got a serious piece of the U.S. elections business.

The first problem was that the Brazilian machines weren't sophisticated enough for the U.S. market and couldn't be certified quickly. So O'Dell needed to buy a company to get into the market for the 2002 midterm elections.

In June 2001, Diebold announced it was acquiring Global Electronic Systems, based in McKinney, Texas, for about $30 million. Global was a $7 million operation that made most of its money printing ballots for its optical-scan reading machine. Its touch-screen system, the Accu-Vote-TS, wasn't a big seller.

Nothing was a big seller then. The elections business was populated by a couple dozen private firms that often literally sold equipment out of the back of their cars. That's because their customers were poor.

U.S. elections are intensely local affairs, run by more than 3,000 separate counties. Buying new equipment was a luxury. If county commissioners had to choose between filling a pothole or buying new voting equipment, the pothole invariably won.

That all changed when Congress passed the Help America Vote Act in 2002. With it came $3.9 billion in grants for states to replace punch-card and mechanical-lever machines and to set up statewide voter lists.

Local election officials soon found themselves inundated by high-powered lobbyists. "I don't think those election boards had ever seen as many dinners out," says Paul Tipps, a prominent Democrat who lobbied for Diebold in Ohio.

With its main rivals - Oakland, Calif.-based Sequoia Voting Systems and Omaha, Neb.-based Election Systems & Software - making inroads in Florida, Diebold targeted other states. In March 2002, just two months after it completed its purchase of Global, Maryland put in a $13 million order to equip four counties with touch-screen machines. In May, Georgia signed a $54 million contract to buy 20,000 Diebold machines.

Early warning signs

After the takeover, the big contracts meant big problems. Diebold had let the Global operation alone, but it just couldn't keep up. Orders were lost, manufacturing fell behind schedule, the technical staff was overwhelmed.

Recalls Swidarski, the unit lacked "the wherewithal really to know how to manage a business. They were doing complex rollouts without the depth or breadth or skill set to deal with what they were going to do."

The same could be said of the customers. Election administrators were often unsophisticated county employees who had been in the job forever. "If we work with Bank of America and they want to roll out 1,000 ATMs, they'll have 25 professional project managers," says Swidarski. "You go to a meeting at a county and you're looking at two people."

It didn't help that Global's touch-screen system, the AccuVote-TS, was flawed from the start. It had purchased the technology from a small company called I-Mark, whose founders had designed it as an unattended voting terminal that could be used in places like shopping malls or supermarkets. "The only problem was they weren't looking at security," says Douglas Jones, a computer science professor at University of Iowa who has been testing voting machines since 1994.

Not quite the only problem. Because there was little demand for touch-screen systems before 2001, Global hadn't spent much on software development. (Jones thinks they needed to start over.)

So the system voters used in 2002 was bug-ridden. Diebold machines crashed early and often, and there was insufficient trained staff to cope with the inevitable problems. (One problem: "vote hopping," where, due to an uncalibrated touch screen, pressing one candidate counted the one next to it.) Even so, after the election, press accounts largely glossed over the problems as isolated hiccups. Orders continued to roll in. And then things fell apart.

Until recently, hardly anyone gave a thought to the mechanics of voting. Even fewer thought about hackers. But in the wake of 2000, the mechanics of voting became politicized.

One key moment came when Bev Harris heard her suburban Seattle county was considering switching to electronic touch-screen machines. Curious, she started trawling the Internet for information - and late one night in January 2003, she discovered a cache of files on an unprotected Diebold server. In it were e-mails between programmers discussing the system's problems.

"Distributing this software is extremely dangerous," a programmer wrote in 2001. "Our smart-card format has absolutely no security, so if someone were to get a copy of this software and a reader, they could stand at the ballot station and quietly burn new voters cards all day.... I can see the cover of USA Today in my head. Consider everyone warned." (Diebold says the problem was fixed before the 2002 elections.)

Digging further, Harris found a version of the company's secret software that ran the machines. She passed it to Avi Rubin, a computer science professor at Johns Hopkins University in Baltimore. Within an hour, Rubin says, he discovered that the software's encryption system was one "everyone knew was broken since 1998." That same day, he found that the administrative password to all the machines was the same: 1-1-1-1.

"It looked like an experimental student project," Rubin says. "If it was my student's project, they would have gotten an F." His report, which came out two days after Maryland had awarded Diebold a $56 million contract for 11,000 touch-screen machines, galvanized those who had always been suspicious of electronic voting.

The company pointed out in a 27-page retort that the software wasn't in use and that there were checks and balances to prevent fraud. The response didn't satisfy the skeptics; an avalanche of criticism - some of it thoughtful, some of it wacko - began to bear down.

In 2004, California decertified Diebold machines and joined a civil lawsuit filed by Bev Harris that alleged Diebold lied when it said its equipment had been federally certified. The company admitted no guilt but agreed to settle, paying California $2.6 million.

At the same time, it continued to have manufacturing problems, once shutting down production because the touch-screen machines were malfunctioning. (It took a year to replace the defective motherboards.)

Changing gears

Soon, Swidarski, then a senior marketing executive in the ATM unit, took over the elections business. "The board understands, as best anyone can, the volatile nature of the business/media and that politics are involved," Swidarski wrote in an e-mail to his deputies in the elections division. "However, the board cannot understand how the [Secretary of State] of [California] indicates that we have lied, misled, and withheld information."

Swidarski fired many Global staff and brought in a new boss from Canton, Dave Byrd, to run the business. The voting unit began to operate more smoothly, grossing $150 million in 2005 and making a small profit.

In December 2005, the board pushed O'Dell out and named Swidarski CEO. Just as he did with the elections business, Swidarski cleaned house: Only two of the seven top executives he inherited are still at Diebold today.

Swidarski is cut from a different cloth than his predecessor. O'Dell liked deals and was frankly bored by ATMs; he loved being known as one of Bush's Pioneers - generous Republican donors. A former senior executive with Emerson Electric, O'Dell's top priority was to make the numbers.

Swidarski, by contrast, is more focused on the customers than he is on Wall Street. (He refuses to give quarterly earnings guidance.) A former marketing executive at PNC Bank in Pittsburgh, he is straightforward and unpretentious. In his short tenure as CEO, he has changed the mood at Canton. "This place is dramatically different from a year ago," says CFO Kevin Krakora, "almost night and day."

Smart Business 100, Swidarski's $100 million plan to cut costs and increase customer service, is beginning to show dividends. Since fading to less than $35 in September 2005, Diebold's stock is now at $42. Profits dropped 41 percent last year, but were still a healthy $161 million on $2.6 billion of revenue.

Diebold looks set to beat those numbers this year. "The new management team," says Gil Luria, a research analyst at Wedbush Morgan Securities, "seems to be on top of what they really need to do to turn around the company." Krakora puts it simply, "This company prints cash."

Dubious voting

But its voting machines continue to attract scorn. In August, Edward Felten, a computer-science professor at Princeton University, got his hands on a Diebold machine similar to those still used in Georgia. With the help of two graduate students, he posted a video online that showed him infiltrating and installing a virus in what appears to be less than a minute.

Felten found that the key to the lock protecting the memory card, which is used to both update the software and record votes, was one commonly used in office furniture and even hotel minibars. Once the door to the slot was open, he could slip in a virus-infested memory card and alter votes. "We were completely floored by how easy it was," Felten says.

Diebold disputes the accuracy, integrity and plausibility of the Princeton study, pointing out that Felten's team used an old machine with two-year-old software not in use today. Plus, the team had four months to figure it all out.

"The report all but ignores physical security and election procedures," says Mark Radke, marketing director of Diebold Election Systems. "Every local jurisdiction secures its voting machines - every voting machine, not just electronic machines. Electronic machines are secured with security tape and numbered security seals that would reveal any sign of tampering."

Therein lies the rub, says Michael Shamos, a computer-science professor at Carnegie Mellon University who has been testing election equipment since 1980.

"Diebold doesn't fully get it about security," he says. "Their position every time somebody raises the prospect of insider manipulation of elections is, 'Are you telling me you think that these election officials would commit a felony?' And the answer is, 'Yes, that's what we're saying. They might commit a felony, and what is your system doing to prevent them?'"

Even so, Shamos doesn't completely buy the Princeton study. "What Felten found wasn't a bug in the software," he says. "It was a deliberate feature that comes from the need to be able to update the machines quickly."

Felten, he says, makes it seem like anyone with a memory card could go into a Diebold machine, root around and swing an election. Shamos points out that since the machines aren't networked, a virus would have to be tailored to the ballot and inserted into each machine one wanted to manipulate. That's a lot more work - and a lot more opportunities to screw up - than it looks like on video.

A national rollout of almost any product is bound to have glitches. But when elections depend upon the product in a country whose politics are scarred by distrust, there is little tolerance for error.

The problem critics had with the early touch-screen systems was the lack of a tangible way - such as the kind of receipt consumers get at ATM machines - to verify results. (Oddly, few made this complaint about lever machines.)

Though about half of the touch-screen systems in use today provide an audit trail that voters can see, that presents its own problems, such as installing the paper or keeping it from jamming.

What really gets the critics going, though, is the possibility of stealing or "editing" votes by the bundle, either in a specific precinct or, worse, by hacking into a central database. As William "Boss" Tweed, who effectively ran New York City in the mid-1800s, once noted, "The ballots made no result; the counters made the result."

Diebold's critics say that is the problem. But for all the sound and fury swirling around the company, there has not been a single confirmed incident of tampering with a Diebold or any other electronic machine; it's much more difficult to write a computer virus than to tinker with a ballot box. (Ah, say the critics, but prove it hasn't happened.)

So what's the prediction for this election? The primaries were a mixed bag. One big story was that Florida was not a story, but there were problems elsewhere, from poll workers unable to boot up the machines, to transmission problems, to unexpected screen freezes.

"History shows us it always takes at least three good-sized elections before we have any new system down," says Doug Lewis, the executive director of the Election Center, an organization that represents and trains local election administrators. "It would be a miracle if there weren't problems in this election."

As for Diebold, Swidarski is questioning whether the election business "fits into our product portfolio." He says he'll make a decision within the next three months. But it says something that Swidarski recently ordered the name "Diebold" removed from the front of the voting equipment. Why? A spokesman would only say, "It was a strategic decision on the part of the corporation."

Reporter associate Susan Kaufman contributed to this article.

Report: Voting Machines Can be Compromised, But Safeguards in Place
Susan Haigh

The new voting machines that will be used in 25 Connecticut cities and towns next week are vulnerable to tampering, but state officials are taking steps to prevent that, according to a report released Tuesday by the University of Connecticut.

The optical scan devices, which automatically read paper ballots filled out by voters, can be compromised in a matter of minutes by tactics such as neutralizing one candidate so his or her votes aren't counted or swapping the votes of two candidates, the report said.

"Such tabulation corruptions can lay dormant until the Election Day, thus avoiding detection through pre-election tests," according to the report.

But the authors of the report credit the secretary of the state's office for implementing new security procedures to protect the machines.

A team of UConn professors known as the Voting Technology Research Center is advising the secretary of the state's office. Alex Shvartsman, a computer science and engineering professor, who heads up the group, said the state has implemented strict rules for how the machines get from the supplier to polling places, tamper-resistant packaging of the machines and planned postelection audits.

"If nobody touches the devices, if there is an unbroken chain of custody from the supplier to the polling place, then we're very confident that nothing can go wrong with them - short of a mechanical malfunction," Shvartsman said.

The optical scan machines are first being used in 25 towns this election, replacing the old mechanical lever machines. The rest of the state will use the new machines next year. Nearly 330,000 voters will be affected this year.

With the new system, voters fill out a paper ballot similar to a bubble sheet used for a standardized test and then scan it into a machine for verification. The technology also provides a paper trail for every vote cast, which Shvartsman said makes the devices more reliable than touch screen and other electronic voting machines.

Secretary of the State Susan Bysiewicz said the report confirms that optical scan machines are the most secure form of voting technology.

"When we considered possible new voting technologies, security was paramount," she said.

But one of her political opponents, Green Party candidate Mike DeRosa, said the report raises concerns about the manufacturer of the new machines, Diebold Election Systems of Ohio, whose machines have been criticized around the country for various malfunctions. He suggested the state should hire technical experts to service the machines.

"We need to have professionalization of our electoral process in Connecticut," DeRosa said.

But Bysiewicz has said Massachusetts-based LHS Associates Inc., not Diebold, designed the machines. Diebold acquired LHS and submitted a bid to the state to provide its electronic machines and LHS's optical scan machines, she said. The state rejected the Diebold-designed machines, Bysiewicz said.

According to the report, the UConn professors determined that a laptop computer user with a simple computer cable can obtain information from the memory cards of the optical scan machines. They also determined there are ways to feed multiple ballots into the machine when an attendant is not watching.

"Poll workers must not be allowed to take their eyes off the machines, and should be wary of attempts at distraction," the report reads.

Shvartsman said he believes the local poll workers are ready for the job.

"I've seen some of these silver-haired ladies and they're tough," he said. "I think we're in good hands."

The new voting machines are helping Connecticut meet the requirements of a federal law enacted after the chaotic Florida recount in the presidential election in 2000.

U.S. Investigates Voting Machines’ Venezuela Ties
Tim Golden

The federal government is investigating the takeover last year of a leading American manufacturer of electronic voting systems by a small software company that has been linked to the leftist Venezuelan government of President Hugo Chávez.

The inquiry is focusing on the Venezuelan owners of the software company, the Smartmatic Corporation, and is trying to determine whether the government in Caracas has any control or influence over the firm’s operations, government officials and others familiar with the investigation said.

The inquiry on the eve of the midterm elections is being conducted by the Committee on Foreign Investment in the United States, or Cfius, the same panel of 12 government agencies that reviewed the abortive attempt by a company in Dubai to take over operations at six American ports earlier this year.

The committee’s formal inquiry into Smartmatic and its subsidiary, Sequoia Voting Systems of Oakland, Calif., was first reported Saturday in The Miami Herald.

Officials of both Smartmatic and the Venezuelan government strongly denied yesterday that President Chávez’s administration, which has been bitterly at odds with Washington, has any role in Smartmatic.

“The government of Venezuela doesn’t have anything to do with the company aside from contracting it for our electoral process,” the Venezuelan ambassador in Washington, Bernardo Alvarez, said last night.

Smartmatic was a little-known firm with no experience in voting technology before it was chosen by the Venezuelan authorities to replace the country’s elections machinery ahead of a contentious referendum that confirmed Mr. Chávez as president in August 2004.

Seven months before that voting contract was awarded, a Venezuelan government financing agency invested more than $200,000 into a smaller technology company, owned by some of the same people as Smartmatic, that joined with Smartmatic as a minor partner in the bid.

In return, the government agency was given a 28 percent stake in the smaller company and a seat on its board, which was occupied by a senior government official who had previously advised Mr. Chávez on elections technology. But Venezuelan officials later insisted that the money was merely a small-business loan and that it was repaid before the referendum.

With a windfall of some $120 million from its first three contracts with Venezuela, Smartmatic then bought the much larger and more established Sequoia Voting Systems, which now has voting equipment installed in 17 states and the District of Columbia.

Since its takeover by Smartmatic in March 2005, Sequoia has worked aggressively to market its voting machines in Latin America and other developing countries. “The goal is to create the world’s leader in electronic voting solutions,” said Mitch Stoller, a company spokesman.

But the role of the young Venezuelan engineers who founded Smartmatic has become less visible in public documents as the company has been restructured into an elaborate web of offshore companies and foreign trusts.

“The government should know who owns our voting machines; that is a national security concern,” said Representative Carolyn B. Maloney, Democrat of New York, who asked the Bush administration in May to review the Sequoia takeover.

“There seems to have been an obvious effort to obscure the ownership of the company,” Ms. Maloney said of Smartmatic in a telephone interview yesterday. “The Cfius process, if it is moving forward, can determine that.”

The concern over Smartmatic’s purchase of Sequoia comes amid rising unease about the security of touch-screen voting machines and other electronic elections systems.

Government officials familiar with the Smartmatic inquiry said they doubted that even if the Chávez government was some kind of secret partner in the company, it would try to influence elections in the United States. But some of them speculated that the purchase of Sequoia could help Smartmatic sell its products in Latin America and other developing countries, where safeguards against fraud are weaker.

A spokeswoman for the Treasury Department, which oversees the foreign investment committee, said she could not comment on whether the panel was conducting a formal investigation.

“Cfius has been in contact with the company,” said the spokeswoman, Brookly McLaughlin, citing discussions that were first disclosed in July. “It is important that the process is conducted in a professional and nonpolitical manner.”

The committee has wide authority to review foreign investments in the United States that might have national security implications. In practice, though, it has focused mainly on foreign acquisitions of defense companies and other investments in traditional security realms.

Since the political furor over the Dubai ports deal, members of Congress from both parties have sought to widen the purview of such reviews to incorporate other emerging national security concerns.

In late July, the House and the Senate overwhelmingly approved legislation to expand the committee’s scope, give a greater role to the office of the director of national intelligence and strengthen Congressional oversight of the review process.

But the Bush administration opposed major changes, and Congressional leaders did not act to reconcile the two bills before Congress adjourned.

Foreigners seeking to buy American companies in areas like defense manufacturing typically seek the committee’s review themselves before going ahead with a purchase. Legal experts said it would be highly unusual for the panel to investigate a transaction like the Sequoia takeover, and even more unusual for the panel to try to nullify the transaction so long after it was completed.

It is unclear, moreover, what the government would need to uncover about the Sequoia sale to take such an action.

The investment committee’s review typically involves an initial 30-day examination of any transactions that might pose a threat to national security, including a collective assessment from the intelligence community. Should concerns remain, one of the agencies involved can request an additional and more rigorous 45-day investigation.

In the case of the ports deal, the transaction was approved by the investment committee. But the Dubai company later abandoned the deal, agreeing to sell out to an American company after a barrage of criticism by legislators from both parties who said the administration had not adequately reviewed the deal or informed Congress about its implications.

The concerns about possible ties between the owners of Smartmatic and the Chávez government have been well known to United States foreign-policy officials since before the 2004 recall election in which Mr. Chávez, a strong ally of President Fidel Castro of Cuba, won by an official margin of nearly 20 percent.

Opposition leaders asserted that the balloting had been rigged. But a statistical analysis of the distribution of the vote by American experts in electronic voting security showed that the result did not fit the pattern of irregularities that the opposition had claimed.

At the same time, the official audit of the vote by the Venezuelan election authorities was badly flawed, one of the American experts said. “They did it all wrong,” one of the authors of the study, Avi Rubin, a professor of computer science at Johns Hopkins University, said in an interview.

Opposition members of Venezuela’s electoral council had also protested that they were excluded from the bidding process in which Smartmatic and a smaller company, the Bizta Corporation, were selected to replace a $120 million system that had been built by Election Systems and Software of Omaha.

Smartmatic was then a fledgling technology start-up. Its registered address was the Boca Raton, Fla., home of the father of one of the two young Venezuelan engineers who were its principal officers, Antonio Mugica and Alfredo Anzola, and it had a one-room office with a single secretary.

The company claimed to have only two going ventures, small contracts for secure communications software that a Smartmatic spokesman said had a total value of about $2 million.

At that point, Bizta amounted to even less. Company documents, first reported in 2004 by The Herald, showed the firm to be virtually dormant until it received the $200,000 investment from a fund controlled by the Venezuelan Finance Ministry, which took a 28 percent stake in return.

Weeks before Bizta and Smartmatic won the referendum contract, the government also placed a senior official of the Science Ministry, Omar Montilla, on Bizta’s board, alongside Mr. Mugica and Mr. Anzola. Mr. Montilla, The Herald reported, had acted as an adviser to Mr. Chávez on elections technology.

More recent corporate documents show that before and after Smartmatic’s purchase of Sequoia from a British-owned firm, the company was reorganized in an array of holding companies based in Delaware (Smartmatic International), the Netherlands (Smartmatic International Holding, B.V.), and Curaçao (Smartmatic International Group, N.V.). The firm’s ownership was further shielded in two Curaçao trusts.

Mr. Stoller, the Smartmatic spokesman, said that the reorganization was done simply to help expand the company’s international operations, and that it had not tried to hide its ownership, which he said was more than 75 percent in the hands of Mr. Mugica and his family.

“No foreign government or entity, including Venezuela, has ever held any stake in Smartmatic,” Mr. Stoller said. “Smartmatic has always been a privately held company, and despite that, we’ve been fully transparent about the ownership of the corporation.”

Mr. Stoller emphasized that Bizta was a separate company and said the shares the Venezuelan government received in it were “the guarantee for a loan.”

Mr. Stoller also described concerns about the security of Sequoia’s electronic systems as unfounded, given their certification by federal and state election agencies.

But after a municipal primary election in Chicago in March, Sequoia voting machines were blamed for a series of delays and irregularities. Smartmatic’s new president, Jack A. Blaine, acknowledged in a public hearing that Smartmatic workers had been flown up from Venezuela to help with the vote.

Some problems with the election were later blamed on a software component, which transmits the voting results to a central computer, that was developed in Venezuela.

Simon Romero contributed reporting from Caracas, Venezuela.

More State Delay Possible on New Voting Machines
Marc Humbert

Already the worst in the nation for complying with new voting standards, New York may again stretch the deadline for counties to order new voting machines, raising new fears about whether they will be available for next year's elections, a state official said Tuesday.

Lee Daghlian, a spokesman for the state Board of Elections, said the board may decided at its meeting on Wednesday to push back the required date for counties to order the machines to "late January or sometime in February."

The deadline had already been shoved back to early January from mid-December.

Daghlian said slower-than-expected state testing of new machines to replace the decades old lever-action machines still used in New York was responsible for the possible new delay.

The state board spokesman said that even with the new delay, New York could possibly make the state-mandated 2007 election deadline for the new machines.

"But if it keeps getting lengthened we might not make it," Daghlian said.

Bo Lipari, a representative of the League of Women Voters on a state advisory panel dealing with replacing voting machines, was less optimistic than Daghlian.

"A delay like this probably puts the nail in the coffin for replacing lever machines in 2007," said Lipari, who is also executive director of New Yorkers for Verified Voting.

New York has been slower than all other states in complying with the federal Help America Vote Act adopted in the wake of the disputed 2000 presidential election. The U.S. Justice Department sued New York earlier this year to force it to install new voting machines for the disabled and compile statewide voter registration lists in time for this year's elections. A court settlement was negotiated to bring New York into compliance.

Nonetheless, state officials are also facing a state-adopted law requiring that the lever-action machines still being used by voters this year be replaced by the 2007 election.

Also at issue is about $50 million already received by the state in federal aid to help pay for the voter system upgrade. State officials have asked federal officials not to require the return of those funds.

E-Voting State by State: What You Need To Know
Angela Gunn

Many Americans will head to the polls for November's midterm elections with less certainty than ever about how -- or whether -- their votes will be counted.

Two years after the controversy-plagued 2004 elections, four years after HAVA (the Help America Vote Act) was passed, and six years after the Supreme Court and America romanced the hanging chad, experts are bracing for yet another wave of challenges to regional vote-counting systems.

One-third of us will use voting machines that have never before served in a general election. Legal challenges to paperless DRE (direct-recording electronic) voting technologies are proliferating across the country, and as computer scientists demonstrated earlier this year, hacking challenges to many of these machines can bear fruit even faster than demands for recounts.

Election-reform watchdog groups haven't kept pace with the massive funding influx and official support that the move to electronic voting has experienced. (Nor, critics say, have they enjoyed the close relationships that exist between many of the e-voting suppliers and government officials in charge of framing the rules for the acquisition of such machines.) But watchdogs and critics have made good use of available resources, especially the Web and the blogosphere, to discuss their findings and keep the issue alive as HAVA implementation has lurched into place.

It's a lot to keep up with, especially since most of us would rather be thinking about who to vote for, not how we'll do it -- and certainly not about what might go wrong. To that end, Computerworld.com presents what you need to know for each of the 50 states and the District of Columbia. You'll find out what equipment and systems are in place for voter registration and polling, any significant legal challenges to the systems, previous Computerworld coverage of individual states, selected coverage from other media, and links to government watchdog sites. We've also got concise FAQ-style information on the vendors, technologies and laws that are important to the issue. Finally, since e-voting is beginning to attract attention in the culture at large, we've asked watchdog Brad Friedman to review one of the highest-profile projects on the horizon: the HBO documentary Hacking Democracy, premiering Nov. 2.

Florida Ballot Terminals Favor Republicans
Thomas C Greene

Florida voters using electronic ballot machines are having persistent problems choosing Democrats in early elections, the Miami Herald reports.

The touch-screen gizmos seem strangely attracted to Republican candidates. One voter needed assistance from an election official, and even then, needed three tries to convince the machine that he wanted to vote for Democrat Jim Davis in the gubernatorial race, not his Republican opponent Charlie Crist.

Another voter who went Democrat across the board kept finding Republicans listed in the summary screen. He made repeated attempts until, finally, the machine registered his votes correctly, and he cast his ballot.

Yet another frustrated voter who complained of difficulties selecting a Democrat was told that the machine she was using had been troublesome. Poll workers fiddled with it for a bit, and then it seemed to work properly.

Apparently, this happens all the time. According to the Herald, "Broward County Supervisor of Elections spokeswoman Mary Cooney said it's not uncommon for screens on heavily used machines to slip out of sync, making votes register incorrectly. Poll workers are trained to recalibrate them on the spot - essentially, to realign the video screen with the electronics inside. The 15-step process is outlined in the poll-worker's manual."

Well that's a relief. Only we have to wonder, if the screens "slip out of sync," might other components do so as well? And why are poll workers permitted to fiddle with the machines?

Unfortunately, the article (http://www.rawstory.com/showoutartic...s/15869924.htm) tells us little. It sounds as if the machines are of poor quality, but the paper neglects to mention the manufacturer(s) responsible for them. The elections supervisor's spokesperson seems altogether too comfortable with the notion that the machines are unreliable. 'They do that all the time?'

With early elections already underway, it looks as if Florida will again be in the headlines for the wrong reasons, as it so often is.

Dutch Government Scraps Plans to Use Voting Computers in 35 Cities Including Amsterdam

Voters in Amsterdam and 34 other Dutch cities may be using paper and pencil instead of computerized voting machines in national elections next month.

The government on Monday banned the use of one common type of computer voting machine, fearing that secret ballots may not be kept secret. It ordered a review of all electronic machines after the Nov. 22 election.

Government Renewal Minister Atzo Nicolai said the move was necessary after an investigation found the machines made by Sdu NV emitted radio signals that a technology-savvy spy could use to peek at a voters' choices from a distance of up to several dozen meters (yards).

"What can be detected is the image on the screen that's visible to the voter, by which his voting could be monitored," Nicolai said in a letter to parliament.

"In short, the machines made by the company Sdu can now be tapped, and there are no technical measures that can be taken before the upcoming elections that would prevent this tapping and guarantee the secrecy of the ballot."

He said he had revoked the permits for all the machines, about 10 percent of all voting machines used in the country.

A sample of the other machines used in next month's vote will be tested before the results are certified to ensure against fraud, Nicolai said.

The turnabout came after a group called "We Don't Trust Voting Computers" protested the vulnerability of electronic voting to fraud or manipulation.

"I think this will have repercussions far beyond Holland" said Rop Gonggrijp, one of the group's founders, after Monday's announcement.

"Holland was one of the first countries to use e-voting widely, certainly in Europe, and it has played a leading role in adoption of voting machines, so it's only natural that Holland be one of the first to realize there are drawbacks," he said, calling the adoption of voting machines a "hasty decision."

Officials with Sdu, the maker of the banned "NewVote" voting machines, could not immediately be reached for comment. Dutch media cited a company executive saying the machines were built to government specifications and he was planning to protest the decision.

The Dutch parliament summoned Nicolai to defend the decision in an extra session Tuesday.

"I realize what this change to the voting process means for these 35 cities" Nicolai wrote. He asked voting councils, the Interior Ministry and other election-related groups to help come up with alternatives quickly.

The City of Amsterdam said in a statement it now plans to use a traditional paper ballot and red-colored pencils. "We'll have to pull those red pencils out of the basement again and sharpen them up," mayor Job Cohen told NOS news.

Machines, made by Nedap NV, are widely used in Germany, France and other European countries.

Gonggrijp predicted that many local and national governments will stop using current models of Nedap and other voting machines within a year.

But the chief technical officer of Nedap's voting systems division said he was confident the machines were secure.

"Nedap is pleased about the concerns and that people are becoming interested in the functioning of voting systems, since that's the cornerstone of democracy," said Matthijs Schippers.

He said the machines were no less vulnerable to fraud than paper ballots, which also can be manipulated if unprotected.

"Anybody can do it."

American Election Hacker Testifies

American computer programmer Clinton Eugene Curtis is seen in this video testifying under oath in front of the U.S. House Judiciary Members in Ohio.

He tells the members how he was hired by Congressman Tom Feeney in 2000 to build a prototype software package that would secretly rig an election to sway the result 51 / 49 to a specified side.

He explains that it would be undetectable and only takes 100 lines of code to implement, watch it and then think about where your vote is really going

Editor’s note: The official accused at the 2004 forum has denied all allegations. – Jack.

Diebold Demands That HBO Cancel Documentary on Voting Machines

Film saying they can be manipulated 'inaccurate'
Michael Janofsky

The program, "Hacking Democracy," is scheduled to debut Thursday, , five days before the 2006 U.S. midterm elections. The film claims that Diebold voting machines aren't tamper-proof and can be manipulated to change voting results.

"Hacking Democracy" is "replete with material examples of inaccurate reporting," Diebold Election System President David Byrd said in a letter to HBO President and Chief Executive Chris Albrecht posted on Diebold's Web site. Short of pulling the film, Monday's letter asks for disclaimers to be aired and for HBO to post Diebold's response on its Web site.

According to Byrd's letter, inaccuracies in the film include the assertion that Diebold, whose election systems unit is based in Allen, Texas, tabulated more than 40 percent of the votes cast in the 2000 presidential election.

The letter says Diebold wasn't in the electronic voting business in 2000, when disputes over ballots in Florida delayed President Bush's victory for more than a month and raised questions about the reliability of electronic voting machines.

"We stand by the film," said Jeff Cusson, a spokesman for HBO, which is a unit of Time Warner Inc.

"We have no intention of withdrawing it from our schedule. It appears that the film Diebold is responding to is not the film HBO is airing."

David Bear, a spokesman for Diebold, said the company bought another firm, Global Elections, in 2002 that served about 8 percent of balloting in 2000, including voters in Florida. The company, which hasn't seen the film, based its complaints on material from the HBO Web site, Bear said.

This is Diebold's second recent defense of its system. On Sept. 26, Byrd wrote to Jann Wenner, editor and publisher of Rolling Stone, saying a story written by Robert F. Kennedy Jr., "Will the Next Election Be Hacked?" was "error-riddled" and that readers "deserve a better researched and reported article."

The HBO documentary is based on the work of Bev Harris, the Renton woman who founded BlackBoxVoting.org, which monitors election accuracy. In 2004 the attorney general of California took up a whistle-blower claim filed by Harris against Diebold and settled with the company for $2.6 million in December.

Grading Congress on High-Tech Cred

CNET News.com ranks every member of the U.S. Congress based on their technology-related votes. Some aren't happy about their score.
Declan McCullagh and Anne Broache

Ever since the mid-1990s, politicians have grown fond of peppering their speeches with buzzwords like broadband, innovation and technology.

John Kerry, Al Gore and George W. Bush have made fundraising pilgrimages to Silicon Valley to ritually pledge their support for a digital economy.

But do politicos' voting records match their rhetoric? To rate who's best and who's worst on technology topics before the Nov. 7 election, CNET News.com has compiled a voter's guide, grading how representatives in the U.S. Congress have voted over the last decade.

While many of the scored votes centered on Internet policy, others covered computer export restrictions, H-1B visas, free trade, research and development, electronic passports and class action lawsuits. We excluded the hot-button issue of Net neutrality, which has gone only to a recorded floor vote in the House of Representatives so far, because that legislation has generated sufficient division among high-tech companies and users to render it too difficult to pick a clear winner or loser.

The results were surprisingly mixed: In the Senate, Republicans easily bested Democrats by an average of 10 percent. In the House of Representatives, however, Democrats claimed a narrow but visible advantage on technology-related votes.

Many high scorers came from Silicon Valley, the birthplace of a laissez-faire attitude toward Internet taxation and regulation. Also unsurprising was George Allen, a first-term Virginia Republican who won the top score in the Senate, at 78 percent, after becoming chairman of the Senate High Tech Task Force five years ago.

A less obvious winner was Rep. Ron Paul, a Texas Republican who represents a rural district along the Gulf Coast that's home to few Web 2.0 start-ups but plenty of cattle ranchers and petrochemical companies. He topped the House rankings with a score of 80 percent, narrowly besting two Northern California Democrats.

"I believe strongly in protecting the Internet," Paul said in an interview. "My colleagues aren't quite as interested in the subject. That, to me, is disappointing."

To create our 2006 News.com scorecard, we selected 20 representative votes in the U.S. House of Representatives and 16 votes in the U.S. Senate. Then we wrote a computer program to download, sort and tabulate approximately 10,400 individual "yeas" or "nays."

To be sure, no political scorecard can satisfy everyone, and all scorecards require making difficult choices. When compiling our votes, we paid close attention to votes on Internet taxes and free trade, which trade associations have long viewed as key factors when evaluating a politician's record. We also included votes on amendments requiring additional reporting to Congress about which electronic surveillance techniques the FBI employs.

Overall, we rewarded politicians who viewed Web sites and computer software as deserving no more regulation than, say, books and magazines--an approach that handed poorer scores to anyone clamoring for new laws. That principle led us to take a dim view of a call for a federal probe of "Grand Theft Auto: San Andreas" and a proposal to target social-networking sites like MySpace.com.

We also awarded points for votes for other longtime favorites of technology companies, such as renewing the research and development tax credit, and curbing class action lawsuits, which lobby group TechNet counted as a priority last year.

Similarly, we gave poor grades to politicians who supported laws that were either duplicative or not effective. Those included the 2003 Can-Spam Act--which zapped tougher state laws and hardly stemmed the flow of junk e-mail--and regulations said to thwart spyware that the Department of Justice and the Federal Trade Commission both say are unnecessary.

Unfortunately, Congress' tendency to shy away from recorded votes means that some important events were not available to score. Bills such as the Family Entertainment and Copyright Act, a Web content-labeling measure, and a high-performance computing measure were approved by voice vote without a record of individual politicians' choices.

Only the winners applaud
Winners reached by News.com did not quibble with their scores. Republican Sen. Mike Crapo of Idaho, who came in second in the Senate with a score of 73 percent, sent us a statement reiterating his commitment to limited regulation and Internet taxation. He told us in an e-mail, "It is important to take every opportunity to support the technology industry, both in my home state of Idaho and nationwide."

Maria Cantwell, a former RealNetworks executive running for a second term in Washington state, landed the top spot among Senate Democrats with a score of 67 percent. "Washington's technology sector is vital to our state's economy," campaign spokeswoman Amanda Mahnke said. "Given her background working in this field, Sen. Cantwell is particularly proud to help support northwest innovation in the Senate."

The losers, on the other hand, complained bitterly about the choice of votes. Sen. John Kerry, the 2004 Democratic presidential candidate, voted in the pro-tech direction in only 2 of 13 votes. That put in him second-to-last place in the Senate, with a score of just 15 percent.

"The methodology behind this scorecard is cuckoo for cocoa puffs," Kerry spokesman David Wade said. "He's been a leader on Net neutrality, helped write the first Internet tax moratorium, and built a coalition of tech leaders and mayors to fight for broadband deployment."

But the Massachusetts Democrat has frequently taken a pro-Internet tax stance. Kerry voted in 1998 to require a supermajority in both the House and the Senate to renew the Internet tax moratorium; and he voted in 2001 against making the moratorium permanent. He also opposed killing an amendment that would encourage online taxation. (Kerry skipped the fourth tax vote, which was held during the 2004 presidential campaign.)

Similarly, a spokeswoman for Democrat Daniel Akaka of Hawaii, the worst-scoring senator, at just 14 percent, claimed that her boss was "not only a friend to the tech industry but also a protector of its future." Akaka scored well on just 2 of 14 votes.

"Sen. Akaka voted in favor of protecting our national security and the American consumer," spokeswoman Donalyn Dela Cruz said. "More specifically, a couple of the votes dealt with protection of our children using the Internet, and another was on a provision contained in the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror and Tsunami Relief. In these cases, his votes do not reflect on his support for the tech industry."

Akaka voted in 1995 for the Communications Decency Act, opposed not only by civil libertarians but also by Microsoft, America Online, Netcom, Compuserve and Prodigy, which jointly sued to overturn it. (In 1997, the U.S. Supreme Court gutted the law as unconstitutional.) In addition, Akaka voted for a so-called emergency appropriations bill last year that contained the controversial Real ID Act, which creates a nationalized digital ID card under the direction of the Department of Homeland Security.

The 30-second hit piece threat
Top-scoring politicians said some bills, especially ones that proponents couched in terms of protecting children from Internet dangers, were politically difficult to oppose.

Rep. Paul, a physician and Texas Republican, has been in a tense re-election campaign with Democratic cattle rancher Shane Sklar. Sklar has been running advertisements questioning Paul's voting record--and especially focusing on Internet-related votes.

"It's the No. 1 issue being used in the campaign against me," said Paul, who has a reputation on Capitol Hill for putting principle before politics. "You do know when you're voting a certain way that it may come back to politically haunt you in the campaign."

Sklar's Web site, for instance, says Paul "has repeatedly voted against legislation designed to catch online child predators"--without noting the constitutional objections that Paul raised at the time.

"I have a personal belief that the responsibility of raising kids, educating kids and training kids is up to the parents and not the state," Paul said. "Once the state gets involved, it becomes too arbitrary."

Like Paul, Democratic Rep. Zoe Lofgren, who represents the district around San Jose, Calif., was in a tiny minority when voting against the Can-Spam Act. She also opposed the Deleting Online Predators Act, which proposes yanking federal dollars from schools and libraries that fail to block MySpace and other social-networking sites. (In July, the House approved that measure by an overwhelming 410-to-15 vote, but it has stalled since then.)

"If you take a look at some of these issues, it's really kind of grandstanding," Lofgren said in a telephone interview. "If you don't come from a tech-rich district, and you know it's going to be a 30-second hit piece ad someplace in the middle of the country, I think that explains it, and that's why (the Republicans scheduled that vote), too--to try to kind of set people up for elections."

The Map

Group of University Researchers to Make Web Science a Field of Study
Steve Lohr

The Web has become such a force in commerce and culture that a group of leading university researchers now deems it worthy of its own field of study.

The Massachusetts Institute of Technology and the University of Southampton in Britain plan to announce today that they are starting a joint research program in Web science.

Tim Berners-Lee, who invented the Web’s basic software, is leading the program. An Oxford-educated Englishman, Mr. Berners-Lee is a senior researcher at M.I.T., a professor at the University of Southampton and the director of the World Wide Web Consortium, an Internet standards-setting organization.

Web science, the researchers say, has social and engineering dimensions. It extends well beyond traditional computer science, they say, to include the emerging research in social networks and the social sciences that is being used to study how people behave on the Web. And Web science, they add, shifts the center of gravity in engineering research from how a single computer works to how huge decentralized Web systems work.

“The Web isn’t about what you can do with computers,” Mr. Berners-Lee said. “It’s people and, yes, they are connected by computers. But computer science, as the study of what happens in a computer, doesn’t tell you about what happens on the Web.”

The Web science program is an academic effort, but corporate technology executives and computer scientists said the research could greatly influence Web-based businesses. They pointed in particular to research by Mr. Berners-Lee and others to build more “intelligence” into the Web — moving toward what is known as the Semantic Web — as an area of study that could yield a big payoff.

Web science represents “a pretty big next step in the evolution of information,” said Eric E. Schmidt, the chief executive of Google, who is a computer scientist. This kind of research, Mr. Schmidt added, is “likely to have a lot of influence on the next generation of researchers, scientists and, most importantly, the next generation of entrepreneurs who will build new companies from this.”

Web science is related to another emerging interdisciplinary field called services science. This is the study of how to use computing, collaborative networks and knowledge in disciplines ranging from economics to anthropology to lift productivity and develop new products in the services sector, which represents about three-fourths of the United States economy. Services science research is being supported by technology companies like I.B.M., Accenture and Hewlett-Packard, and by the National Science Foundation.

Web science research, said Irving Wladawsky-Berger, a technology strategist at I.B.M. and visiting professor at M.I.T., is “a prerequisite to designing and building the kinds of complex, human-oriented systems that we are after in services science.”

Mr. Berners-Lee and his colleagues at the M.I.T. Computer Science and Artificial Intelligence Lab and in Britain have had preliminary discussions with government agencies in the United States and Europe that finance scientific research, as well as with leading technology companies. But Mr. Berners-Lee said his group had decided to publicly circulate their ideas about Web science before trying to attract government, foundation and corporate funding.

With initial support from M.I.T. and the University of Southampton, the program will hold workshops on Web science and sponsor research fellowships. “But we also want to educate and train people who can understand and analyze how these huge, complex systems on the Web work,” said Wendy Hall, a professor at the University of Southampton. “That means eventually having undergraduate and graduate programs in Web science.”

The M.I.T.-Southampton partnership, the researchers emphasized, is intended as a catalyst for Web science research at universities worldwide.

Privacy, for example, will be one area of research in Web science. The traditional approach to protecting privacy has been to restrict access to databases containing personal information. But so much personal information is already available on the Web, often given voluntarily on sites like MySpace and Facebook, that the old approach will not work, said Daniel J. Weitzner, technology and society director at the Web consortium.

On the Web, Mr. Weitzner said, a better way to try to guard privacy may be to develop rules, backed by accountability and sanctions, for how personal information is used by businesses, government agencies and individuals.

Ben Shneiderman, a professor at the University of Maryland, said Web science was a promising idea. “Computer science is at a turning point, and it has to go beyond algorithms and understand the social dynamics of issues like trust, responsibility, empathy and privacy in this vast networked space,” Professor Shneiderman said. “The technologists and companies that understand those issues will be far more likely to succeed in expanding their markets and enlarging their audiences.”

Pentagon Boosts 'Media War' Unit

The US defence department has set up a new unit to better promote its message across 24-hour rolling news outlets, and particularly on the internet.

The Pentagon said the move would boost its ability to counter "inaccurate" news stories and exploit new media.

Defence Secretary Donald Rumsfeld said earlier this year the US was losing the propaganda war to its enemies.

On Monday, Vice-President Dick Cheney said insurgents had increased attacks in Iraq to sway the US mid-term polls.

The Bush administration does not believe the true picture of events in Iraq has been made public, the BBC's Justin Webb in Washington says.

The administration is particularly concerned that insurgents in areas such as Iraq have been able to use the web to disseminate their message and give the impression they are more powerful than the US, our correspondent says.

'Correcting messages'

The newly-established unit would use "new media" channels to push its message and "set the record straight", Pentagon press secretary Eric Ruff said.

"We're looking at being quicker to respond to breaking news," he said.

"Being quicker to respond, frankly, to inaccurate statements."

A Pentagon memo seen by the Associated Press news agency said the new unit would "develop messages" for the 24-hour news cycle and aim to "correct the record".

The unit would reportedly monitor media such as weblogs and would also employ "surrogates", or top politicians or lobbyists who could be interviewed on TV and radio shows.

Mr Russ said the move to set up the unit had not been prompted either by the eroding public support in the US for the Iraq war or the US mid-term elections next week.

'War of ideas'

Mr Rumsfeld said earlier this year that he was concerned by the success of US enemies in "manipulating the media".

"That's the thing that keeps me up at night," Mr Rumsfeld said.

On Monday, US Vice President Dick Cheney also made reference to the use of media, suggesting insurgents had increased their attacks and were checking the internet to keep track of American public opinion.

"It's my belief that they're very sensitive of the fact that we've got an election scheduled and they can get on the websites like anybody else," Mr Cheney told Fox News.

"There isn't anything that's on the internet that's not accessible to them. They're on it all the time. They're very sophisticated users of it."

Mr Cheney's comments came as American forces suffered one of the highest death tolls in October - more than 100 troops killed - since the war began in 2003.

President Bush has said recently that terror groups were trying to influence public opinion in the US, describing their efforts as the "war of ideas".

U.S. Seen Balking at Challenge by Islamist Web

The Bush administration is failing to counter Islamist online propaganda that could propel militancy into the next generation, experts say.

From the Middle East, Asia and Europe, Islamists have built an expansive Internet library of sophisticated texts on the ideology that underpins violence against the West and other enemies, analysts and intelligence officials said.

``It's a steady, stealthy indoctrination aimed at creating a whole new generation of jihadists. And scandalously, it is unopposed,'' said Stephen Ulph, who studies the Islamist Web for the Jamestown Foundation, a Washington think tank.

E-books and online pamphlets, with titles such as ``39 Ways to Serve and Participate in Jihad,'' encourage the growth of home-grown militant cells across the world, including in such Western countries as Canada and Britain, the experts believe.

U.S. intelligence is reluctant to mount an effective counteroffensive by recruiting Islamic experts from overseas to rebut and even ridicule Islamist authors, according to experts and U.S. officials.

``Anything exposing the West as a supporter would destroy Islamic opposition to the jihadis,'' one intelligence official on condition of anonymity. ``We are completely out of luck with the Muslim world, across the board.''

Several agencies including the CIA, FBI and the office of U.S. National Intelligence Director John Negroponte are part of a closely guarded effort to monitor the content of Islamist Web sites.

But the program is hampered by stringent security standards that make it hard for intelligence agencies to employ Islamist experts from the Arab world.

``Even if we think we understand elements of the religion, we certainly don't understand elements of their cultural communications,'' the intelligence official said.

Pop Jihad Propaganda

Others warned that U.S. policy-makers could be making a fatal error by ignoring doctrinal online texts that lay bare the substance of a violent Islamist mind-set.

``In order to be able to fight something, you have first of all to understand what is going on. And I don't think that at this stage they understand it well enough to fight it,'' said Rita Katz, director of the SITE Institute, which tracks and analyzes international terrorism.

In a presentation this week, Ulph said doctrinal material accounts for 60 percent of Islamist Web content and most texts are in Arabic. But many have begun to reappear in English and other European languages in an apparent appeal to Muslims living in the West.

One of the most popular is the 1,600-page treatise, ``Call to Global Islamic Resistance,'' a comprehensive guide to militant life by al Qaeda ideologue Mustafa Setmariam Nasar, also known as Abu Musab al-Suri, who was captured in Pakistan a year ago.

The Islamist Web became a center for al Qaeda operational planning, training and fund-raising after the fall of the Taliban regime in Afghanistan.

Thousands of Islamist Web sites have since sprouted, many appealing to disenfranchised Muslim youth with so-called Pop Jihad propaganda that can include films of beheadings and spectacular attacks on U.S. troops in Iraq.

But Ulph and others, including former intelligence officials, say the future of Islamist militancy depends on the more sophisticated doctrinal material, capable of guiding the life of the committed militant from childhood to martyrdom.

``The focus has been on how these guys use the Internet for fund-raising and operations,'' said Jarret Brachman of the Combating Terrorism Center at the U.S. Military Academy at West Point, New York. ``Only recently have we realized there are strategic implications.''

Entercom to Sell 3 Radio Stations Due to Antitrust Concerns
Deborah Yao

The Justice Department said Tuesday it has suspended an antitrust investigation into Entercom Communications Corp.'s purchase of several New York radio stations because the company said it would sell three stations to comply with media ownership rules.

The Justice Department had been looking into Entercom's $262 million purchase of 15 radio stations from CBS Corp. in Austin, Texas; Cincinnati; Memphis, Tenn.; and Rochester N.Y.

The investigation centered on Rochester where Bala Cynwyd-based Entercom already owns four radio stations, one AM and three FM. The acquisition would hand over four more FM stations in the area.

With eight radio stations, Entercom would control more than 57 percent of the radio advertising market, and the Justice Department was investigating whether its dominant market share would lead to reduced competition and higher prices for radio advertising.

Federal Communications Commission's rules on local ownership would prohibit Entercom from owning more than five FM stations in an area, requiring it to sell two.

Entercom said it's planning to sell three stations - the CBS-owned WRMM-FM and WZNE-FM and Entercom's WFKL-FM - to comply with FCC rules. The stations are expected to be sold within three months to a buyer approved by the Justice Department, according to a news release issued by the department Tuesday.

After the sale, Entercom's share of Rochester's radio ad market would fall to 40 percent.

Entercom officials did not immediately return a call for comment Tuesday.

One of the nation's largest broadcasters, Entercom owns radio stations in 20 markets and posted annual revenue of $432.5 million. CBS, based in New York, owns and operates 179 radio stations in 40 markets nationwide, among other assets. Last year, it reported $14.5 billion in total revenue.

Shares of Entercom fell by 2.6 percent, or 75 cents, to close at $27.67 on Tuesday on the New York Stock Exchange. CBS shares fell by 6 cents to end the day at $28.94 on the New York Stock Exchange.

Cingular to Offer 25 XM Radio Streams

XM Satellite Radio Holdings Inc., a provider of satellite radio, and Cingular Wireless LLC, a wireless carrier with more than 58 million customers, announced a partnership Thursday to stream 25 XM music channels to Cingular handsets.

Beginning Nov. 6, Cingular Wireless customers will be able listen to a variety of XMs popular commercial-free music channels through the XM Radio Mobile service.

Audio streams of 25 commercial-free XM music channels will be available to Cingular customers.

XM will deliver data to make it possible to view the song title, artist and album while listening on a variety of compatible handsets.

Shooting Down Satellite Radio?
Olga Kharif

Terrestrial broadcasters are going for an FCC-aided kill in their long-raging fight with XM and Sirius

The radio wars are escalating. In a one-two punch aimed at enlisting regulators to their cause, the National Association of Broadcasters (NAB) and National Public Radio want the Federal Communications Commission to investigate alleged misdeeds by satellite radio companies XM (XMSR) and Sirius (SIRI).

On Oct. 12, National Public Radio CEO Ken Stern wrote to FCC Chairman Kevin Martin alleging that the satellite broadcasters' devices interfere with NPR broadcasts. And last week, David Rehr, president and CEO of the powerful NAB, fired off two letters to Martin alleging several regulatory violations.

Old Radio Vs. New Radio The latest correspondence should strike Martin with a sense of déja vu—and Sirius and XM with a sense of foreboding. Seven months ago the NAB sought the FCC's help in preventing XM from acquiring wireless licenses to provide an array of new services, such as on-demand audio and video, competing more directly with terrestrial radio. XM abandoned the bid in May, figuring that the agency would oppose the effort.

That's just one of many instances where terrestrial broadcasters and satellite radio outfits have clashed over the years. And the NAB, which represents land radio stations, with some 260 million listeners every week, has won thus far.

"The NAB has tried to kill satellite radio from the beginning," says Tom Watts, an analyst with Cowen & Co. (COWN) "Because the FCC has listened, broadcasters are using the regulators as a weapon now." That's proving easier, however, since XM and Sirius have recently admitted to some of the violations—which is partially why the terrestrial broadcasters are taking their fight further in this latest skirmish.

Satellite Slip-ups Claiming "a persistent corporate (if not industry) circumvention of the FCC's regulations," the NAB and NPR are demanding an investigation into at least three separate issues, two of which the broadcasters raised with the FCC earlier this year. The NAB's goal seems to be stripping XM and Sirius of their licenses.

The satellite operators have displayed "a lack of candor in dealing with the FCC," says NAB spokesman Dennis Wharton. "In such cases, a licensee can have the license taken away."

That worst-case scenario is unlikely to play out: Some of the alleged violations cited in the NPR letter can't be conclusively linked to satellite radio devices. Other alleged missteps could simply result in tens of thousands of dollars in fines and a slap on the hand, says John Garziglia, a lawyer specializing in FCC issues at law firm Womble Carlyle in Washington. "It doesn't appear to be a big deal," he says.

Yet other allegations, if the FCC deems them serious, could result in temporary degradation in quality of service for satellite radio subscribers, major product recalls, and even shifts in the satellite radio industry's marketing and content strategies. These measures could potentially prompt a slowdown in satellite radio subscriber growth.

Consultancy ABI Research currently predicts subscriber numbers to rise from 14 million by yearend to 30 million at the end of 2011. "NAB's sole interest here is in trying to hamper competing services that offer consumers compelling choices that terrestrial radio can't provide," according to a statement from XM. New York-based Sirius didn't return calls seeking comment.

FCC Compliance There are several complaints, and several possible outcomes. Take the NAB claim, supported by XM and Sirius' own filings, that some of the satellite companies' terrestrial repeaters (devices that receive signals and retransmit them), installed on buildings and towers to ensure seamless satellite radio coverage, don't comply with FCC rules. Of XM's 794 repeaters, 19 weren't authorized by the FCC, and as many as 142 are located more than 500 feet from their authorized locations.

The NAB also finds fault with 11 Sirius repeaters, though the letter states that "Sirius' effort to minimize the significance of its transgressions is apparent." In an industry where terrestrial radio stations have followed FCC rules to the dot, the violations "bring into question the fitness of the licensee," says Tom Taylor, editor-in-chief of industry publication Inside Radio.

The NAB letter further alleges that 28%, or 221 of XM's repeaters, exceed their authorized power level. XM says that has not adversely affected other broadcasters' transmissions, and it's working with the FCC to correct such problems.

If the FCC were to ask XM and Sirius to remove or tweak the offending repeaters, which is likely, that could result in temporary degradation in service quality for customers in the affected areas while the work is being done, says Frank Viquez, a research director at ABI Research.

In its second claim, the NAB contends that XM and Sirius shouldn't be allowed to give away their products for free to new car buyers or online. Last week, Sirius streamed Howard Stern's program for free on its Web site.

The NAB argues that such freebies ought to subject satellite radio to the same FCC regulations as those governing terrestrial radio. That likely would trigger restrictions, for example, on language and other racy content.

Content Issues If the FCC listens and tries to regulate the satellite radio industry's content, that could affect programs like The Howard Stern Show, which has single-handedly driven millions of subscribers to Sirius (see BusinessWeek.com, 9/7/06, "A Sirius Stab at XM"). Earlier this year, the Federal Trade Commission and the FCC commenced probes into XM's marketing practices. In September, XM disclosed that the Securities & Exchange Commission began an informal inquiry into how the company tried to reach subscriber targets last year.

Finally, there's the third complaint, from NPR, which claims that many FM modulators, used to feed programming from portable satellite radio devices into car stereos, exceed FCC power requirements. That means a driver listening to NPR might suddenly hear a blast of obscenities from Howard Stern from a car as far as 100 feet away. NPR stations have received hundreds of complaints from listeners, says Mike Starling, chief technology officer of NPR Labs, which has studied the issue.

In July, NPR Labs measured FM modulator levels in traffic in the Washington, D.C., area. While it found that 30% to 40% of the modulators exceeded FCC-mandated power levels, the study couldn't conclusively determine whether satellite radio devices or, say, unrelated MP3 players used in cars were the violators, says Starling.

In June, Marsha MacBride, executive vice-president for legal and regulatory affairs at the NAB and former FCC chief of staff, cited NAB-sponsored research in a letter to Martin, asking him to examine both satellite radio players and MP3 players, some of whose FM modulator emission levels exceeded regulations by as much as 20,000%.

What can the FCC do to solve this problem? Potentially, the agency could order a recall of the satellite operators' FM modulators, installed in cars by people who bought the radios at retail stores. Viquez estimates that such a recall could involve more than 1 million cars.

While the modulators' power levels can be adjusted with a very cheap part, owners might have to take their cars into professional body shops for repair. And that's likely to peeve many customers.

Losing Numbers Any of these disruptions could affect XM and Sirius' subscriber targets or financial performance. Earlier this year the FCC found that some XM and Sirius FM transmitters, used in portable devices, did not comply with certain emission levels. The companies' manufacturing partners had to halt shipments and tweak their designs. The direct result: XM widely missed the Street's subscriber estimates in the second quarter, says David Bank, an analyst with RNC Capital Markets (see BusinessWeek.com, 10/4/06, "Investors Tune Out of Radio Stocks").

Of course, whether Martin responds to the land-based broadcasters' latest complaints remains to be seen. But this flurry of blows has the potential to leave satellite radio with a few bruises.

40,000 internet radio stations silenced for this? – Jack

An Exchange with SoundExchange on Unpaid Artists

The Money Belong to the Artists Who Created the Music
Fred Wilhelms

SoundExchange is the sole entity that collects and distributes license fees for digital distribution of recordings; primarily satellite radio services and Internet streaming broadcasts (but NOT downloads). Over the years they have collected money for thousands of artists who don't know about it.

Several years ago, John Simson, the Executive Director of SoundExchange, asked for my help in finding these people. I work primarily with veteran artists and have proven pretty proficient at finding people. Despite my constant prodding, SoundExchange never put me to work, and I finally washed my hands of the project when John told me he could give me the list of "unfound" artists, but only if I agreed to a Non-Disclosure Agreement. In essence, I could find out who they had money for, I just couldn't tell anyone they were on the list.

What happens to the money they can't pay because they can't find the person to pay?

They get to keep it themselves. Nothing succeeds like failure.

In my email this morning was the following note from Simson:


Given your concern on this issue I wanted to notify you that, after SoundExchange Board approval, we have posted a list of all performers who are oweð royalties from the period February 1, 1996 to March 31, 2000 and which are subject to release under Copyright Office regulations regarding undistributed royalties.

The list is on the website. Please call me if you have any questions or any ideas regarding our continuing efforts to locate featured performers.

Thanks in advance for any assistance in locating addresses or other contact information for any of the performers on this list.



This was my reply:


Thank you for the note.

I have already seen the list on your website. This is truly a prime example of "too little, too late." I understand why SoundExchange waited so long to publicize the list. It is, or at least it should be, a major embarrassment to the organization, and to everyone who has publicly said what a good job the organization has done finding people.

If my comments sound harsh to you, they should. You and I know how SoundExchange has failed to keep its promise, and how much more could have been done to prevent this injustice, and I just cannot put a positive spin on this.

In the first two hours after I had the list, and even before I had gotten completely through the "A" entries, I found five people you and your staff were not able to find in six years. And just so I'm clear on this, these were people I did not know when I started the search. At most, it took three telephone calls to find a current contact and pass on the information about registration. I actually came up with one by checking Directory Assistance in his hometown.

Sadly, there is no way I can spend the time necessary before the deadline to do everything I could to see that SoundExchange does the job it was given. There are just too many people on your "unfound" list, and I have clients who need my immediate attention. All I can do is reach out to as many people as possible in the limited time left and hope that my efforts start a landslide that swamps your office before December 15.

I may be wrong, but I suspect that, with the publication of the list, SoundExchange has abandoned any proactive efforts to locate the "unfound." I hope, for your sake, that after the deadline, you never hear one story about an artist being unable to afford a prescription, or getting evicted, and then you discover they were on the forfeited list. That prospect haunted me during my AFTRA days, and it still bothers me that I didn't do enough to prevent it from happening over and over again.

I truly wish there was some penalty that SoundExchange would have to pay for not finding people. Instead, the organization profits from its own failure by getting to keep the money it should be paying out.

That's a disgrace. Every time you deposit your paycheck, or get a bonus, or give one to someone else for a "job well done," or even expense a lunch, some of that money is coming from artists who never knew it was there because SoundExchange didn't find them in time.

I know the search was not easy, and that there was really no possibility you were going to find everyone, or even almost everyone. You and I know, however, that SoundExchange didn't do all that it could to cut that list to size. I think you are a good enough man to realize the scope of this failure, and I hope that it eventually impels you to do whatever it takes to make SoundExchange responsive to those it is supposed to serve. Today, for artists, the organization is nowhere close to meeting that goal.


Here's the list of the people they can't find:

I've been circulating the following message. Feel free to forward it to any mailing lists, message boards and telephone poles in your neighborhood.


SoundExchange is the entity that collects and distributes broadcast royalties from digital distribution of music. This includes streaming Internet broadcasts (not downloads) and satellite radio services. These royalties have been payable since February 1, 1996. If your music has been played on the Internet since that date, you are entitled to a share of the royalties.

On December 15, 2006, any royalties that are unclaimed for performances up through March 31, 2000 WILL BE FORFEITED.

If you, as an individual or as a member of a recording group, are not registered with SoundExchange by December 15, 2006, you will lose all rights to your royalties earned before March 31, 2000.

There are thousands of identified artists who will lose these royalties unless they act before the deadline. SoundExchange has listed these "unfound" artists on their website.

Take the time to read the list. If you are on it, follow the instructions for filing a claim. It costs you nothing and it does not take much time. If you register now, you will receive the unclaimed royalties and will received future royalties automatically.

Friends and families of recording artists should also check the list. If you know anyone on there, PLEASE LET THEM KNOW IMMEDIATELY. You will note that there are a number of deceased performers on the list. If you know any surviving relatives, let them know about this.

This money belongs in the hands of the artists who created the music.

Fred Wilhelms is a lawyer who represents musicians and songwriters. He can be reached at: fred.wilhelms@gmail.com

Help Us Find These Musicians and Get Them Paid

SoundExchange and Unpaid Music Artists
Fred Wilhelms

Our story from last week on SoundExchange and a huge list of unpaid music artists has had a global impact.

It has been reposted on a number of websites, listservs and message boards, and because my address is included, I get the feedback.

A guy in Singapore has found a couple electronica artists and let him know about the royalty fund.

An Australian video game designer spent an hour on Google, found contact info about two dozen artists and has heard back from seven of them, including C. W. McCall of "Convoy" fame, thanking him for telling him.

The family of blues legend Son House has applied because a friend found his name on the list.

Over a hundred "world music" artists from the list have been contacted.

That's just the reaction I know about. It's been amazing.

And it tells me one thing; if SoundExchange had exploited that sense of community that music creates, I doubt there would be more than a handful of artists left on the list, and those would be ones who, for whatever reason, didn't want to be found.

I am willing to bet that every one of the artists who has registered since September 15 has done so as a result of the negative publicity given the lists and the viral current that runs link-by-link from the CounterPunch article and the other fee starting nodes. That could be the most important development that comes out of this mess: a reinforcement that the "truth is out there" on the Internet, you just need to tap into it.

SoundExchange wasted a lot of money on its unsuccessful "search" efforts over the years when the most effective and cost efficient solution was just a couple emails and message board posts away. Good Lord, a SoundExchange MySpace page might have cleared 50% of that list in weeks.

One other side effect of the CounterPunch piece has been the reigniting of a longstanding debate among the heavy thinkers of the technology world about the best way for artists to get paid. SoundExchange was the darling of the "blanket license" proponents; showing, they thought, that a collective effort was the most efficient and effective way to move money to the creators. The SoundExchange lists tarnish that idea a bit. The other main proponents the "micropayers" (in which each artist negotiates payment individually with each end consumer) are overjoyed, and will be until someone explains that they are, in essence, reproducing standard record company royalty accounting standards and projecting them on every artist forever. That's not such a hot idea, either. The debate, however, has moved up a notch, thanks to CounterPunch giving it new fuel and air.

So, at the end of a week, we can pretty say that CounterPunch has succeeded in doing what it is supposed to do; it stirred things up and actually caused some action in the right direction. The stirring has been a great deal of fun, and the progress is measured in money moved to artists and new heights of both rhetoric and fact.

Anyone Seen the Mormon Choir?
Dan Mitchell

WHERE the devil is the Mormon Tabernacle Choir?

For years, it seemed as if SoundExchange, the nonprofit organization that handles royalty payments for musicians whose work is streamed over the Internet and broadcast on satellite radio networks, didn’t know. The group insists that it tried hard to find the choir and about 9,000 other artists who still hadn’t been paid. A few months ago, SoundExchange posted the list on its Web site, giving artists a deadline of Dec. 15 before they lose their money forever (soundexchange.com).

Some people have criticized SoundExchange saying it has sat on its hands. Who, they ask, doesn’t know that the Mormon Tabernacle Choir is in Utah? And how hard can it be to find the Olsen twins? The list has received a lot of publicity online, and the Olsens, the Mormons and others have been paid, but not without criticism directed at SoundExchange.

Writing for the Web site of the political newsletter Counterpunch, Fred Wilhelms, a lawyer who helps musicians with royalty payments, accused Sound-Exchange of moving slowly on purpose. “What happens to the money they can’t pay because they can’t find the person to pay?” he asked. “They get to keep it themselves. Nothing succeeds like failure” (counterpunch.org).

SoundExchange denies the accusation. In a letter responding to an article in The Los Angeles Times, the organization’s executives said they had “engaged in numerous outreach campaigns” that managed to get payments to 25,000 artists last year. As for the difficulties tracking down well-known musicians, they said “a number” of the artists on the list “simply have failed to respond to our notifications” (latimes.com).

For SoundExchange, the timing of the negative attention couldn’t be worse. It is fighting before the Library of Congress (loc.gov) to remain the sole distributor of the royalties. Would-be competitors including Royalty Logic would like to get into the field (royaltylogic.com).

For the most part, the amounts in question aren’t very impressive — so far. Just 75 of the artists whose music streamed from 1996 to 2000 are owed $500 or more. But the amounts are growing every year, and the future of the business looks bright, as both streaming audio and satellite broadcasting become more popular. According to SoundExchange, royalties will total more than $40 million next year. (Downloaded music, as from iTunes, isn’t involved.)

In the meantime, has anyone seen Men Without Hats? SoundExchange has a check for them.
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I Was Disappeared by Salon

When journalists threaten to sue
Debbie Nathan

On August 24, the online magazine Salon published my opinion piece "Why I Need to See Child Porn." It argued that we need a government system to vet researchers' and journalists' qualifications, allowing them to test government claims about the prevalence, content and profitability of internet child pornography images without fear of legal sanctions.

The next morning, August 25, Salon received communication from New York Times reporter Kurt Eichenwald, threatening to sue Salon and me for libel if my article were not immediately removed from Salon's site. Among other things, my piece had discussed Eichenwald's August 20 Times article, "With Child Sex Sites on the Run, Nearly Nude Photos Hit the Web."

Within hours after receiving Eichenwald's threat of a lawsuit, Salon pulled "Why I Need to See Child Porn," along with dozens of letters responding to it. My piece was not archived on Salon's site and neither were the letters. All the material was irretrievably removed. A correction was run stating it was "inaccurate" that journalists and other researchers have "no protection from prosecution if they viewed visual depictions of child pornography." On August 26, Salon's editor, Joan Walsh, wrote on Salon's forum for subscribers, Table Talk, that my article was taken down because its "central premise" was "impossible to just correct." She did not mention that Salon had been contacted by Eichenwald and threatened with a lawsuit.

I was not consulted about the decision to irretrievably remove my opinion piece and the letters. I had no input into the language of the correction.

After Salon pulled the article and ran its first correction, Eichenwald continued to threaten a suit unless another correction was run. On August 31 Salon ran a second correction, based primarily on language supplied by Eichenwald and his lawyer. I had no input into the decision to publish this correction, nor any input into its wording. Salon gave me no opportunity to respond to the correction.

The first correction had been published in a format allowing the public to respond by clicking a link on the same page the correction appeared on. People could read the responses sent in by clicking on the same page, just under the correction. During the next few days beginning August 25, Salon posted over 150 responses.

When Eichenwald demanded a second correction, he specified it must be "locked" so no public response could be submitted on the correction page or be readable from there. Subsequently, Salon formatted the second correction so it is impossible to send or read responses on the same page as the correction. Postings now can be made only by paid subscribers, to Salon's "Table Talk" section. No discussion topic links in "Table Talk" are marked as having anything specifically to do with "Why I Need to See Child Porn."

I am extremely disappointed with Salon's handling of this incident. Nevertheless, I trust public discussion will continue about the issues my article raised.

For more information, see:

Alia Malek, "Child Pornography: To See or Not to See?" (Columbia Journalism Review CJRDaily, September 21, 2006)

Child Pornography: To See, or Not to See?
Alia Malek

Writing in Salon on August 24, Debbie Nathan wanted to start a conversation about child pornography. She raised the question: How can journalists report on child pornography when it is a crime to even look at such images? Nathan argued that journalists should be protected from prosecution for possession of child pornography if that possession is for legitimate reporting purposes, including, for example, testing government claims about the prevalence of child pornography.

Instead, the conversation came to a screeching halt.

According to Nathan's article, her inquiry was rooted in her own research this summer into child porn on the Internet. In the course of her reporting, she inadvertently stumbled onto a Web site that featured illegal images. She became consumed with a fear that she would be arrested and prosecuted, recalling the prosecution and incarceration in 2000 of freelance journalist Lawrence Matthews in Washington, D.C. on charges that he had received and transmitted pornographic images of children in the course of his research on the topic. She reached out to other journalists and researchers who had looked into the subject, and heard stories of people abandoning the enterprise because of the risk of prosecution.

Then on August 20, the New York Times published a piece by Kurt Eichenwald that exposed a group of new Web sites purporting to have legal images of children but which in fact feature images that are arguably pornographic. As Eichenwald explained, courts have decided that nudity is not required for images to be deemed child pornography. The Times article was accompanied by a disclaimer that stated: "Covering this story raised legal issues. United States law makes it a crime to purchase, download, or view child pornography, unless the images are promptly reported to authorities and no images are copied or retained. The Times complied with the law, disclosing what it found to appropriate authorities."

Eichenwald's article, beyond just reporting on the trend, included lurid descriptions of the kinds of images found on these "child modeling" sites, though he says he relied on law enforcement and chat-room descriptions of the images rather than firsthand viewing. Nathan, however, assumed that Eichenwald had seen the images himself, and kicked off her article by provocatively saying that Eichenwald had spent time recently "look[ing] at a lot of kiddie porn." Though she discussed Eichenwald's tactics and opined on their legality, she ultimately was arguing that "the government prohibits reporters and other legitimate investigators from doing front-line research into child pornography," because she believes such work requires journalists to view illegal images and risk being prosecuted.

Uncontested in Nathan's argument is the notion that journalists have to actually see these images to test "government claims as to how prevalent child pornography really is and what makes an image pornographic."

On the same day Nathan's article was posted on Salon, the magazine pulled it and any letters it generated, and issued two corrections. The first correction emphasized that the law "does offer some legal protection for journalists and other researchers" and that an "affirmative defense may exist that would protect such work under certain circumstances, and the opinion asserted by Nathan that her work ... would constitute a violation of the law was inaccurate."

(An affirmative defense is one that does not deny the truth of the allegations against the defendant but gives some other reason why the defendant cannot be held liable.)

The second correction stressed that Eichenwald's article was "not based on reviewing the content of the sites themselves" and reiterated the legal disclaimer that the Times originally ran with Eichenwald's piece, asserting that journalists who come to possess these images inadvertently and who report them to the federal authorities are protected from prosecution.

With Salon disavowing Nathan's entire article, the matter seemed settled. But the two questions at the heart of this episode are worth considering. First, the question Nathan addressed in her ill-fated article: Should journalists be protected from prosecution when they intentionally seek out child pornography for reporting purposes? And this one, which Eichenwald vigorously answers in the negative: Do journalists need to see these images -- and therefore break the law -- to adequately report on the subject?

The Times limited its interpretation of the federal statute's provision for an affirmative defense to the case of inadvertent viewing. But a journalist like Nathan, who wants to see the images for her reporting, by definition would break the law and risk prosecution. (For a detailed review of the law as it pertains to journalists, see "Reporting on Child Pornography: A First Amendment Defense for Viewing Illegal Images?" by Clay Calvert, Kentucky Law Journal, Fall 2000/2001.)

We asked Calvert, a professor of communications and law and co-director of the Pennsylvania Center for the First Amendment at the Pennsylvania State University, to fill us in on the state of the law and any affirmative defenses as they apply to journalists:

"It is still very risky for journalists today to receive and transmit, during their investigation of a story or a report, images of child pornography. The Matthews case makes this clear in the U.S. Court of Appeals for the Fourth Circuit, and the general line of Supreme Court precedent is that journalists are not exempt from generally applicable laws that apply equally to all citizens. Clearly child pornography statutes are such laws of general applicability, so journalists take a risk today when investigating child pornography as they come across it on the Web, even with the exception spelled out in the federal statute pertaining to destruction of the images and reporting the matter to law enforcement officials. That defense under federal statute [18 U.S.C. 2252A (d)] only applies, by its terms, to the possession of 'less than three images of child pornography.' In other words, basically a journalist would be allowed under this defense to only possess two images, and that's not a lot of content to look at for a full-blown investigative article."

Nathan argues that to report on child pornography, journalists will be forced to take the government's word about, for example, what these images are, where they are, who is involved, the extent of the problem, and how much revenue is generated. And by extension, so will the public. Her argument is that the government cannot be trusted.

Indeed, in May of this year, a piece in Legal Times tried to ascertain the source of a statistic, used by Attorney General Alberto Gonzales, on the prevalence of consumers of child porn on the Internet. As it turns out, both the media and the government were using a number -- that at any given time 50,000 predators are on the Internet prowling for children -- that seemed to come out of thin air. The media cited the government and the government cited the media as the source for the number.

But does contesting such a government claim require viewing the images? For Legal Times, at least, it did not.

In a heated exchange in the comments section of the blog on Open Democracy between August 25 and September 2, Eichenwald asserted that journalists don't need to see the images to adequately report on the subject. Eichenwald quotes his own e-mail to Nathan on the blog, saying that her "apparent belief that we need to study child porn images has all the earmarks of a rubbernecking obsession on the grotesque." He argued that journalists can trust descriptions of the images given by the courts and law enforcement officials. He reiterated these comments to CJR Daily in a phone interview.

This is tricky territory. We understand the importance of challenging government claims, especially when labels are used to stigmatize people and silence debate. For example, in the context of "terrorism," we have more than anecdotal evidence that the government has falsely accused individuals and misled the public. But such investigations did not require journalists to engage in terrorism themselves, or to break the law in any other way, to find out the truth.

In the context of reporting on child pornography, it seems the only reason to see the images (and thereby break the law) is to determine whether or not they are actually pornographic, and we haven't yet seen credible evidence that the press is being lied to and manipulated in this context. Some might see this as a chicken/egg problem. But the most expedient methods of accessing information are rejected by journalists all the time when those methods are illegal. Those who argue the need to see child porn to understand it too easily dismiss the fact that not only is viewing illegal, but that it also prolongs the exploitation of these children -- because society has determined that merely seeing children in these poses victimizes the child. Similarly, we recognize the tension this creates with our role as the Fourth Estate.

Whether this situation necessitates a privilege analogous to what journalists seek in a federal shield law is perhaps a discussion worth having. Of course, such a discussion would require -- as in the shield law debate -- an examination of the question, Who is a journalist? And in a profession that requires no licensing, there is the very real danger that pedophiles could hide behind our privilege to indulge their criminality.

Alia Malek writes Those who argue the need to see child porn to understand it too easily dismiss the fact that not only is viewing illegal, but that it also prolongs the exploitation of these children.

Claptrap. Not all child pornography would fall under the category of "exploitation" and one need only to reference the Michael Jackson trial and how Prosecutors sought to indict Mr. Jackson on child pornography charges over a coffee table book; A book by the way that had been in the possession of the District Attorney who earlier sought to indict Mr. Jackson on similar charges but failed.

Alia Malek does CJR a disservice by reciting the usual bumper sticker cookiee cutter echochamber phrases.

Posted by: Nelson G

Alia Malek should brush up on her logic. She quotes Attorney General Alberto Gonzalez as saying that 50,000 child-sex predators are prowling the Internet, "a number," she says, "that seemed to come out of thin air," but then writes, appropos of whether kiddie-porn images are truly pornographic, that "we haven't yet seen credible evidence that the press is being lied to and manipulated in this context." If a made-up figure is not evidence of manipulation, what is? Given the Bush administration's unparalleled record of mendacity, any journalist who is not suspicious should be drummed out of the profession. Malek also suggests that a reporter who wishes to evaluate such claims first-hand is somehow comparable to one who believes he or she must engage in an act of terrorism in order to undrestand what the phenomenon is all about. But the comparison is speciouis. Viewing a kiddie-porn web site is analagous to visiting Ground Zero in order to see the results of a criminal act. She similarly puts the car before the horse in asserting that looking at an allegedly pornographic photo somehow "prolongs the exploitation of these children." But a photo is merely a record of an act that has already taken place. In a touching display of political deference, finally, she concludes that reporters should heed the law and not conduct such research because something called "society" has has forbidden it. But this is exactly the problem: the Bush administration has launched a major crusade around this issue, yet forbids journalists to engage in the most elementary fact-checking to determine that its claims are correct. This is positively Orwellian, yet CJR backs the administration up. Clearly the lapdog press has learned nothing from missteps over WMDs and the War on Terrorism. How sad!

Posted by: Dan Lazare

24 Years Later, Believe It or Not, the Who’s Next
Alan Light

SIX years ago, at a press conference to kick off a tour by the Who, the singer Roger Daltrey announced that he was working on songs for the band’s new album. The bass player John Entwistle chimed in that he was doing the same. This news shocked Pete Townshend, the band’s guitarist and primary songwriter, though it was mostly a bluff meant to prod him into action.

After much further cajoling from Mr. Daltrey, Mr. Townshend finally sat down to try writing the music last year. But he had no idea what he wanted the new record to sound like — especially since the results would be the illustrious band’s first album since 1982.

“You come up against such enormous preconceptions about what would constitute material for a new Who album,” he said. “It had to deal with the past and the future and contain that magic ingredient, and I tried to figure out what that was.”

The result is “Endless Wire,” coming out Tuesday on Universal Republic Records. A sprawling work, it ranges from the first songs Mr. Townshend and Mr. Daltrey have ever recorded as an acoustic duo to some that hold their own next to the band’s finest stadium rockers. At its heart is “Wire & Glass,” a 10-song “mini-opera” that is Mr. Townshend’s latest foray into extended musical narrative, an approach he pioneered with the rock operas “Tommy” and “Quadrophenia.”

“The stripped-down acoustic-vocal stuff is what slays me,” Eddie Vedder, Pearl Jam’s lead singer and a longtime champion of the older band, wrote in an e-mail message. “After 20-plus years of not recording new Who material, they didn’t pick up where they left off — it’s where they are now.”

The album announces that one of the greatest rock bands of all time is back in business as something more than a touring heritage act. The release also puts the spotlight back on the notoriously spiky partnership that helped bring it into being.

Mr. Daltrey, 62, and Mr. Townshend, 61, are the two surviving members of the founding lineup, after the deaths of their incendiary drummer, Keith Moon, in 1978 and Mr. Entwistle in 2002. And though they seem lately to have attained an uneasy peace in their relationship, it was clear in separate interviews — Mr. Daltrey in a friend’s apartment high above Central Park and Mr. Townshend over the phone from a tour stop in Vancouver — that this hasn’t stopped them from taking the occasional swipe at each other.

“After John died,” Mr. Townshend said, referring to Mr. Entwistle, “I was left with one very clear relationship and that was with Roger — which was probably the least important to me in the band. We had a lot of discussion that our friendship meant more to us than anything else.”

Mr. Daltrey puts it another way: “He’s like the brother I never had. I love him dearly; I don’t like him sometimes, but I love him dearly. And I’m sure he would say the same about me.”

Mr. Daltrey recalled the day, just before Christmas, when some demo recordings arrived. “He told the press that he’d given me 26 songs,” said Mr. Daltrey, “yet I only received 4! So I was still very skeptical as to whether this was really going to happen, because I’ve been burned so many times before.”

After handing over that first batch, Mr. Townshend set the new songs aside to concentrate on a different kind of writing, which led to the mini-opera. “I’d written a novella as a possible basis for a theatrical play or a two-man show or maybe something in Las Vegas,” he said. “I didn’t know what it was.”

“The Boy Who Heard Music” (posted at www.petetownshend.co.uk/projects/tbwhm) is a tightly knit, hallucinatory tale of the rise and fall of a band made up of three teenagers from different ethnic groups, and an aging rock star observing them from a mental institution. (Mr. Townshend says his online research for the project led to his arrest in 2003 on suspicion of possessing indecent images of children; the charge was dropped, but he remains on a sex-offender watch list.) He reworked the novella into “Wire & Glass” — some songs that “had some teeth," he said. He then “knocked off the rest a bit Jack White style, using stuff from notebooks as far back as 1971,” and after more than two decades, a new Who album was ready to roll.

Still, Mr. Townshend was apprehensive about sending these songs to Mr. Daltrey. “Roger is always difficult to present new music to,” he said. “He operates rather like an editor. When you present him with finished material, he’s a fantastically positive interpreter. But I don’t think he knows enough about being an artist and the vulnerability of the creative process.”

Mr. Daltrey — who called “Wire & Glass” a “quirky, cranky idea” — suggested that Mr. Townshend’s narrative writing had as much to do with marketing as with art. “In the early days we used to call it hype, and it still is hype,” he said. “It was a device to get noticed in the press: ‘Oh, the Who have a new album, just like the Stones and the Beatles.’ But if you said you had a mini-opera, then all of a sudden they were interested.

“Whatever Pete wants to call it as the device that makes him write the songs, I don’t care,” he continued. “There’s still some interesting words on there. So I take all of that with a pinch of salt, and I don’t fight it anymore.”

Forty-two years after their first recording and 24 years after a Who “farewell tour” — a farewell that lasted seven years before the band went back on the road — the volatile chemistry between the singer and the guitarist still yields a powerful stage presence, as a series of recent shows in the New York area proved. (The touring band also includes Mr. Townshend’s brother Simon on guitar, Pino Palladino on bass, Zak Starkey on drums and John Rabbit Bundrick on keyboards. On the album, Pete Townshend plays numerous instruments and Peter Huntington plays drums on many tracks, since Mr. Starkey — Ringo Starr’s son — was touring with the band Oasis when most of the album was recorded.)

The band was the clear highlight of the Concert for New York City after the 9/11 attacks, an intensely emotional show that Mr. Townshend described as an example of “the Who mechanism working in ideal circumstances.” As this tour was starting, however, the band mates’ differing worldviews — which Mr. Townshend attributed to the contrast between his more bohemian art-school background and Mr. Daltrey’s more working-class roots — clashed yet again.

Mr. Townshend, always interested in new technology, announced that the concerts would be Webcast, only to retract those plans a few days later at Mr. Daltrey’s insistence. Eventually, the band made a deal with Sirius Satellite Radio to broadcast the shows as part of an all-Who channel that will continue throughout the tour.

“I don’t particularly like the world technology has created,” Mr. Daltrey said. “Has anything really gotten better with the computer, or are you just doing more and more of less and less? I’m incredibly paranoid about it, especially after what happened to Pete. I think the Internet is just an advertising device of very dubious returns.

“Also, I haven’t got the luxury of throwing the kind of money at it that he can,” he continued, referring to Mr. Townshend’s songwriting revenue. “I haven’t got the publishing, I’m just the singer. So I have to look at it much more hard-nosed as a business and ask if I can put a million dollars into it, and the answer is no.”

Mr. Townshend responded: “Roger likes things that are finished, and with the Internet, everything is a work in progress. I try not to bludgeon him with this stuff, but I can’t help it; it’s my passion.”

For Mr. Daltrey, “Endless Wire” closes a door for the band that was left open after the death of the high-flying Mr. Moon (about whom he is developing a film project, with Mike Myers committed to the role). “We were ill equipped to deal with Keith’s problems at the time,” he said. “If we’d known then what we know now about rehabilitation, we wouldn’t have lost him. So it always felt that if that had really been the end, it wouldn’t have been right. With this album, now there can be an ending. I don’t want it to be, but it can be, and I’m at peace with that.”

Mr. Townshend, characteristically, disagreed with that assessment. “It doesn’t feel like closure; it feels completely new,” he said. “Closure implies that we couldn’t do it again, couldn’t do another album with the same quality and dignity.

“This album isn’t some sort of Who miracle. It’s just two guys who’ve come together to do something creative. It just happens to be under a very powerful brand name.”

The Difficulties of Discovery: Bumping Into New Music Can Be a Circuitous Task
Marc Fisher

Time for Serendipity Showdown, in which old-fashioned radio descends into the pit of battle against satellite radio, music blogs and online music-discovery engines to determine the best way to find new sounds.

Throughout the Top 40 era, radio held sway simply by playing the hits. With the FM revolution came a flowering of new formats, which introduced music that listeners would never hear on hit radio. But the Internet era brought radio a slew of new competitors and a theoretically infinite menu of musical choices.

No matter how many songs are on their iPods, though, listeners often grow tired of the tunes they've chosen to put on their digital players. That phenomenon allows radio executives some hope about their future: For now, at least, despite the proliferation of new technologies, old-fashioned broadcast radio remains music fans' primary vehicle to discover new sounds.

Although 61 percent of people in the 35-to-54 age bracket say they go to traditional radio to find new music, only 35 percent of those ages 18 to 34 use radio for that purpose. According to a study by Bridge Ratings, a California company that conducts research for the radio industry, younger listeners are more likely to learn about new tunes from friends via online sharing, via Internet radio or on one of the new online music networks.

So I put the various media to the test: Which would prove the most alluring and efficient way to discover unknown sounds?

Radio, stuck for a couple of decades in a calcifying set of heavily researched formats, remains the cheapest and easiest way to hear the most popular tunes in the land. But a generation of listeners whose MP3 experience leads them to more eclectic tastes often finds radio formats too restrictive. Radio responded with new formats known variously as Jack, Bob or Dave, that combine well-known and second-tier hits from the 1960s through the '90s with a smattering of current rock and pop songs. By scrapping deejays and mixing up the decades, these stations hope to capture some of the spirit of an iPod shuffle.

No Washington area station has adopted the pure form of the format, but WRQX-FM (Mix 107.3) comes closest, with a blend that purports to include the best of "everything." But the station's definition of "everything" turns out to be awfully narrow. In one three-hour stint, I heard nothing more exotic than Lisa Loeb, Ashlee Simpson or the Goo Goo Dolls. There wasn't a single song played that I hadn't heard before and the closest the station came to offering a rediscovery was Kim Carnes's "Bette Davis Eyes," the 1981 hit that turned out to be just as annoying a quarter-century later.

Over on pay satellite radio, the selections are more varied. With dozens of music choices on XM or Sirius, I could stick to the hits by listening to channels designed to mimic hit radio stations of the 1960s, '70s or '80s, or venture into more narrowly defined terrain.

On XM's Fred channel, I took the nostalgia train back to Debbie Harry's "Rapture" and moved along to Iggy Pop's "Blah Blah Blah" and the Cure's "Club America." But satellite radio is highly segregated by format, and only Sirius's Shuffle channel moves randomly -- and clumsily -- from rock to country to hip-hop and beyond. XM's Fine Tuning channel offers a more intelligent eclecticism, shifting from Celtic music to U2 to Tangerine Dream to Philip Glass. But although there are new artists to discover here, the overall sound is too bland; the selections are made to create a consistent aural ambiance rather than a surprising mix of genres.

To find true serendipity, it seems, it's necessary to tap into a more daring intelligence. Online music lovers are using blogs to display their own collections, and although each individual blog can be anything from stultifying to magnificent, blog aggregators give adventuresome listeners an easy way to explore.

At http://hype.non-standard.net , the Hype Machine connects to dozens of music blogs, ranking tunes by how often listeners click on them. It doesn't take much to create a hit on the Hype Machine; a few dozen listeners can take a song such as the Delgados' 2004 version of the Electric Light Orchestra's "Mr. Blue Sky" and put it into the top 25. But the winnowing process nonetheless leads to some interesting tunes -- within those genres where early adopters tend to hang out.

The songs that bubble to the top on the Hype Machine come primarily from within the boundaries of indie rock, dance music and hip-hop, with a bit of pop. It's possible to follow links from aggregators to individual music blogs or to listeners' MySpace pages and find rich troves of new sounds from the clubs of New York, the streets of Brazil or the vaults of classic jazz labels, but it takes time and a willingness to comb through lots of really bad stuff.

The Hype Machine hit list led me at random to Caetano Veloso's "Irene," a typical gem from the Tropicalia movement of samba-influenced rock, funk and soul from Brazil in the 1960s, and when I followed the link to the blogger who posted that tune, there were plenty more of that ilk. But that's the rare success; most links take you to typical blog fare, where messages to personal friends crowd out the occasional musical gem.

If you want your serendipity a little less random, the answer is a music recommendation system such as Pandora.com or Last.fm. Both use algorithms based on the same idea as the Amazon.com service that suggests books based on what you've already looked at. Pandora lets you create as many as 100 stations; you type in the names of artists or songs that serve as the foundation, and the software -- guided by dozens of Pandora staffers who catalogue tunes according to about 400 musicological attributes -- builds a station with sounds you're likely to favor.

For example, when I programmed a station with some old school R&B (Harold Melvin, O'Jays, Stylistics), Pandora served up "Patches" by Clarence Carter and "Heavy Love" by David Ruffin. Ask the site why it's delivering the music it is, and you get very specific reasons: It found tunes that matched my original choices in exhibiting "classic soul qualities, gospel influences, major key tonality, and mixed acoustic-electric production," the software informed me.

Sometimes, Pandora is too literal; it feeds you songs almost identical to those you plug in, acting almost like a radio station's music testing does -- giving listeners only what they are almost certain to like and not enough that's surprising.

You can, however, work the machine to be more adventuresome by creating stations with a more eclectic foundation. When I started a station with Prince, Van Morrison, Randy Newman and Steely Dan, the machine delivered Bjork, Phish, Kraftwerk, Counting Crows, Elvis Costello and Death by Chocolate. When Pandora came up with Kiss's "Nothin' to Lose" on this station, I inquired how that could happen. Answer: The songs shared "basic rock song structures, a subtle use of vocal harmony, acoustic rhythm piano, and major key tonality." Well, yes, but still, no thanks.

Listeners can fine-tune their stations by rejecting Pandora's offerings, up to a limit of six tunes each hour. It's easy on Pandora to narrow your station so tightly that you don't learn anything new, but it's also possible to work the machine to keep serving up tunes you've never heard before, songs that are not bad at all.

In the Serendipity Showdown, if you're willing to put in the time, Pandora delivers.

Love ‘Springtime for Hitler’? Then Here’s the CD for You
Alex Williams

SACHA BARON COHEN, meet Irving Berlin.

Jokes that compare Jews to cockroaches have left some viewers of Mr. Cohen’s farcical new film, “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan,” shifting uncomfortably in their seats.

But probably few of those shocked by the movie realize that long before Mr. Cohen shed his Ali G persona for Borat’s ill-fitting suit — in fact, long before the 1929 stock market crash — Berlin, the songwriter behind “White Christmas” and “God Bless America,” was reeling off satirical songs about Jews that might seem dodgy on the “Borat” soundtrack. One such Berlin number, “Cohen Owes Me Ninety-Seven Dollars,” from 1916, concerns a businessman on his deathbed who cannot stop fretting over his unrepaid i.o.u.’s.

This song and others by long-dead Tin Pan Alley songwriters are featured on a new compact disc, “Jewface,” which is aimed not at the History Channel crowd, but at a hipper audience. The album, to be released Nov. 14, contains 16 songs salvaged from wax cylinder recordings and scratchy 78s, from a century-old genre that is essentially Jewish minstrelsy. Often known as Jewish dialect music, it was performed in vaudeville houses by singers in hooked putty noses, oversize derbies and tattered overcoats. Highly popular, if controversial, in its day, it has been largely lost to history — perhaps justifiably.

“It’s like Hitler’s playlist, but it’s not, because it was actually Fanny Brice’s playlist,” said Jody Rosen, 37, a music critic for the online magazine Slate, who has spent more than a decade researching the genre. (Brice was the Ziegfeld-era singer and comedian played by Barbra Streisand in “Funny Girl.”) “It’s a more complicated and nuanced vision of Jewish history than what you absorb at Hebrew school.”

In spring 2005, Mr. Rosen, who is the author of “White Christmas: The Story of an American Song” (Scribner, 2002) and has also contributed articles to The New York Times, joined forces with Courtney Holt, a former Interscope Records executive, who now runs MTV digital operations; David Katznelson, a former Warner Records executive; and Josh Kun, an associate professor in the Annenberg School for Communication at the University of Southern California. They turned a shared obsession into “Jewface,” an album they hope will turn the MySpace generation on to a form of music that offended many even in their great-grandparents’ day.

“Jewface” is the fourth album released on Reboot Stereophonic, a nonprofit record label devoted to unearthing odd Jewish-theme pop recordings from earlier eras, which Mr. Holt, Mr. Kun and Mr. Katznelson founded a couple of years ago. The CD will soon be available at record chains like Virgin, as well as on Amazon.com and iTunes.

Coarse, yes. Consider the very title “When Mose With His Nose Leads the Band,” from 1906. The four collaborators acknowledge that these playful vaudeville ditties could function as hate speech in the wrong context, and they carry particular power in a politicized climate where newspaper cartoons can cause riots, and Mel Gibson has risked his career with a drunken outburst.

But to the project’s partners — music professionals typically associated with the likes of the Beastie Boys (for whom Mr. Holt produced a music video) and the Flaming Lips (whom Mr. Katznelson signed at Warner), not Eddie Cantor — this forgotten genre serves as a window into American Jewish heritage for people just like them: young secular Jews weaned on kitschy pop culture, abrasive rock and irony, as much as on the Torah.

“We’re all kind of disaffected American Jews, who aren’t particularly religious, don’t really practice and don’t really lead very Jewish lives at all,” said Mr. Kun, 35. “Digging up these recordings was really about figuring out who we were in this world.”

Many of these lost recordings spent nearly a century buried under dust on wax cylinders, the canister-shape phonograph records that predated discs. To contemporary ears the songs are camp, much like a previous Reboot Stereophonic release, “God Is a Moog” — a 1968 rock-opera reinterpretation of the traditional Jewish Sabbath service, performed on Moog synthesizer by the electronic-music pioneer Gershon Kingsley.

But they also fit with a growing tendency among Jews of Generations X and Y to embrace, and even have fun with, stereotypes that might have made their parents squirm. It is the same impetus behind Heeb magazine, an irreverent publication about Jewish culture, and the proliferation of hipster Hanukkah parties in Manhattan each December, when fashionable young clubgoers bat around inflatable dreidels as house music blares.

The “Jewface” tracks may soon find their way onto the dance floor. Adam Dorn, a Manhattan musician and producer who records under the name Mocean Worker and has worked with Bono and Elvis Costello, recently cut a trancy remix of “Under the Matzos Tree,” a 1907 song performed by Ada Jones, complete with blips and beeps and a thudding drum machine laid over lyrics like “Listen to your Abie, baby, Abie, come out in the moonlight with me.”

“I just said, let’s take this woman who would probably be 116 now and give her a backbeat,” explained Mr. Dorn, 35.

But even the original versions of the old tunes rock, in their way.

“There’s an ethereal quality” to the music, said Mr. Katznelson, 37. “It teleports you to another time. It’s almost psychedelic.”

Mr. Holt pointed out that such dialect music was usually performed by Jews and was popular among Jewish as well as non-Jewish audiences when it was released. For many immigrants, laughing at even newer arrivals from the Old World was a way to make themselves feel more at home in their adopted country.

But even after a century, the music carries the potential to shock. “My Yiddisha Mammy,” a 1922 riff on Al Jolson’s “Mammy,” written by Eddie Cantor and others, may offend contemporary Jews and African-Americans equally with lyrics like these:

I’ve got a mammy,

But she don’t come from Alabammy.

Her heart is filled with love and real sentiment,

Her cabin door is in a Bronx tenement.

The “Jewface” project, however, does have historical as well as musical value, said Jeffrey Magee, an associate professor of musicology at the University of Illinois at Urbana-Champaign.

“This album is a big step in repossessing this stuff that has been muted for a century,” said Dr. Magee, who explained that this music was generally ignored, except in academic works, by earlier generations of American Jews, who were trying to assimilate and wanted to run from painful stereotypes, not explore them. (Other groups, like the Irish and Italians, had their own vaudeville self-parodies.)

“Some generations had to come and go,” Dr. Magee said, “before younger people could listen with fresh ears, say: ‘Hey, let’s listen to this. It’s not us, but it’s our predecessors.’ ”

Many Jews in the vaudeville era ran from this music. In 1909, Mr. Rosen writes in the album liner notes, a prominent Reform rabbi said that such Hebrew comedy was “the cause of greater prejudice against the Jews as a class than all other causes combined,” and that same year it was denounced by the Central Conference of American Rabbis.

Kenneth Jacobsen, the deputy national director of the Anti-Defamation League, said that a project like this “gets very complicated.” It is on the one hand comedy, and that it was usually performed by Jews softens its impact. Still, he said, “our experience in this kind of thing is that inevitably somebody will probably use this for not such good purposes.”

Mr. Rosen discovered the genre in the mid-’90s, while working on a master’s degree in Jewish history at University College London. One day, while doing research at the British Library, he ran across the sheet music for a song called “I Want to Be an Oy, Oy, Oyviator” — a comedy song about a Jewish aviator. Digging deeper, he found sheet music for hundreds of such songs, usually decorated with insulting caricatures of Jews as Shylocks, nebbishy immigrant greenhorns or schlemiels (like Levi, the Jewish wrangler in “I’m a Yiddisher Cowboy,” from 1908, who falls for an Indian maiden, then runs afoul of her father, the Chief).

Fascinated, Mr. Rosen set off on a quest to track down actual recordings of this music. He trolled dusty junk shops, record-collector conventions and, inevitably, eBay, looking for wax cylinders, which cost $10 to more than $100, and 78s. His search, he said, “took roughly 10 years on and off.”

Mr. Kun heard Mr. Rosen speak about the genre at the Experience Music Project conference in Seattle last year. Within weeks, they said, they were planning an album.

Mr. Kun recalled: “I would get e-mails at 6 in the morning: ‘Hey, have you ever heard of this guy?’ I remember one night he found the personal stationery of one of these old vaudeville performers, and it was as if he had found a brick of gold in the pyramids.”

While the collaborators hardly expect “Jewface” to become a commercial smash, their industry savvy does increase the chances that the music will be heard.

Mr. Holt, who worked on the iPod deal between U2 and Apple while at Interscope, is trying to organize a concert and eventually an album, with established rock and folk acts doing covers of the old songs. He’s making calls, he said. So far no one is getting back to him.

“It’s a hard sell,” Mr. Holt acknowledged last week over a Scotch at SoHo House, the private club in downtown Manhattan, declining to name the acts he has been in touch with about the concert. “It’s like, ‘Oh my God, there’s this lost Jewish music, recorded by Jews, making fun of Jews for non-Jews to be able to enjoy, in order to assimilate!’ That’s not a great elevator pitch.”

Even family members can be skeptical. Mr. Rosen said his in-laws were taken aback. But to him, Jewish dialect music played a role similar to that which gangsta rap plays among African-Americans today. Vulgar and, to some, culturally debasing, it nevertheless managed to smuggle a subculture’s distinct idiom into mainstream popular culture, while creating jobs for entertainers, managers, theater owners and music publishing houses from the same culture.

“To some extent, people like to see themselves represented,” Mr. Rosen said, “even if they are badly represented.”

Hollywood’s Knocking but Mom Guards the Door
Kimberly Brown

WHEN the 30-year-old singer Jeff Buckley, best known for his haunting 1994 album “Grace,” walked into a Memphis river fully clothed in 1997, he wrote a Hollywood-ready end to a brief but compelling life story.

Soon the movie people came calling, wooing his mother, Mary Guibert, for the rights to tell his story and to use his music in the telling. But Ms. Guibert, wary of letting her son’s memory be exploited, was a tough customer.

Brad Pitt, who at one point had called himself obsessed with Mr. Buckley’s music, struggled for two years to make a film inspired by his life. But Ms. Guibert rejected the scripts he developed as straying too far from reality. She shot down another effort, in part because the screenwriter imagined a scene with Mr. Buckley on LSD, hallucinating a meeting with his father, Tim Buckley, the 1960’s folk and jazz troubadour, who died in 1975 (and whom Jeff barely knew). She turned down a third project because it was too truthful: she did not want to make a purely biographical film.

“The great curiosity the world has about him should be fed somehow,” Ms. Guibert, 58, said recently over lunch near her home in Los Angeles. “But in the right ways.”

Now, almost 10 years after Mr. Buckley’s death, Ms. Guibert, whose life and career revolve around tending to his estate, has taken matters into her own hands. She is working with a young producer, Michelle Sy, and an even younger screenwriter and director, Brian Jun, to develop a film she plans to call “Mystery White Boy.” But whether she will have any more success getting a movie made is anything but certain.

“If I had my druthers, we wouldn’t be doing this,” she said, voicing her ambivalence about the entire undertaking. Ms. Guibert said her son was uncomfortable with his celebrity and would not have wanted any movie made about him. But her fear that someone might make a film without her cooperation, somehow sullying Mr. Buckley’s memory in the process, has motivated her to take the wheel, however reluctantly.

The tale of the on-again, off-again Buckley movie shows how even a project with a charismatic main character, a true story and a built-in audience — not to mention the makings of a popular soundtrack — can get stuck in the peculiar hell known as development.

It also shows how films involving dead musicians and artists can be among the trickiest to make: if the subject’s survivors control the rights to their music or art, they can exercise a veto merely by withholding those rights. “When a parent or a spouse has a certain memory of someone, that’s the movie they want to see,” said Dale Pollock, a former president of A&M Films. “And what’s the use of the movie if you can’t have any of the songs?”

Mr. Pollock said that he spent seven years trying to make a biographical movie about Otis Redding, but that Mr. Redding’s widow, Zelma, refused to approve any script that depicted her husband as a womanizer. “Her presence made it impossible to make a realistic film about Otis Redding,” he said. “You took this big part of what he was out of his life, and the story didn’t work.”

(Reached by phone at her shoe boutique in Macon, Ga., Ms. Redding, 64, said she was not opposed to airing a certain amount of dirty laundry in a biopic, but denied he was a womanizer, adding, “I’m not going to let anybody scandalize Otis Redding’s name.”)

The broad outlines of Mr. Buckley’s family story are what captured Hollywood’s attention. Like Tim Buckley, Jeff was a talented, handsome singer who flirted with stardom, wrestled with the temptations of the music industry and died young. He looked startlingly like his father and had the same unusually wide vocal range. Both made music that defied convention, as the music critic David Browne wrote in “Dream Brother: The Lives and Music of Jeff and Tim Buckley” (HarperEntertainment, 2001).

And yet the father was only a fleeting presence in his son’s life. Ms. Guibert, who was Tim Buckley’s high school sweetheart, was abandoned by him as a pregnant teenager and raised their son without him. Jeff met Tim only a few times before Tim’s death from a drug overdose. Still, Tim’s abbreviated but impressive career cast a long shadow over his son.

When “Grace” was released by Columbia Records, a division of Sony, critics swooned over Jeff Buckley’s beguiling falsetto and celestial sound. In a concert review at the time, Jon Pareles of The New York Times wrote that “with his voice, a world of tumult and obsession becomes almost seductive.”

Critics praised “Grace” and Mr. Buckley’s admirers included Paul McCartney, Bono and Jimmy Page, but the album’s sales were underwhelming. By 1997, Mr. Buckley was under pressure from Sony, which had signed him to an impressive three-album deal, to come up with a more commercial follow-up to “Grace.” He headed to Memphis in search of a creative refuge. His band members were on their way to join him the night he drowned.

His death left Ms. Guibert in the awkward position of managing his posthumous career. It is difficult not least because she has been a polarizing figure among her son’s friends and fans, critiqued and second-guessed for everything from her handling of his memorial service to the release of his music. Some of his friends even asserted that he would not have wanted her to run his estate.

And yet she spends her days policing the Internet for sales of bootlegs, maintaining a fan Web site, promoting tribute concerts and working with record companies to release more of his music. She also fields requests to use Mr. Buckley’s music on television and in films.

“This is my life’s work,” said Ms. Guibert, who shelved dreams of becoming an actress when her son was born but nonetheless retains an air of drama. “I think about this 24/7.”

She said she had not become rich as the custodian of Mr. Buckley’s legacy. Though “Grace” continues to sell as many as 1,000 albums a week domestically, Ms. Guibert said the record company was just now breaking even on it. This summer, she said, she went without hot water for several weeks, waiting to repair her water heater until the next royalty check arrived. A film, she acknowledged, would no doubt help, not least by improving sales of Mr. Buckley’s music.

At first, Ms. Guibert said, she turned away the writers and producers who asked for the right to tell her son’s story. But Mr. Pitt tempted her by helping her set up an archive of Mr. Buckley’s music and writings, including diaries and audio journals that he had recorded on cassette.

Once Mr. Pitt had Ms. Guibert’s blessing to develop a film, he hired Emma Forrest, a British novelist and journalist, to write a screenplay in the vein of the 1979 Bette Midler film “The Rose.” After all, there had been speculation that Mr. Buckley’s death was not an accident, that drugs, alcohol, or perhaps some form of mental illness had played a role.

But Ms. Guibert rejected Ms. Forrest’s two drafts.

“Her immediate response to the first draft was, ‘No, my son didn’t take drugs, he never suffered from depression,’ ” Ms. Forrest said. It was a question of competing truths, she added. Ms. Guibert’s recollections of her son differed from those of Mr. Buckley’s friends, interviewed by Ms. Forrest. Ms. Forrest said she wanted to explore the nature of genius and mine the links between music and emotional disintegration, but Ms. Guibert wanted none of it.

“We were trying to tell a story about creativity” and how it can affect people who are “exceptionally talented,” Ms. Forrest said, adding that she had struggled with mental illness herself, which she wrote about in her 2001 novel, “Thin Skin.”

Ms. Guibert said she dismissed Ms. Forrest’s screenplay in part because it was too fantastic: Ms. Forrest had her Jeff character meet the ghost of Judy Garland. She also depicted him mutilating himself, a form of mental illness that Ms. Guibert said was based too much on the screenwriter’s life and not enough on Jeff Buckley’s.

Ms. Guibert, who insists her son had no drug or alcohol problems, said he didn’t suffer from mental illness though he had the occasional panic attack and bouts of depression.

Mr. Pitt, who did not return calls for comment, eventually gave up on the project.

Mr. Buckley’s story continued to interest other filmmakers, however; no fewer than four documentaries have been made about him. And after Mr. Browne’s double biography was published, he said he was approached several times by writers and producers interested in adapting it. The book was optioned last year by Train Houston, a writer in Los Angeles who briefly interested the actor Tobey Maguire’s production company in the project.

But Ms. Guibert stood in the way. She said the script Mr. Houston wrote had a “verisimilitude” problem, and that she did not trust his approach. Mr. Houston said he had planned to learn more about Mr. Buckley once his script was sold and pushed Ms. Guibert to reconsider, but she would not budge.

“Obviously, I was not going to have any control over it,” Ms. Guibert said.

Now she is very much in charge. Through her lawyer, Ms. Guibert met her co-producer, Ms. Sy, a former director of development at Miramax Films who received an executive producer credit on “Finding Neverland.” Ms. Sy in turn linked up with Mr. Jun, 26, after his film “Steel City,” about a complicated father-son relationship, was favorably reviewed at Sundance.

On the Jeff Buckley Web site, Ms. Guibert assures his fans that Mr. Jun will not “sugarcoat or manipulate” the facts: “I’ve looked into his eyes and I know that he’s a straight shooter. There’s a depth of character to Brian, surprising in someone so young, and I have seen from his filmmaking that he has the courage and the skill to do this the way it should be done.”

Whether some sugarcoating can be avoided in a project that remains under Ms. Guibert’s watchful eye is an open question: she is, after all, his mother.

“I try to be impersonal and realistic,” Ms. Guibert said. “You know, to be a good business person about all of it. In the final analysis, I’m his mother. And when the chips are down and when our backs are to the wall, that’s it, that’s the one reason that remains. Because I’m his mother, that’s why. Because I’m still alive.”

Mission: Rescue Operation
Laura M. Holson

The film star, who took a beating when Paramount ended his longstanding production deal last summer, has found not just a home, but a new career direction that could point the way for expensive actors who are struggling in cost-conscious Hollywood.

Mr. Cruise and his producing partner, Paula Wagner, will take charge of United Artists, the famous production company started by Charlie Chaplin and Mary Pickford, the company said Thursday.

For Mr. Cruise, gaining control of United Artists undoubtedly provides a sense of vindication that he is still a force in Hollywood after he was unceremoniously cut loose this summer from a 14-year deal with Paramount Pictures. Sumner M. Redstone, chairman of Viacom, Paramount’s parent company, said at the time that Mr. Cruise’s “recent conduct has not been acceptable to Paramount.”

He was referring to Mr. Cruise’s couch-jumping on Oprah Winfrey’s show, and his frequent mentions of his belief in Scientology. Mr. Redstone claimed that his behavior had cost the studio as much as $150 million in movie ticket sales for “Mission: Impossible III.”

“He was embarrassing the studio,’’ Mr. Redstone recently told Vanity Fair. “And he was costing us a lot of money.”

Ms. Wagner will be named chief executive of United Artists and Mr. Cruise will be an executive and producer associated with the studio under an unusual arrangement that gives them a minority share of the company. Ultimately Metro-Goldwyn-Mayer Inc., which owns United Artists, hopes that investors take a direct stake in both the unit and Mr. Cruise’s career. “The studios and talent don’t trust each other,” Harry E. Sloan, MGM’s chairman and chief executive, said in an interview Thursday. “We need to start a dialogue.”

For MGM, which is owned by private equity firms in partnership with the Comcast Corporation and the Sony Corporation, the deal offers an alliance with a major star on terms more manageable than the huge fees he commanded from Viacom’s Paramount Pictures for expensive films like last May’s “Mission: Impossible III.” It also offers a way to unlock the value of the United Artists name, which carries enormous cachet, but has been attached to only a few films lately.

The deal also offers a fresh twist on recent trends that have seen investors become directly involved with film producers, even as stars seek more creative and financial control over their careers. Established producers like Joel Silver and Ivan Reitman are among those who have made partnerships with outside investors, allowing them to finance films intended for distribution by studios.

Initially, Mr. Cruise and Ms. Wagner will have authority to produce about four movies a year, for distribution by MGM. Neither Mr. Cruise nor Ms. Wagner put up any capital, Ms. Wagner said. Mr. Cruise may or may not star in the pictures, and will remain free to work as an actor for other studios.

Mr. Sloan and his team have been working to revive MGM as a full-blown movie and television distribution company. Last year, several producers in Hollywood had sought to buy United Artists but were unsuccessful. So far MGM’s recent track record as a distributor of other producers’ movies is unimpressive.

“School for Scoundrels,” which starred Billy Bob Thornton and Jon Heder, brought in only $17.2 million at the domestic box office when it was released in September. The World War I epic “Flyboys” flopped, bringing in only $12.8 million.

Mr. Sloan said MGM was trying to create a new studio model in its dealings with Mr. Cruise and Ms. Wagner. The company will finance United Artists’ first few movies, with budgets of $40 million to $50 million — relatively modest amounts, by current Hollywood standards — and will pay for the unit’s overhead.

After that, Mr. Sloan expects to approach outside investors to finance United Artists’ movies in partnership with Mr. Cruise, who will share an ownership stake in the operation with Ms. Wagner. If investors are not interested in financing the films, MGM said it would pay for them all.

Those outside investors could be hedge funds, wealthy individuals or investment banks. According to Mr. Sloan, the proposed United Artists financial model will spread risk more equally between the studio, talent and the outside investors than a conventional Hollywood deal.

Mr. Sloan said he expected to announce United Artists’ first movie soon. When asked if outside investors would still be interested if United Artists’ initial movies flopped, he laughed and joked, “We’ll take the model out to investors before the first picture opens.”

Recently, some financial funds have seen disappointing results from their investments in studio films. Legendary Pictures, which has a five-year, $600 million deal with Warner Brothers Entertainment to co-finance and co-produce deals, for instance, was an investor in some of that studio’s more noticeable summer duds, including “Lady in the Water” and the animated “The Ant Bully.”

“The actors are not going to have a cakewalk,” said Harold Vogel, the author of “Entertainment Industry Economics.” “These investors don’t say, ‘Oh, it’s so glamorous to go to a party.’ They aren’t that dumb. Instead they say, ‘You will get your money, but we get ours first.’ ”

Mr. Cruise seems to be hedging his own bets by staying on the market as an actor for hire. Also, films already in development under their Cruise/Wagner Productions moniker can be produced by other studios, although Ms. Wagner said she and Mr. Cruise were in negotiations with Paramount to buy back some of the projects they developed there.

When asked to comment on Mr. Cruise’s new deal, Mr. Redstone said, “I wish Tom and his associates the greatest good fortune in their venture.”

Ms. Wagner said she hoped United Artists would become a home for talent, in keeping with the company’s roots. The studio was originally founded in 1919 by Mr. Chaplin, Ms. Pickford, Douglas Fairbanks Sr. and D. W. Griffith. In later years, it became associated with MGM, and for decades was controlled by the billionaire Kirk Kerkorian, who ultimately engineered the sale to its current owners.

Unlike Mr. Silver and Mr. Reitman, who expect to focus on low-budget thrillers and comedies, United Artists expects to make mainstream films of considerable range, Ms. Wagner said. She added that United Artists’ financial backers would have no creative input; their role would be limited to how money was spent. “We are not looking to make a film that makes people unhappy,” she said.

Of course, that is harder than it seems. Other well-known Hollywood personalities have tried to start talent-friendly studios over the years with limited success. Revolution Studios, to choose one relatively recent example, was started in 2000 by the veteran producer and executive Joe Roth, who said he too wanted to bring actors deeper into the process of creating artful films at a reasonable cost, like the old United Artists. But the deal he cut with Sony to create Revolution was not renewed after a string of disappointments, and he is now going to be a Sony producer.

“I’m still reeling,” said Ms. Wagner of the day’s news. “The ink is not dry on this. If you have a movie, send it our way. We are still figuring this all out.”

'Why I Sacked Tom Cruise'

THE man who ended Tom Cruise's 14-year-relationship with Paramount Pictures says he was influenced in the shock decision by his wife, because she and "women everywhere" had started to hate the star.

Viacom boss Sumner Redstone stunned Hollywood earlier this year when he revealed that the studio would sever its ties with the actor's production company, accusing him of "creative suicide" with his outlandish behaviour.

Now the outspoken 83-year-old has told Vanity Fair it was his wife Paula who turned on Cruise first.

"Paula, like women everywhere, had come to hate him," Redstone said. "The truth of the matter is, I did listen to her, but I make business decisions myself."

The split between Paramount and Cruise/Wagner Productions came after months of negative publicity for Cruise, much of it focused on incidents such as his famous couch-jumping appearance on Oprah Winfrey's show.

He also used NBC's Today show to attack Brooke Shields over her use of anti-depressants for postnatal depression after the birth of her first child.

Redstone defended his decision not to renew Paramount's deal with Cruise, saying again that he had embarrassed the studio and cost it millions of dollars.

"When did I decide?" he asked Vanity Fair. "I don't know. When he was on the Today show? When he was jumping on a couch at Oprah? He changed his handler, you know, to his sister - not a good idea.

"His behaviour was entirely unacceptable to Paula, and to the rest of the world. He didn't just turn one (woman) off.

"He turned off all women, and a lot of men ... He was embarrassing the studio.

"And he was costing us a lot of money. We felt he cost us $US100 million ($130 million), $US150 million ($195 million) on Mission: Impossible III.

"It was the best picture of the three, and it did the worst." Cruise's business partner, Paula Wagner, disputed Redstone's version of events at the time, saying negotiations on a new contract had simply fizzled out.

Negative Publicity Is the New Hot Hype
David M. Halbfinger

The TV networks don’t want you to see ads for the Dixie Chicks documentary “Shut Up and Sing.” The movie theater chains don’t want you to see the fictionalized polemic “Death of a President.” The president of Kazakhstan doesn’t want you to see “Borat.”

Just ask the people promoting the movies.

Hollywood appears to have hit upon a fail-safe strategy for getting attention for just about any kind of film: get someone, anyone, to try to suppress it, and then rush to the news media with breathless warnings about the First Amendment coming under attack.

“Profoundly un-American,” Harvey Weinstein, the distributor of Barbara Kopple’s Dixie Chicks film, declared in a statement shopped around by his publicists late on Thursday, in which they asserted that NBC and the CW network had refused to run ads in which the singer Natalie Maines refers to President Bush with an expletive and as “dumb.”

(NBC acknowledged that it had rejected the ads for fairness reasons, since Mr. Bush couldn’t be expected to buy response ads, as he would in a political campaign. CW said the Weinstein Company had not bought any time on the network. The Weinstein Company, for its part, said that if it had concocted the dispute for publicity’s sake, it would have done so a week ago to avoid stepping on the film’s mostly positive reviews.)

Newmarket, the distributor of “Death of a President” — the poorly reviewed British pseudo-documentary that caused a furor for depicting the assassination of President Bush — has been fielding a platoon of public relations consultants to hype the fact that networks like Fox, CNN and National Public Radio refused to carry advertisements for it.

None of this is new, of course, with the possible exception of Sacha Baron Cohen’s surprisingly successful baiting of the Kazakh government for his raunchy Fox comedy, “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan.” In fact, veteran movie marketers say that while entertainment journalists keep falling for the ploy, audiences have long since wised up to it.

“These are all time-tested canards that get people to write about your film,” said Eamonn Bowles, president of Magnolia Pictures, who as an executive for Mr. Weinstein oversaw the distribution of the NC-17-rated “Kids” when Miramax was barred from releasing it by its parent, the Walt Disney Company. “Unfortunately, I don’t think the public really cares. It can get word out, but it can’t get people to want to see your film. People just yawn. And sometimes it reeks of desperation, too.”

Take a low-budget movie few have heard of, and not many more are likely to see, that depicts Jesus as a black man: “Controversy continues to swirl around ‘Color of the Cross,’ ” the film’s publicist cried a few weeks ago, before reporting that some black ministers had refused to screen it for their congregations.

The major studios, of course, are known for ducking controversy, denuding their films of political leanings to avoid alienating large portions of the audience. They have other reasons, too: one marketer who worked on Fox’s climate-change blockbuster “The Day After Tomorrow,” released in 2004, said the studio wanted to avoid having the movie seen as an issue-oriented film, lest audiences decide it sounded boring.

But even studio films are turning up in the news columns more and more: “Blood Diamond,” a new Warner Brothers movie starring Leonardo DiCaprio, made headlines in The Los Angeles Times, for example, when it got caught in a public relations battle between De Beers, the diamond conglomerate, and a group of Kalahari bushmen who were evicted from their land in Botswana, where De Beers is mining.

Still, it’s the independents like Magnolia and ThinkFilm that have made a specialty out of marketing controversy, as Mr. Weinstein did perhaps better than anyone before or since with Michael Moore’s “Fahrenheit 9/11.” Mark Urman of ThinkFilm owned up to capitalizing “a bit cynically” on the NC-17 rating last year for Atom Egoyan’s “Where the Truth Lies,” for one. But he said the outrage he expected over “The Aristocrats” last year never materialized, scotching his plans to use it to sell tickets.

“I’m finding that a lot less of this is working,” he said. “The last film that was successfully sold with controversy at the root of its campaign was ‘Passion of the Christ,’ a film accused of anti-Semitism and then sold to a very large Christian population as ‘this film Jews don’t want you to see.’ It worked in a stunning way, by making it appear to be a beleaguered film.”

Mr. Urman and Mr. Bowles said that conservative and religious audiences — who once could be relied on to protest, picket and draw the rest of America’s attention to movies like “Priest” or this summer’s “Jesus Camp” — have learned to resist the bait.

Magnolia hoped to market “Jesus Camp” both to liberals who would be appalled by its seeming brainwashing of the Christian young, and to conservatives who would be proud. But an important Christian leader turned against the film, Mr. Bowles said, and the result was neither the support nor the vocal opposition the distributor was hoping for.

Mr. Urman is now distributing “Shortbus,” an unrated movie with hard-core sex, and he says he has been shocked by the lack of resistance to it from the religious right.

“They see you coming,” he said. “Conservatives don’t want to be used. And liberals are no more motivated to see something because conservatives are against it.”

Bill O'Reilly Wants to Ban Horror Movies (and is a Moron)
Scott Weinberg

You know Bill O'Reilly? That stuffed shirt knee-jerk reactionist / sexual harrassment expert? Yeah, that guy. Well, Bill has finally discovered that there's a thing out there called A Horror Movie, and get this: He wants to ban them. Yep, O'Reilley threatens to "look into it" at the tail-end of this moronic video clip in which some wifty psychologist and some puritan author spend about six minutes boo-hoo-hooing over the shameless gruesome nastiness of movies like Saw, Hostel and The Texas Chainsaw Massacre. Look out, Lionsgate! Bill O'Reilly plans to "look into" horror movies and, I guess, put a stop to the durn things, consarnit! Stockholders beware!

Words like "sickening" are tossed around the studio as the three overwhelmingly ill-informed hand-wringers ramble on, poorly covering a subject that they know nothing about. O'Reilly even states that this type of horror "could never have happened in America ten years ago," blissfully ignorant to the fact that gore flicks have been around since (at least) the days of Herschell Gordon Lewis. (Like, the 1960s!)

Billy's guests are Dr. Virginia Klein, "a psychotherapist," and James Hirsen, the smug author of a book called Hollywood Nation -- a book that has a piece of effusive front-cover blurbage from none other than Michael Medved. (As if that's a person you want praise from.) So obviously Bill is really interested in covering both sides of the Horror Movie argument. Sheesh. Klein seems to claim that the only people who like Saw 3 are those who "are on tranquilizers" or "like toys." (Don't feel bad; I don't have any idea what she's talking about either.) Dr. Klein ends up a total wiffle-ball washout, and here's why: The "psychology" of horror flicks is so simple that I don't even feel the need to explain it here -- but she STILL gets it completely wrong! She blathers and blithers for a few minutes before Billy Boy shoots it on over to Mr. Hirsen, the "Hollywood Insider." Ahem.

Hirsen's insights into the realm of "extreme horror" are as such: Horror fans refer to the goods at "ultra-violence." We do? Hey Hirsen: Ever heard of A Clockwork Orange? Came out in 1971? Ever heard of Kubrick? Give it a rent one day. It delivers some actual insight into the nature of violence, and no, there's no Cliff's Notes, sorry. Hirsen also bemoans the fact that the hardcore horror movies take place in "an amoral universe in which you can't tell who the good guys are and the bad guys are." THIS is a guy who actually writes about film? Did he actually just imply that movies have no business dealing in that grey moral area between white-hatted heroes and mustache-twirling villains? Whaaat? And he has the stones to go on FOX NEWS and use the phrase "amoral universe"?? Holy freakin' macaroni, who allowed this clip to air on national television? It's so inept I'm almost embarrassed for the participants; they even have the balls to say that our young horror filmmakers are celebrated "because of money." As if there's any other gauge of value in Hollywood besides money. Nope, just in the horror gerne, I suppose. Very insightful, fellas. Eli Roth should apologize for his success, but Adam Shankman is the next Billy Wilder because his flicks make money? Whatever.

And then there's O'Reilly himself. Y'know, I've always been more than content to simply ignore O'Reilly, but he's so ill-prepared and obtuse in this clip... He yearns for the old horror movies like Dracula and Frankenstein -- not because they're beautifully made and grimly effective pieces of cinema, but because they "cut away" from the violent material. Brilliant. He then goes on to describe a few generic atrocities that may or may not appear in the Saw series ("Eyeballs gouged out! Hands being lopped off! women being defiled!") before casually reminding his viewers that Fox also makes horror movies. (Way to cover your ass there, Bill.) The raving dolt even implies that Warner Brothers has to come out and "explain" and apologize for why they made The Texas Chainsaw Massacre. And yet Sony doesn't have to "explain" why they made White Chicks? Fox doesn't deserve a nationally-televised rap on the knuckles from O'Reilly the Holy for that last Lindsay Lohan flick? Please.

Argh, I gotta wrap this rant up; I'm just too aggravated to continue. Horror has always been seen as the black sheep of the movie world, and frankly I'm sick to freakin' death of this B.S. This moronic video is yet another piece of low-minded and shamelessly elitist nonsense that exists only to prove, what, -- That Bill O'Reilly is Too Good for horror movies? Fine, more for the rest of us, you aimlessly nattering blowhard. And, with all humility, I'll close this geeky diatribe with an offer-slash-challenge to Mr. O'Reilly: Bill, seriously: Next time you want to hang the horror genre in effigy without even bothering to find ONE person who'll come to its defense, I challenge you to drop me an email and let me represent the pro to your clueless con. And good luck with your crusade against horror films; I'm sure all the people you just labeled sick, twisted deviants who have the GALL to enjoy this stuff will take your opinions as if they came from someone with half a brain. Grr.

[Thanks to Bloody-Disgusting.com for pointing me towards the video clip, because it enabled me to rant endlessly and have fun doing it. Also, it looks like Saw 3 director Darren Lynn Bousman was penning his own response to O'Reilly at the same time I was -- and we even make some of the exact same (and very valid) points. Heh.]

Sadistic ‘Saw III’ Rips Away at Ratings Board Standards
Tenley Woodman


Movie Rating: (R) | Critic: F

Reading tales of medieval punishments is haunting. Watching people being tortured is not. It’s just sick.

The first 20 minutes of ‘‘Saw III” is a bloodbath. Like trapped animals, the unfortunate people in serial torture-killer Jigsaw’s (Tobin Bell) grasp try to free themselves by breaking their limbs and ripping the flesh from their bodies.

Pass the popcorn - I think not.

Surpassing the gore and psychological trauma of ‘‘Se7en,” ‘‘Silence of the Lambs” and ‘‘Hannibal,” ‘‘Saw III” is an exercise in bad taste.

Jigsaw is dying from a brain tumor, but continues his warped games through Amanda (Shawnee Smith, ‘‘Summer School”), a former torture victim who survived one of his horrific challenges.

Beneath the torture and gore is a story; whether it’s one you care to follow is another matter.

Per Jigsaw’s request, Amanda captures an unhappy doctor named Lynn (Bahar Soomekh) to perform a back-alley lobotomy on him. Meanwhile, Amanda lays the trap for Jigsaw’s next victim, Jeff (Angus Macfadyen, ‘‘Braveheart”), a grieving father unable to control his rage over his son’s death.

Jigsaw assumes moral high ground by convincing his victims that whether they live or die is by their choice. But let’s get real, if you have hooks and other nasty contraptions piercing, twisting and maiming your body, is there a choice?

If the film is not disturbing enough, the antics of those behind the scenes also bring decency into question.

Bell donated his own blood so it could be mixed with the red paint for the film’s promotional posters.

Filmmakers approached the MPAA rating board seven times before receiving an R rating.

One graphic scene shows a woman’s rib cage being ripped out while she is still alive. If this is what the rating board believed was reasonable R material, I’d hate to see what was left out.

Director Darren Lynn Bousman made his directorial debut with ‘‘Saw II” and stayed on to direct this third installment. Keep in mind he was once a production assistant for Tara Reid, so clearly, he has no taste.

(‘‘Saw III” contains grisly violence and gore, sequences of terror and torture, nudity and profanity.)

Washed Up in a World of Urban Vermin Intrigue
A. O. Scott

Don’t get me wrong: I’m looking forward to the next James Bond movie as much as anyone else. But it strikes me as unlikely that any British action picture released this year will surpass “Flushed Away.”

Yes, the 007 franchise has the gadgetry, the babes and the dry martinis, but does it have google-eyed, rubber-mouthed leeches (unless they were slugs, or maybe some kind of aquatic worm) singing “Don’t Worry, Be Happy” in splendid choral harmony? (I know, I never wanted to hear it again either, but trust me, you haven’t really experienced the song until you’ve heard it performed by leeches.) Does Mr. Bond have Kate Winslet as his love interest? (Playing a sewer rat, yes. But still. Kate Winslet.) Is his nemesis a giant toad with a fondness for royal family paraphernalia and an obsessive hatred of rodents?

I could go on, but I’ve made my point. “Flushed Away,” directed by David Bowers and Sam Fell, is the first computer-animated feature to come from the very English whimsy factory that is Aardman Animations, progenitors of Wallace and Gromit, Rex the Runt and “Chicken Run.” (DreamWorks, a co-producer of “Chicken Run,” was also involved with “Flushed Away.”) The technological shift from the traditional Aardman stop-motion animation, using plasticine models, has given the filmmakers new freedom and flexibility — for instance, in confecting sequences that take place in and under water — but the eccentric, handmade “Wallace and Gromit” aesthetic remains happily intact. And at a time when all-ages three-dimensional animation seems to be in a serious rut (how many more movie-star-voiced pleas for interspecies understanding must we be subjected to?), it is a relief to encounter such exuberant and infectious silliness.

At first, “Flushed Away” does not seem so different from its lesser competitors, even as it dares to aim a few mocking jabs at Pixar, the top dog in the computer-animation world. At one point the sentimentality of “Finding Nemo” is grazed by a satirical harpoon, and the story begins in an expansive London house whose clean spaces and tidy right angles recall “Toy Story.” So, at first, does the situation in which the hero, a pet mouse named Roddy (Hugh Jackman), finds himself when his young owner and her family have gone on vacation. He cavorts with the Barbies and the Kens, but this is a lonely, empty pastime — they’re just toys, after all — and it seems to promise a boring movie.

As it happens, a less boring movie would be hard to imagine. Roddy’s life, as they say, is changed forever when an uncouth rat named Sid (Shane Richie) pops up through the plumbing. Roddy, trying to rid himself of the interloper, finds himself sent down the pipes, where he is accidentally introduced into a world of subterranean urban vermin delights.

In spite of the title and the necessity of using a toilet as a portal to the London sewer, the humor in “Flushed Away” is mostly clean. The narrative, on the other hand, is gratifyingly messy, as Roddy, washed up in a miniature London built out of trash and flotsam beneath the actual city, becomes embroiled in some fairly complicated intrigue. He falls in with Rita (Ms. Winslet), who pilots an old boat, and who is harassed by the grandiose toad (Ian McKellen) and his minions, a veritable charcuterie platter of voice-over excess featuring Bill Nighy, Andy Serkis, and Jean Reno as the toad’s French cousin, who is (naturellement!) a frog.

As is the custom with Aardman productions, there is a sweet and modest decency — a wry celebration of Traditional British Values, if you will — peeking out amid the clamor and craziness. (The pop-cultural references and canny music selections, meanwhile, mark “Flushed Away” as an all-American DreamWorks animation product.)

The filmmakers also take evident pleasure in topping themselves, and in conceiving a structure that is less like a roller coaster ride than a ski jump. The picture relentlessly picks up speed, zooming from drollery to anarchy to complete — albeit brilliantly controlled — comic chaos, and before you know it, you’re airborne (even if, strictly speaking, you’re still in the sewer), carried aloft on the wings of leeches.

“Flushed Away” is rated PG (Parental guidance suggested). It has a few mildly naughty jokes.

From Kazakhstan, Without a Clue
Manohla Dargis

Sometime in early 2005, a mustachioed Kazakh journalist known as Borat Sagdiyev slipped into America with the intention of making a documentary for the alleged good of his Central Asian nation. Many months later, the funny bruised fruits of his labor, “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan,” are poised to hit the collective American conscience with a juicy splat. The Minutemen, those self-anointed guardians of American sovereignty, were watching the wrong border.

Borat, who just recently invited the “mighty warlord” George W. Bush to the premiere of his film before a gaggle of excited news crews, is the dim brainchild of Sacha Baron Cohen, the British comic best known until now for another of his pseudonymous identities, Ali G. Described by his creator as a “wannabe gangsta,” Ali G was the host of a British television show, starting in 2000 (HBO had the American edition), where, as the voice of “the yoof,” he interviewed serious and self-serious movers and shakers, including “Boutros Boutros Boutros-Ghali,” Sam Donaldson and Richard Kerr, a former deputy director of the Central Intelligence Agency, who found himself explaining why terrorists could not drive a train into the White House. (No tracks.)

Mr. Baron Cohen succeeded in seducing politicians and pornography stars alike, mostly because Ali G’s phenomenal stupidity made the character seem harmless. He also seemed to represent the ultimate in media big game: young people. Dressed like a Backstreet Boy, complete with Day-Glo romper suits, designer initials and a goatee that looked as if it had been painted on with liquid eyeliner, he was met with bewilderment, exasperation and patience that at times bordered on the saintly. Like Borat and Bruno, another of the comic’s similarly obtuse television alter egos who made regular appearances on the shows, the joke was equally on Ali G and on the targets of his calculated ignorance.

With Borat, Mr. Baron Cohen took the same basic idea that had worked with Ali G and pushed it hard, then harder. The joke begins with an apparently never-washed gray suit badly offset by brown shoes, which the performer accents with a small Afro and the kind of mustache usually now seen only in 1970s pornography, leather bars and trend articles. Think Harry Reems, circa 1972, but by way of the Urals. Married or widowed, and he appears to be both, Borat loves women, including his sister, the “No. 4 prostitute” in Kazakhstan, with whom he shares lusty face time in the film’s opener. He’s a misogynist (a woman’s place is in the cage), which tends to go unnoticed because he’s also casually anti-Semitic.

That Mr. Baron Cohen plays the character’s anti-Semitism for laughs is his most radical gambit. The Anti-Defamation League, for one, has chided him, warning that some people may not be in on the joke. And a sampling of comments on blogs where you can watch some of the older Borat routines, including a singalong in an Arizona bar with the refrain “Throw the Jew down the well,” indicates that the Anti-Defamation League is at least partly right: some people are definitely not in on the joke, though only because some people are too stupid and too racist to understand that the joke is on them. As the 19th-century German thinker August Bebel observed, anti-Semitism is the socialism of fools, a truism Mr. Baron Cohen has embraced with a vengeance.

Given this, it seems instructive to note how discussions of Borat, including the sympathetic and the suspicious, often circle over to the issue of Mr. Baron Cohen’s own identity. Commentators often imply that Borat wouldn’t be funny if Mr. Baron Cohen were not Jewish, which is kind of like saying that Dave Chappelle wouldn’t be funny if he were not black. For these performers, the existential and material givens of growing up as a Jew in Britain and as a black man in America provide not only an apparently limitless source of fertile comic material, but they are also inseparable from their humor. But no worries: Borat makes poop jokes and carries a squawking chicken around in a suitcase.

Like General Sherman, he also lays waste to a sizable swath of the South, a line of attack that begins in New York and ends somewhere between the Hollywood Hills and Pamela Anderson’s bosom. The story opens in Kazakhstan (apparently it was shot in a real Romanian village that looks remarkably like the set for a 1930s Universal horror flick), where Borat sketches out his grand if hazy plans before heading off in a horse-drawn auto. Once in New York, in between planting kisses on startled strangers and taking instruction from a humor coach, he defecates in front of a Trump tower (Donald Trump was one of Ali G’s more uncooperative guests) and masturbates in front of a Victoria’s Secret store. The jackass has landed.

It gets better or worse, sometimes at the same time. Whether you rush for the exits or laugh until your lungs ache will depend both on your appreciation for sight gags, eyebrow gymnastics, sustained slapstick and vulgar malapropisms, and on whether you can stomach the shock of smashed frat boys, apparently sober rodeo attendees and one exceedingly creepy gun-store clerk, all taking the toxic bait offered to them by their grinning interlocutor. There is nothing here as singularly frightening as when, during his run on HBO, Borat encountered a Texan who enthused about the Final Solution. That said, the gun clerk’s suggestion of what kind of gun to use to hunt Jews will freeze your blood, especially when you realize that he hasn’t misheard Borat’s mangled English.

That scene may inspire accusations that Mr. Baron Cohen is simply trading on cultural and regional stereotypes, and he is, just not simply. The brilliance of “Borat” is that its comedy is as pitiless as its social satire, and as brainy. Mr. Baron Cohen isn’t yet a total filmmaker like Jerry Lewis (the film was directed by Larry Charles, who has given it a suitably cheap video look), but the comic’s energy and timing inform every scene of “Borat,” which he wrote with Anthony Hines, Peter Baynham and his longtime writing and production partner, Dan Mazer. These guys push political buttons, but they also clear room for two hairy men to wrestle nude in a gaspingly raw interlude of physical slapstick that nearly blasts a hole in the film.

Clenched in unspeakably crude formation, those hairy bodies inspire enormous laughs, but they also serve an elegant formal function. The sheer outrageousness of the setup temporarily pulls you out of the story, which essentially works along the lines of one of the Bob Hope-Bing Crosby road movies, though with loads of smut and acres of body hair, relieving you of the burden of having to juggle your laughter with your increasingly abused conscience. Just when you’re ready to cry, you howl.

“If the comic can berate and finally blow the bully out of the water,” Mr. Lewis once wrote, “he has hitched himself to an identifiable human purpose.” Sacha Baron Cohen doesn’t blow bullies out of the water; he obliterates them.

“Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan” is rated R (Under 17 requires accompanying parent or adult guardian). It includes raw language, naked men and nude wrestling.

Don’t Touch That Dial
Bill Carter

IN every television season some new lesson about the American audience is imparted. This season’s lesson was clear within the first weeks of the fall: you can ask people to commit only so many hours to intense, dark, intricately constructed serialized dramas, to sign huge chunks of their lives away to follow every minuscule plot development and character tic both on the air and on Internet sites crowded with similarly addicted fanatics.

Ask for more and you will get what happened to every network this fall. “The Nine” got low numbers. “Vanished” was banished. “Kidnapped” went unransomed. “Smith” was swift-kicked. “Runaway” sounded like a command.

“The message we received was that people have strains on their lives,” said Kevin Reilly, the president of NBC Entertainment. “People are saying, ‘I’ve got my handful of shows like this, and I don’t want more.’ ”

Or as Kevin Lubarsky, a recent Villanova University graduate who has relocated to Los Angeles, put it one recent afternoon: “Sundays you’ve got football. Then you’ve got a couple of these serialized shows. You can’t spend your life watching television.”

Inspired by the tremendous popularity of “Lost,” a program that is as hard to follow as it is to produce, the networks this fall introduced no fewer than 10 similarly demanding serialized dramas (and even a couple of comedies). Mr. Reilly was genuinely excited about the prospects for “Kidnapped,” NBC’s series about the abduction of a wealthy New York family’s scion. The show had high production values and an exceptional cast, including Jeremy Sisto, Delroy Lindo, Dana Delany and Timothy Hutton.

It had three chances on Wednesday nights before being exiled to the wastes of Saturday night, where it is expected to die a quiet, premature death. Writers will try to wrap up the story in 13 episodes instead of the 22 that were planned.

“Smith” won’t even get that minimally dignified exit. The CBS series, about a ruthless gang of master thieves, also had an impressive cast, headed by Ray Liotta and Virginia Madsen. But it was expunged from existence after just three episodes. If you want to know what happened to those characters, you’ll just have to use your imagination. They will forever be suspended in midstory.

Similarly, will we ever know what “The Nine,” ABC’s drama about characters held hostage in a bank robbery, was supposed to add up to? It has the built-in advantage of following directly after “Lost,” but in its first four outings, it has frittered away an enormous number of viewers. That’s even more than “Invasion,” the serialized drama that last year tried to march into viewers’ homes on the heels of “Lost.”

The prospect of devoting time and passion to a show only to see it cut off, like a movie snapping in half in midprojection, has made a lot of viewers feel commitment-phobic this season.

Mary Beth Fay, a high school teacher from Round Hill, Va., has been a faithful fan of serialized shows like “Lost” and “Prison Break” from the beginning of their runs. And she was willing to try a few more entries this season.

But she said the demands on her time and concerns about cancellation sent her fleeing from some of the shows, like “Six Degrees,” ABC’s serial about intersecting events involving six New York strangers. “I decided not to stick with that one because it wasn’t being very successful in the ratings. It’s not worth watching a show if you’re not going to get the story completed on the air.”

Other viewers learned that lesson the hard way — by committing themselves to a show, only to be left at the altar a few episodes later. They tend to be bitter. Writing on the Web site misguidedthoughts.com, someone using the name Runaway Fan” lamented the injustice of it all: “They could have at least let us see the rest of the season instead of getting us hooked and then dropping it.”

It may be the network itself that pays the greatest price. On the same site, a fan named Jasmine wrote, “I’m not watching the CW at all anymore.”

Dana Walden, president of the 20th Century Fox Television studio, said: “What the audience seems to be saying is: ‘Enough. We can’t get involved with more of these.’ ”

Logically this result should have been expected. But logic often runs aground in the offices of television executives who endlessly try to anticipate the future by repeating the past. Or, as Preston Beckman, executive vice president for entertainment for the Fox network, put it, “In this business we always overcompensate.”

It all started six years ago with “24,” the first of the you’ve-got-to-see-it-every-week dramas built around a single, suspense-laden, seasonlong storyline. The show, which appeared on Fox, became a hit in the United States and abroad, and even validated the emerging business of sales of DVD’s of entire seasons of series.

ABC raised the stakes two years ago with “Lost,” which became a bigger sensation than “24.” And viewers of “Lost” don’t even get a resolution at the end of the season. They commit themselves to the show knowing that it will tease and confuse them for the entire length of its run.

Fox expanded the genre last year by adding “Prison Break,” a less spectacular but still solid hit that also told a continuing story.

Viewers were watching three of these densely plotted novelized series, and they were watching them with the kind passion network executives and program creators craved.

Soon Hollywood talent agencies, where writers first kick around concepts for shows, and studio and network development offices, where programs are pitched every year, were filled with what Ms. Walden called “big, hooky ideas” for more shows that would stir the same passions.

“It did sort of filter into the ether,” she said. “We were all having conversations about event drama, and all an event drama is is a serialized drama.”

Part of the appeal was the chance to take on a new kind of challenge. “It’s difficult to get creative people not to want to do this kind of show,” Mr. Beckman said. “After you do 15 cop dramas, you get resistance to do more of them.”

HANK STEINBERG already had the best kind of creative credentials when he walked into network offices ready to pitch his idea for “The Nine.” He had created a hit series in the CBS procedural drama “Without a Trace,” one of the many successful hourlong shows that tell a complete story each week. He was looking to branch out creatively.

“I wanted to do a serialized show after doing a closed-ended, episodic series,” Mr. Steinberg said. He was aware of “24” and “Lost,” he said, and how addicted viewers were to them, though he himself was not hooked.

But he and his co-creator, his sister K. J. Steinberg, wanted a more realistic series, without any supernatural plot twists. “We wanted the event to have a mundane quality to it,” Mr. Steinberg said. “A sense of randomness.”

The plan was to tell the story of a hostage crisis and the trauma it caused, but to tell it in flashbacks as the characters’ lives moved forward. How exactly this was going to translate into many years of episodes had not been completely worked out, Mr. Steinberg said. Maybe, he said, “we would propel Season 2 by a new series of events; we might not even be mentioning the bank.”

In essence, the idea for “The Nine” was a big premise to a single story, something you might see unfolding in two hours in a theater.

“It was more like a movie about a bank robbery, and by the end of the season you would see how that worked out,” Mr. Steinberg said.

For some critics of this year’s serial dramas, that was part of the problem. Many of the season’s new serial dramas seemed much more like ideas for movies than for extended television series.

A poster named GregB on the Metacritic Web site (metacritic.com) said he was reluctant to commit to “The Nine” after seeing the pilot. “Watching the pilot made me feel like I was reading a book and missing chapter 2-10, and then had all the characters talk about all those chapters,” he wrote. “I feel like I’m being teased.”

One senior network entertainment executive, who spoke anonymously because his own network had put on several of the shows in question, said: “You have this problem with these shows. If you don’t give people enough information about the main plot every week, they get antsy and want to quit. And if you give them too much information, you start to ruin the suspense. So you wind up with a lot of deliberate confusion. And confusion is death for shows like this.”

Another problem is that with such intricate plots, these shows are much more difficult to join in progress. Three episodes in, the audience for “Kidnapped” was dropping. Even if the network could attract more viewers, how could they follow the action if they had already missed the first three hours?

After the first season of “24,” the decision-makers at Fox were torn over whether the show’s gimmick — one story told over 24 hours in real time — should be maintained. Some said its second season should have a new format, where each episode would cover a self-contained 24-hour period. That would have made the series far less risky, more repeatable and utterly ordinary.

But it might have ended up that way save for one thing: DVD sales. The first season was in stores, and it was selling well. That gave Fox hope, and the original model was retained.

Now, Ms. Walden said, those elements are crucial parts of the formula for how to get a new serialized drama made. “At the studio we first check with our international sales and home entertainment departments before we go ahead.”

None of that really matters, of course, if the show doesn’t last. If a show can’t get by 3 or 6 or even 13 episodes, no DVD will get made, and the international broadcasters will be left as much in the lurch as the viewers.

That would seem to argue for networks to be as patient as possible with serialized shows. But, as Mr. Reilly noted, network executives get assailed for “having itchy trigger fingers” while also facing almost instant declarations in the news media that a new show is a flop and needs to be yanked from the schedule.

Patience is just one lesson the networks have been struggling to learn. Bob Wright, the chairman of NBC, said he learned another from his own wife: don’t schedule a show about a child’s kidnapping at 10 p.m., right before every mother in America goes to bed.

That pitfall extends to the whole premise of a series with dark and scary overtones. Some sense of uplift is needed in most of the episodes, several executives said, or viewers will feel a chill and walk away.

Another lesson is to find some way to increase the audience for a show if it demonstrates promise — and find it as quickly as possible. That’s why some shows — like “24” and “Prison Break” — have run “marathons” of multiple episodes in a single night to hook viewers who might be curious but reluctant to dive in midstream. In addition, replays available on network Web sites the next day are intended to ensure that early fans aren’t left adrift just because they had to attend a wedding or birthday party.

EVEN when serialized shows do become hits, they face challenges that conventional shows do not. They never repeat successfully, for one thing, making it crucial to attract big first-run audiences and strong DVD sales.

And holding onto huge ratings year after year is difficult. That seems increasingly to be the case with the genre’s biggest hit so far, “Lost.” Now in just its third season, the show has seen its ratings fall more than 25 percent. While those numbers are still exceptionally good, ratings tend to increase for almost every conventional hit drama in the third season. It appears that new viewers are unwilling to join “Lost” at this point because the story is so far along and so convoluted that it would take weeks of DVD viewing to catch up.Given all the risks, and all the failure early this season, serialized dramas might be expected to be at a saturation point, or worse — at the point when a creator walks into a network office to pitch a serialized drama and quickly gets ushered out of the building.

Some of that may already be happening. Ms. Walden described a new wave of ideas landing at the feet of drama developers this year. “We’re hearing an awful lot of ‘Grey’s Anatomy’ in the corporate world, ‘Grey’s Anatomy’ in a lawyer world.”

Even so, the door to serialized drama has not been completely closed. No one in the television business has overlooked the outstanding new hit of the fall season: “Heroes” on NBC. The convoluted, dense story of a group of people suddenly imbued with supernatural powers is straight out of the “Lost” playbook. And it is grabbing viewers and getting them to sign on for the long ride.

“Regardless of how saturated the landscape might be,” Ms. Walden said, “there’s always room for another great show.”

Cos. Have Broad Aims for TV on the Web
Brian Bergstein

Eyebrows went up when Google Inc. recently agreed to spend $1.65 billion for YouTube, the most popular Web site for free video clips. But that figure could be blown away one day if some emerging companies achieve their much broader visions for the future of online TV.

These companies are building flexible online networks that can host content, serve up ads and dish out interactive features. While "viral" video-sharing sites like YouTube focus on individual clips - many pirated - these new Internet TV platforms are designed to host full-fledged channels that content creators can control.

One of the best positioned is Brightcove Inc., which on Monday is taking the wraps off an Internet video network that handles virtually everything for content creators.

Aiming to serve everyone from garage auteurs to major media companies, Brightcove offers free publishing tools and runs video wherever publishers want it.
That could be on the central Brightcove site, which is accessible through the video search functions at Google, Yahoo and AOL. Or content publishers can use Brightcove to run video on their own separate, branded sites. Or they can syndicate it to third-party Web sites, such as blogs or MySpace pages, where the content might run alongside user-generated material.

All those videos can be sold as paid downloads or streamed for free, with ads. Brightcove will sell ads and pool them among its customers, or it will plug in commercials that content creators sell themselves.

"They can launch a business in our system in a week," said Brightcove's founder and CEO, Jeremy Allaire, who formerly was chief technical officer at "Flash" graphics creator Macromedia Inc. before it was acquired by Adobe Systems Inc.

It's not a new idea that the abundant bandwidth of the Internet could become the delivery mechanism for thousands of TV channels - including new special-interest stations that would struggle to crack the cable or satellite lineup. We heard that pitch in the dot-com heyday.
But after a slow ramp-up, more than half of U.S. Internet subscribers now have broadband rather than dial-up. And the explosive growth of video-sharing sites, YouTube included, has helped convince advertisers that the medium has legs (though the term most commonly used is eyeballs).

These trends have helped Brightcove draw $28 million in funding from such companies as Time Warner Inc.'s AOL LLC, Hearst Corp., General Electric Co. and IAC/Interactive Corp. And Brightcove's flexibility has attracted diverse publishers trying to expand their broadband video presence. National Geographic, the Travel Channel, Warner Music, The New York Times and The Washington Post are all Brightcove customers.

So is Barrio 305, a Miami-based Internet-only channel devoted to the tropical hip-hop music flavor known as reggaeton. Brightcove pumps Barrio 305's videos to free sites in addition to Barrio 305's own pages. That gives the upstart network such wide dispersal that it hasn't mattered that Barrio 305 has yet to persuade any cable TV programming buyers to offer its package.

"We can bypass these traditional media agencies, and we can get out directly to our audience," said Antonio Otalvaro, one of the three brothers who founded Barrio 305. "Our primary audience is online. They're not watching TV."

Brightcove wins big praise from Forrester Research video analyst Josh Bernoff, who says Allaire "has really got it all figured out."

Even so, Brightcove is not alone in holding video publishers' hands as they step into the Internet.

NBC Universal recently launched an Internet video distribution system called NBBC (short for National Broadband Co.) that is working with NBC affiliates and even traditional NBC rivals such as CBS Corp. and News Corp. NBBC is a marketplace where content owners and third-party sites can agree to share content and ad revenue.

"You can syndicate over millions of sites, each one of which will drive somewhere between one stream and a million," said Mike Steib, NBC Universal's general manager for strategic ventures. "Web site partners can say, `I'd love to have Vibe.com (clips) and NBC News and product reviews from CNet, and `Saturday Night Live' - the Web site owner tells you what fits best for their audience. Being able to create that, we think, is the next big thing."

Another key player, Maven Networks Inc., is headquartered in the same Cambridge office complex as Brightcove. (The ties aren't just geographic: Allaire briefly served as an adviser to Maven before founding Brightcove in 2004; Maven licensed a video publishing tool to him and owns a minuscule stake in Brightcove.)

Like Brightcove, Maven is hosting video for customers and giving them quick, mouse-click methods of positioning content and setting up ad campaigns. Unlike Brightcove, Maven doesn't want to double as a video portal or dip into the ad business. Maven gets paid when viewers check out one of its customers' videos.

Maven's CEO, Hilmi Ozguc, is a tech veteran who sold an online ad company to ExciteAtHome - which flamed out when its big dreams got way ahead of the early state of U.S. broadband penetration. Retrenching, Ozguc started Maven in 2002 "with an eye to this broadband future" and has raised about $30 million, mainly from venture capitalists.

Maven's customers include CBS-owned College Sports Television and The Weather Channel. Maven also powers aspects of NBBC's system, while 20th Century Fox uses Maven to show movie trailers.

"The whole industry is being transformed," Ozguc said.

So deeply is it being changed, in fact, that Web video companies will have to smartly evolve as content coming over the Internet is routinely funneled not only to computers but directly to living room TVs. This will require navigating around or working with cable companies, for example, that make a good deal of their money controlling what you see on TV.

Consumers would also benefit from better methods of finding all this stuff, since traditional Web search engines were built to read text.

None of these obstacles are insurmountable, but whoever can solve them would likely create an enormously valuable enterprise. Sure, YouTube sold for $1.65 billion, but Bernoff predicts "there will be multiple multibillion-dollar companies" before all is said and done.

Swiss TV-Over-Broadband Service Launched

Switzerland's dominant telecommunications company has launched a TV-over-broadband service that offers more than 100 television channels and more than 70 radio stations.

Swisscom said its existing high-speed Internet customers will be able to watch and record those stations through its $24-a-month Bluewin TV service. Video on demand will cost extra.

The launch of the service was delayed a year because of technical difficulties, including problems with the development of software designed by Microsoft Corp. for the set-top box.

"We wanted to offer a mature service, so we worked on it for another year," Swisscom spokesman Christian Neuhaus said.

TV-over-broadband services, also known as IPTV, have so far been launched in France, Spain, Italy and Britain.

The technology is not yet compatible with high-definition television, which would require a tenfold increase in bandwidth.

The Death of TV: Google to Smack Down UK's Top Channels

The deformed children of the first dotcom boom roam the streets like dogs, but it looks like background radiation must be reaching safe levels again because new heroes are rising. Google's purchase of YouTube for $1.65bn and Murdoch's acquisition of MySpace for $580m are just two of the more flamboyant transactions sprung from this new-found confidence.

But this is just the beginning. It's now reported that Google's advertising revenue will surpass that of the UK's main commercial TV channels. Could it be that the days of traditional broadcast advertising are numbered, or can the two co-exist like Ritalin stepkids in some horribly dysfunctional family?

Channel 4 is predicted to collect £800m in returns from advertisers this year, but Google is expected to surpass this figure in the UK. It is then likely that the Internet search giant will overtake ITV1 within 18 months. What's not clear is how parasitic the relationship between online and offline advertising is. It's too early to tell whether advertisers are turning away from television onto the Web, or if they're supplementing TV ads with online versions.

What does this mean for the glorious creative output that UK television advertising is globally applauded for? The US has been forced to contend with heinously patronising and crude TV advertising for decades, but the UK's advertising industry has managed to create art out of the dirty act of selling. Some of the best short films of the last century have been television advertisements.

Who can forget the Guinness man as he waits, Buddha-like, for that perfect wave? Or the Hovis kid, cycling his rickety old bicycle up cobblestone streets delivering bread -- his face prematurely lined because, you imagine, his father died in a recent mining accident and his mother is a drunk?

And what is to become of masterpieces like the new Sony Bravia advert, where thousands of litres of paint are exploded across a Glasgow housing estate? Even if some of these make the transition to online (the Bravia ad has), they'll lack the spectacle of their TV equivalent.

Of course, it may be that this argument is moot. As the Internet becomes more pervasive, we might abandon our televisions all together, and stream 'television' solely over the Internet. Rather than there being any great paradigm shift as advertisers switch from TV to the Web, perhaps the Web will simply turn into TV. If you have anything to say on the matter (preferably outrageous, fuelled by anger and uncorroborated by fact), let us know by posting a comment below. -CS

Diller’s Web: Think Cable of the Past
Richard Siklos

When Barry Diller hired longtime television and film executive Michael Jackson as programming president at the IAC/InterActiveCorp, he had to reassure investors that he was not going back into the entertainment business.

IAC is an Internet company, after all, and Internet companies promise higher growth than media businesses typically deliver. But could Mr. Diller resist his past? Hollywood dominates his résumé, and Mr. Jackson had worked for him previously, overseeing the USA Network and the Sci-Fi Channel, among other TV and film ventures.

So far, Mr. Diller has allayed their concerns. He has not gone out to buy a studio, nor has he leaped onto the latest wave of Internet content megadeals by laying down big dollars for the likes of a Facebook or YouTube.

Instead, a glimpse at Mr. Jackson’s early efforts in online programming are now coming into view: he is thinking big by going small, investing in and starting targeted content sites built around humor, news and popular culture that remind him of the early efforts in cable television programming.

In an interview, Mr. Diller said he expected Mr. Jackson to carry out perhaps dozens of such ventures during the next few years. “The amount of capital we’ll put in this over time will be hundreds of millions of dollars,” he said. “This is a wonderful area right now to invest in.”

The company recently unveiled a test version of a new daily newsletter and Web site, Very Short List, which carries recommendations of unheralded cultural and entertainment products, including books, CDs and DVDs. And in August, IAC acquired control of the Web site www.collegehumor.com — whose name is fairly self-explanatory, though its appeal depends on which college you attended.

Mr. Jackson’s next project, scheduled for a debut next year, continues in a mirthful vein: a continuously updated satirical Web site that IAC is beginning as a joint venture with The Huffington Post, the assemblage of left-of-center blogs that was founded last year and is edited by the author and pundit Arianna Huffington.

The concept behind the to-be-named site is to deliver throughout the day the kind of humor that has been the preserve of late-night talk-show hosts like Conan O’Brien and the Comedy Central stalwarts Jon Stewart and Stephen Colbert.

Kenneth Lerer, a former Time Warner executive who is a founder of The Huffington Post, calls the idea “real-time satire — real news, not fake news,” and said it would be edited by Ben Wikler, a comedy writer who has worked closely with Al Franken.

Mr. Jackson’s career suggests that more is in store for him. Before he ran the television business of USA Networks and the Universal Television Group, which were acquired by NBC in 2003, he was the chief executive of Channel 4 in his native Britain.

He took some time off after the businesses he led were acquired, then worked on several film and TV projects. But he decided not to return to television because of his view that even the cable networks had become too bland.

A clincher for Mr. Jackson was that at the beginning of this year, Trio, a small cable channel for nonfiction programming that he and Mr. Diller had taken a particular interest in, was recast as Sleuth. It shows reruns of the investigative police shows that dominate prime time. “The cable world has become conservative,” Mr. Jackson lamented.

During his interregnum, Mr. Jackson was thinking Webby thoughts. He collaborated with the author and journalist Kurt Andersen and the designers Bonnie Siegler and Emily Oberman to develop a collection of eclectic and carefully “curated” items (books, CDs and so on) boxed together and periodically shipped to subscribers.

That was the origin of Very Short List, which has evolved into a daily newsletter and Web site because Mr. Jackson and Mr. Diller — who financed the venture through IAC and rehired his old colleague in January — deemed the box concept too expensive to succeed at first.

In its preintroduction form, one of the site’s recent picks included Michel Gondry’s video for a new single by Beck. Another was the book “The Laws of Simplicity” by John Maeda, a professor at the Massachusetts Institute of Technology, whose tenets, if his unusually stark office is any indication, Mr. Jackson already lives by.

In the case of the planned satire site, Mr. Jackson said he had sought out The Huffington Post as a partner because it appeared to know how to start up a Web business quickly. The Huffington Post ranked 24th in the blogs category of Web sites during the month of September, with 635,000 unique visitors, according to comScore Networks.

Sean Mills, president of The Onion, a satirical Web site and publication, said that the Web had proved to be particularly suited to humor. But “to maintain it over a long period of time is a very difficult thing,” he added, “and something that we are constantly challenged with.”

In addition to competing with the likes of The Onion, IAC’s new venture may have another rival: Time Warner is developing an online comedy site involving its Home Box Office and AOL divisions, which also proposes to include a satirical take on breaking news, an executive briefed on the plan said.

Where CollegeHumor was concerned, Mr. Jackson conceded that the site might not be for everybody. (Last week, the site featured what it called the “greatest picture ever to grace CollegeHumor”: two half-naked women kissing atop kegs of beer.) It ranks sixth among humor Web sites, according to comScore, with 1.3 million unique visitors in September.

“What attracted us to CollegeHumor is it’s a brand,” Mr. Jackson said. “I think those things that have a point of view can be successful on the Web. That’s a model that goes back forever.”

Mr. Diller said that although IAC could afford a big acquisition like the $1 billion said to be sought for Facebook, a social networking site, he was reluctant to do so. “Making very large bets on businesses that don’t yet have a business model is just not our history,” he said. “I’ll leave that to the media imperialists.”

Instead, he and Mr. Jackson said they favored the economics of starting their own ventures and investing in nascent ones. “This is a medium where how much you spend has much less effect on the outcome than ever before,” Mr. Jackson said. “Some of the best content online has been created by amateurs for nothing.”

Mr. Jackson appears to be something of an island unto himself at IAC, whose better known operations, including the Home Shopping Network, Citysearch, Ticketmaster, Match.com, LendingTree and the search engine Ask.com, generate more than $6 billion a year in revenue.

He said his next area of focus might be news — a site that aggregates and edits news and helps point people to the best information available — but he was not ready to talk about specifics.

Whatever he does, his friends expect it to make a splash.

“If there’s something to do online that makes sense,” Mr. Andersen, the author, said, “he’s as well positioned as any 48-year-old guy to figure out what that is.”

Students Produce Movies With Cell Phones
Melissa Trujillo

The cameras capture the young man walking down the stairs, reciting a monologue about the three things people should know about him: His favorite movie is "Gone with the Wind," he loves roller coasters and he hates when people don't take him seriously.

The shot is complicated and takes several attempts to perfect. But there's no big camera equipment, no expert sound system and no reels of film to capture the moment.

Instead, everyone involved, from the three cameramen and the sound guy to the extras, is producing the miniature movie with - and for - cell phones.

The exercise is part of a new Boston University class created through a unique partnership with cellular company Amp'd Mobile and taught by director Jan Egleson. During the semester, the students will produce a series of short episodes that eventually will be distributed by the company for its cellular customers. The students have challenged each other to shoot it using only the phones, despite obstacles surrounding sound and video quality.

The class, which the university believes is the only one of its kind in the country, offers students credit and a chance to be part of the new media culture - where anyone, anywhere, can create, distribute and view entertainment using a variety of emerging technologies. Amp'd benefits by getting mobile content created by one of its targeted audiences: young, tech-savvy adults.

Amp'd, whose backers include Qualcomm Inc. and Viacom Inc., is trying to compete with mainstream cellular players like Cingular Wireless by branding itself as a youth-oriented company offering more than just phone service. It sells comedy clips, cartoons and music videos for subscribers to watch on cell phones for prices that start at 45 cents for a single download to $20 for unlimited access.

Most content is geared toward people ages 18 to 35.

"They're all about anywhere, anytime," said Seth Cummings, Amp'd Mobile's senior vice president for content, who helped start the program at his alma mater. "They want to be able to take their media with them."

Amp'd has hired established writers to create original content, but Cummings said the company decided to work with BU to target budding artists.

"I know that when I was there, there was this stuff that we'd create that there was no outlet (for)," Cummings said. "There's a real outlet here."

The medium is so new, the students and Egleson spent some time in a recent class debating what to call their work. Options included mobisodes (mobile episodes), mobilettes or cellenovelas (cellular telenovelas).

"We're on the cutting edge of a new era of film medium," said Mark DiCristofaro, a 21-year-old BU film student. "Why not get on board early?"

And because anyone with a cell phone can make a video and upload it to the Internet to watch on computers or phones, the students said they felt a greater opportunity to get people to see their work. Television production graduate student Chris Miller said cell phones give young filmmakers a new way to distribute their work.

"It's so hard to get the studios to really pay attention, especially the beginning filmmakers," Miller said. "So if they don't want to go that route, you don't have to."

In some respects, Egleson's film class is like any other. In the first hour, he guides the students through a discussion of editing, graphics, music and tone. They work on their series, centered on a group of diverse students who each harbor a secret.

"The bottom line is always that if it's a good story and you get involved, it doesn't matter what format it is," said Egleson, who has directed films and television shows.

Other times, though, the students and teacher run into challenges unique to working with their black, shiny cell phones provided by Amp'd:

- The phones film for just 15 seconds at a time. For longer scenes, such as the monologue in the stairwell, multiple phones are used.

- The phones don't pick up sound well. During this class, the students try putting a phone in an actor's pocket or using a makeshift boom created with a tiny microphone and a bendable, green stick.

- In some scenes, cameramen can be seen in the shots. So when they finish filming, they quickly put their cameras to their ears and become extras casually chatting on the phone.

The picture quality isn't as good as film, either, because the phone's camera records 15 frames per second, compared with the typical 24 to 30 frames per second in movies or on television.

"I wish I could tell you I've done this a million times," Egleson tells the class as they watch him upload their footage stored on the phone's memory cards onto his laptop, done by connecting the phone to the computer with a USB cable.

Miller said the students also have had to adapt their film-making style for the small - very small - screen. Scenes are shorter, cuts are quicker and visuals are larger. Nobody is trying to make a "Saving Private Ryan" epic, and the students refuse to edit out the quirks, saying they want to create videos the average phone user could make themselves.

"It's not quite as clean as what you'd expect from television. It's a little more raw," Miller said. "It's not your `Everybody Loves Raymond' sitcom."

On the other hand, Egleson said, the phones give the cameramen more flexibility because they aren't lugging around large equipment and can easily whip a phone out of their pocket for spontaneous scenes. And Egleson expects the phone technology to improve quickly.

Paris recently held its second film festival devoted exclusively to movies shot with cell phones. But it's too early to say how popular mobile programming will become in the United States, said Linda Barrabee, an analyst at the Yankee Group, a Boston-based technology research firm.

Although cell phones are ubiquitous, a much smaller percentage of people own phones with the technology to watch videos or subscribe to services to do so.

Current trends, she said, lean toward people being most interested short programming, such as sketches or sports highlights, that they can watch in line at the store or on the subway.

"For the most part, what we're talking about is snacking," she said.

But Barrabee wouldn't rule out feature films watched in segments - or even attracting older people, who have more buying power than young adults.

Despite the challenges and uncertain future, a wave of enthusiasm traveled through a recent three-hour BU class, from the experimental filming to the writing session.

"I feel like I should pay $7 for this," one student said as the class crowded around cell phones and computers to watch their edited footage.

Which is exactly what Amp'd Mobile wants to hear.

Google Shares Ad Wealth With Videographers
Greg Sandoval

Google has begun sharing advertising revenue with the makers of a popular video clip in a groundbreaking deal that could drive up the costs of competing in the fledgling video-sharing sector.

The search company has agreed to turn over most advertising revenue generated by the latest video from Fritz Grobe and Stephen Voltz, creators of "The Diet Coke & Mentos Experiment," according to Peter Chane, a senior product manager for Google Video.

In exchange, Grobe and Voltz, who saw their original offering--which shows a version of Vegas' Bellagio Fountains made of 101 2-liter bottles of Diet Coke and 523 Mentos--catch fire with video-sharing fans last summer, have agreed to let Google host their latest video, "The Diet Coke & Mentos Experiment II."

Until now, most amateur-made material that appears on video-sharing sites was made for fun. But inviting talented videographers to share in the ad revenue generated by their clips is the way of the video-sharing future, analysts say. Metacafe, one of the top 10 video-sharing sites, also announced on Monday that it will pay $5 to video creators for every 1,000 times their video is watched.

Critics argue that most video-sharing companies are profitless, and their costs, such as the high price of bandwidth, make sharing ad revenue difficult. Yet, video-sharing site Revver.com has shown that rewarding video makers helps attract the best talent. The Los Angeles-based company, which pays 50 percent of ad revenue to videographers, has drawn some of the Web's top auteurs, including the producers of Lonelygirl15, a much-watched fictional video series about a home-schooled teenage girl.

Revver is betting that audiences will follow the best video makers. Apparently, the deep-pocketed Google is making the same bet.

"This is the first case where we matched up video content with advertising," Chane said. "We've taken user-submitted material that is not considered professional content and monetized it."

How long will it be before YouTube, which sees more than 50,000 videos uploaded to its site daily, begins writing checks to its content creators? Google acquired YouTube, the sector's largest company, earlier this month for $1.65 billion.

"Until the deal closes, we're continuing to operate as two separate companies," a Google representative said in an e-mail.

YouTube could not be reached for comment.

One thing is sure: Stupid pet tricks and people acting goofy on camera have never been as lucrative a business.

Grobe and Voltz, for instance, pocketed $35,000, their share of the ad revenue paid to them by Revver, for their first Coke-and-Mentos video back in July. Now, the pair could earn big bucks from Google if the latest video is a hit. The two are also hosting a video-making contest sponsored by Coca-Cola, which paid them an undisclosed amount.

Asset Sales Boost Time Warner 3Q Earns

Time Warner Inc., the world's largest media conglomerate, posted sharply higher third-quarter earnings on Wednesday due largely to several asset sales and adjustments related to its deal to acquire cable systems from Adelphia, but earnings excluding items fell shy of analysts' expectations.

The company's AOL unit, which is revamping its business model, posted higher profits as it slashed marketing expenses for its dial-up access service. But AOL's revenues fell as lower revenues from dial-up subscribers outpaced gains in Internet advertising.

The New York-based company, which owns Time Inc., Warner Bros. and HBO, had earnings of $2.3 billion, or 57 cents a share, versus $853 million, or 18 cents a share, in the year quarter last year.

Revenues rose 7 percent to $10.9 billion from $10.2 billion. Analysts polled by Thomson Financial had been expecting revenues of $11.1 billion.

The earnings included 23 cents per share for discontinued operations related to cable systems that Time Warner has since transferred to Comcast Corp. as part of a three-way deal with Comcast to acquire the systems of Adelphia Communications Corp.

The figures also included 14 cents per share in gains from the sale of Warner Bros.' Australian theme park business, other asset sales and one-time effects.

Without the discontinued operations or one-time gains, the earnings were equivalent to 19 cents per share, up from 17 cents per share on a comparable basis in the year-ago period.

Analysts polled by Thomson Financial had been expecting earnings of 20 cents per share.

On an operating basis -- before interest expenses, taxes, depreciation and amortization -- Time Warner's income grew 16 percent to $2.9 billion, led by gains at its cable TV business and at AOL. The company's cable networks and magazine publishing divisions also posted gains, while TV and movie programming declined.

The company's shares fell 31 cents or 1.6 percent in pre-market trading to $19.70. The shares have been rising steadily since their $15.84 close on August 9, shortly after the company announced its new strategy for AOL. Longer term, the shares have been trading below $20 since May of 2002.

AOL posted a 21 percent gain in profits despite a 3 percent decline in revenues as the division cut back on marketing expenses for its dial-up Internet access business, which continued to dwindle rapidly.

AOL is in the midst of turning its business model away from charging for Internet access in favor of selling advertising online, a formula being followed successfully by Internet rivals Yahoo Inc. and Google Inc.

AOL lost another 2.5 million dial-up subscribers in the quarter, bringing its total to 15.2 million. Subscription revenues fell 13 percent to $210 million while advertising revenues jumped 46 percent, to $151 million.

This summer AOL said it would offer many of its services for free, including e-mail, as part of its business overhaul.

For the first nine months of the year, Time Warner earned $4.8 billion, or $1.13 per share, versus $1.4 billion, or 29 cents per share, in the comparable period last year. Nine-month revenues rose 2.8 percent to $31.8 billion.

The company also backed its previously announced full-year outlook of posting growth in operating income in the low double-digit percentage range, excluding the impact of the Adelphia transaction and other one-time effects.

Execs: AOL Free Strategy Still on Track
Anick Jesdanun

AOL saw its largest quarterly drop in paying subscribers, while traffic to the company's free, ad-supported Web sites held steady, prompting Time Warner executives to declare Wednesday that their online unit's new strategy is on track.

The accelerated decline had been expected following AOL's announcement in August that it would give away AOL.com e-mail accounts, software and other services once reserved for those paying as much as $26 a month for Internet access. In the process, AOL stopped actively marketing subscriptions and halted the trial discs that often came unsolicited in mailboxes and magazines.

The company lost 2.5 million U.S. subscribers in the July-September period, compared with drops of fewer than 1 million subscribers a quarter since AOL hit its peak of 26.7 million four years ago. That leaves 15.2 million paying subscribers in the United States, nearly two-thirds for dial-up access.

As a result, subscription revenues declined 13 percent, though that was partly offset by a 46 percent boost in advertising over the same period last year, Time Warner Inc. reported Wednesday. Online ads now account for 24 percent of AOL's total revenues, compared with 16 percent a year ago.

Over the past two years, AOL has been increasingly making its features and services available for free in hopes of driving traffic to ad-supported Web sites. In August, it decided to give away most of what's left to prevent further defections to rivals like Google Inc. and Yahoo Inc.

Data from comScore Media Metrix show that AOL has managed so far to keep people visiting its sites even after they cancel subscriptions.

AOL sites had about 16.0 billion U.S. page views in September, down only slightly from 16.5 billion in June, before the strategy shift. AOL had 111 million unique visitors in September, a 1 percent drop from a year ago, even as paid subscriptions dropped 24 percent over the past year.

"The early results of the strategy we announced ... are encouraging," Time Warner Chief Executive Dick Parsons said during a conference call. "These members are maintaining their level of usage after they switch. In addition, we are also signing up more new users than we initially expected."

Jeff Bewkes, Time Warner's chief operating officer, said only two-thirds of AOL's 3 million free e-mail users were people who had dropped paid accounts, meaning the company has about 1 million new users who weren't even subscribers right before the strategy shift.

E-mail is particularly important because people use it frequently and regularly. While checking e-mail on an ad-supported Web page, users may even stumble upon a video clip or other content, boosting AOL's ad opportunities.

The 46 percent third-quarter boost in advertising is more than Yahoo's 18 percent though less than Google's 70 percent.

AOL has been able to grow fast partly because it started with relatively low ad revenues. It had $479 million in the third quarter, compared with $1.37 billion at Yahoo. Yahoo's growth was about $210 million, greater than the $150 million for AOL.

Time Warner executives acknowledged that AOL might not sustain its recent growth rates, but said the company should be able to keep pace with industry growth trends.

Parsons added that Europe presents additional ad opportunities. Time Warner is selling its access businesses there - a deal for AOL's French subscribers closed Tuesday - and the arrangements call for AOL to provide content and ads for the new owners' existing customers.

Is Vista a Dead End?
John C. Dvorak

As we get ever closer to the official release of Microsoft's Windows Vista operating system, we have to ask ourselves what comes next—or is this the end? I think it is the end, for a lot of reasons.

First, it's possible that Microsoft is out of ideas, and Apple is out of ideas from which Microsoft can borrow. If Microsoft wants to keep improving its OS, there is only one hope: somehow to develop an OS to coordinate and control the multiple cores within the CPU. In other words, make a universal parallel-processing OS—a feat nobody has yet managed.

The multiple cores in a CPU are generally like those multi-CPU computers that process a lot of data in parallel. Applications are specifically written to use all these chips. The apps do the work, and the OS tries not to get in the way. Even if the OS does nothing more than use multiple cores to multitask programs, coordinating that among the CPU, the OS, and subsystems such as memory, hard drive, and peripherals is nightmarish.

Demos showing the power of multicore chips are usually games in which a specific function—AI, ray tracing, or something that can't make too big a mess—is shoved to the extra core. If Microsoft ever makes its OS take advantage of multiple cores, you can be sure it will be for something mundane.

Somewhere down the road, these multiple cores may be functional at the OS level. But does Microsoft have the talent for this challenge? And how many decades will it take to develop?

The situation looks even bleaker when we see what's already happened to Vista. Microsoft couldn't get the promised database-centric file system to work, so it was left out of the new OS. This sort of file system goes back to the 1970s and was used in the Pick OS and other systems. Yet Microsoft, with all its resources, can't make it work.

To make matters worse, when Microsoft tries to add features to its OS, it gets attacked by companies who provide these functions as third-party vendors. This includes the antivirus and firewall companies, a few of which are threatening to sue Microsoft on the same grounds as the old antitrust case.

Microsoft's unfortunate history, combined with its incredibly deep pockets, makes it a wide-open target for legal harassment as well as legitimate attacks. It's still unclear how Microsoft will be treated in Europe and China over the long term.

I don't get how Microsoft's supposed visionaries couldn't see this coming when the company was riding roughshod over its competition in the 1980s and 1990s, especially when you consider that Bill Gates's dad is a leading partner at a huge law firm.

While Microsoft, because of its sheer size, is no more doomed than IBM ever was, it's never going to be a leader again, if the Vista saga is any indication. What we are witnessing now is nothing more than upgrades and maintenance.

The company still makes its money from two product lines (OS licenses and Microsoft Office) and seems less than sincere when it ventures into other markets. When it does have a winner, such as the Xbox 360, it can't bring itself to stomp on the gas pedal. Despite having billions in the bank, the company is still risk-averse.

Once Vista emerges and the OS scene is reset for another two or three years, there will be an opportunity for something new to become the rage. It may finally give the slowly growing Linux a chance to capture the desktop and change the way we spend our money. Everyone would love to get off Microsoft's expensive treadmill. Opportunity is knocking. Will anyone answer?

2 Giants in a Deal Over Linux
Laurie J. Flynn and Steve Lohr

Microsoft acknowledged the influence of the Linux operating system on Thursday by striking a deal with Novell, a longtime rival, to ensure that Novell’s version of Linux could operate together with Windows in corporate data centers.

In an industry known for strange bedfellows, the two companies said they were collaborating on technical development and marketing programs. They also took steps to ensure that Microsoft’s intellectual property was protected as it modifies its software to work with the operating system Novell acquired in January 2004, known as SuSE Linux.

Steven A. Ballmer, the chief executive of Microsoft, said that the companies began discussing the collaboration in April, but that Microsoft had been getting pressure from its largest corporate customers far longer.

“I certainly recognize that Linux plays an important role in the mix of technologies our customers use,” Mr. Ballmer said at a news conference here announcing the partnership. But he added that Microsoft would continue to push Windows over Linux to customers, endorsing SuSE Linux only if customers insisted on using it.

The partnership, according to industry analysts, is driven by both competitive and customer considerations. Linux and Windows are increasingly used on corporate server computers powered by the lower-cost microprocessors from the personal computer industry.

“This is a customer-driven information technology world now, and this move by Microsoft is partly an accommodation to its corporate customers,” said Gary Beach, publisher of CIO magazine, whose audience is mainly the chief information officers of companies.

Analysts said Microsoft’s move might well help its fast-growing server software business by reassuring corporate technology managers that they could make continued investments in Windows and Linux. Both proprietary Windows and open-source Linux have made strong gains in corporate data centers, not so much against each other, but by supplanting costly machines that run commercial versions of the Unix operating system and sometimes, mainframe computers.

Microsoft’s server software sales are now running at $10 billion a year, rising 17 percent in the most recent quarter.

Richard Sherlund of Goldman Sachs said, “Microsoft doesn’t have to like Linux, but C.I.O.’s want Windows to play well with Linux.”

As part of the agreement, Microsoft said it would not file patent infringement suits against customers who purchase Novell’s SuSE Linux.

Stuart Cohen, chief executive of the Open Source Development Labs, said that aspect of the deal could further increase acceptance of Linux among corporations. The risk of lawsuits by Microsoft had been a lingering fear among Linux developers because Microsoft executives have been highly critical of what they said was the Linux world’s careless disregard for intellectual property rights.

“Microsoft customers are going to run a lot of Windows and a lot of Linux, and today Microsoft is saying that’s O.K. and there will not be resistance from Microsoft,” said Mr. Cohen, who leads a consortium that promotes the adoption of Linux.

In trading Thursday, Novell’s stock rose 92 cents, or 15.7 percent, to $6.79 as word of the deal leaked out. The formal announcement was made after the close of regular trading. Financial terms of the deal, effective until at least 2012, were not disclosed. Microsoft declined 4 cents, to $28.77.

Microsoft’s and Novell’s move comes a week after Oracle, the big database company, announced that it would provide technical support for Linux software distributed by Red Hat, a leading Linux company. But Oracle also said its support would be at about half the price of Red Hat’s service.

Red Hat makes its money on technical support, so the Oracle move was seen as a hostile act, noted Charles di Bona, an analyst at Sanford C. Bernstein & Company. Red Hat shares fell on the Oracle announcement last week. They slipped 2.7 percent on Thursday, after the Microsoft partnership with Novell, Red Hat’s main competitor as a Linux company, was announced.

Matthew J. Szulik, chief executive of Red Hat, said the announcement was recognition by Microsoft that Linux is now a “core component of information technology infrastructure” and an effort by Novell, a “weakened and vulnerable” Linux company, to gain ground.

Mr. Ballmer, though, disputed the notion that Microsoft’s announcement was in response to Oracle’s arrangement with Red Hat.

“We’ve been working on this deal for a long time,” he said, calling Oracle’s deal “just a service agreement” with Red Hat. “You get no covenant not to sue if you chose Oracle.”

Microsoft and Oracle are the two largest software companies in the world, competing in databases, programming tools and some business applications. Yet Oracle’s fundamental business is corporate database software, while operating systems are Microsoft’s core franchise.

“As of last week, Oracle essentially got in the operating system business,” Mr. Beach of CIO magazine said. “This is Microsoft’s response.”

Microsoft plans within weeks to introduce the first major upgrade to Windows in many years. In the meantime, some customers have defected to Linux to reduce their dependence on Microsoft’s development schedule and to cut their costs.

Open-source software, which developers are free to modify and redistribute, is seen as the antithesis of proprietary software like Windows. Linux companies like Novell make the bulk of their revenue from support and service for Linux, not the initial sale.

Laurie J. Flynn reported from San Francisco and Steve Lohr from New York.

In Teens' Web World, MySpace Is So Last Year

Social Sites Find Fickle Audience
Yuki Noguchi

Teen Web sensation MySpace became so big so fast, News Corp. spent $580 million last year to buy it. Then Google Inc. struck a $900 million deal, primarily to advertise with it. But now Jackie Birnbaum and her fellow English classmates at Falls Church High School say they're over MySpace.

"I think it's definitely going down -- a lot of my friends have deleted their MySpaces and are more into Facebook now," said Birnbaum, a junior who spends more time on her Facebook profile, where she messages and shares photos with other students in her network.

From the other side of the classroom, E.J. Kim chimes in that in the past three months, she's gone from slaving over her MySpace profile up to four hours a day -- decorating it, posting notes and pictures to her friends' pages -- to deleting the whole thing.

"I've grown out of it," Kim said. "I thought it was kind of pointless."

Such is the social life of teens on the Internet: Powerful but fickle. Within several months' time, a site can garner tens of millions of users who, just as quickly, might flock to the next place, making it hard for corporate America to make lasting investments in whatever's hot now.

MySpace is one of the most wildly successful sites in recent years, amassing 124 million profiles and transforming teen life online during its 2 1/2 years of existence. The site functions like a cross between a diary, e-mail program and photo album where content can be shared with friends, whose pictures appear on a member's profile.

One key measure of a site's popularity is the amount of time a user stays on the site. Tracked over time, such usage data for older networking sites frequented by young people show how popularity gradually rises then falls, like an inchworm's back.

Take Xanga, the hot social networking site before MySpace: In October 2002, the typical Xanga user spent an average of 1 hour and 39 minutes a month on the site, a figure that declined steadily, reaching only 11 minutes last month, according to Nielsen-NetRatings. Friendster, another older site, hit its first usage peak of 1 hour and 51 minutes in October 2003, and then hit another peak of 3 hours and 3 minutes in February 2006. But last month, the average user was on Friendster for a mere 7 minutes.

MySpace usage ramped up heavily during its first year and a half, hitting 2 hours and 25 minutes in October last year. Then it dropped to about 2 hours and held relatively steady there for the past year. Facebook, a younger networking site, is still on a gradual incline, reaching 1 hour and 9 minutes last month .

It's hard to make an online audience stick. Most Internet services are free and compete for a viewer's time, which most sites then try to parlay into advertising dollars. The more time someone spends on a site, the more ads they see. The successful sites engender habits among their users, but users can -- and historically have -- defected to other services for any number of reasons.

The high school English class cites several reasons for backing off of MySpace: Creepy people proposition them. Teachers and parents monitor them. New, more alluring free services comes along, so they collectively jump ship.

The relatively short lifecycle of a popular site is a terrifying prospect for companies like Google Inc., which this month spent $1.65 billion in stock to acquire the Internet's latest grass-roots favorite, year-old YouTube, whose popularity Google hopes to harness as a loyal video audience.

To a youth market composed of teens like Kim and Birnbaum, MySpace is just the latest online fad. Before MySpace, the place to be was Xanga, and before that, Friendster, MiGente and Black Planet.

"They're not loyal," Ben Bajarin, a market analyst for Creative Strategies Inc., said of the youth demographic. Young audiences search for innovative and new features. They're constantly looking for new ways to communicate and share content they find or create, and because of that group mentality, friends shift from service to service in blocs.

Consider the most popular teen sites tracked by Nielsen-NetRatings. Topping the list last month were Snapvine.com, PLyrics.com, Picgames.com -- none of which appeared among the top 10 for April, or the list a year ago.

Madeline Dell'Aria, another high school junior, has fallen in and out of love with a number of sites. In middle school she started avidly blogging on Xanga. Last year, after most of her friends abandoned Xanga and migrated to MySpace, she followed. "No one was using Xanga anymore," she said.

Initially, MySpace drew her in, and she spent lots of time looking at her friend's photos or leaving comments on their pages, she said. Now, only a year or so later, ennui is setting in. She spends a lot less time on the site, instead listening to music or talking on the phone, she said.

MySpace said it hopes to earn a permanent place in its users' lives, becoming as essential as e-mail and cellphones.

"There will always be anecdotes of people that love MySpace and people that don't," a spokeswoman for the site said, but the site is adding an average of 320,000 new profiles every day and continuing to go mainstream. In the past year it launched new services such as mobile and video channels, and expanded internationally.

Some teens, however, say security and privacy -- already a common concern among parents and teachers -- are dampening their enthusiasm for MySpace.

Over the summer, Birnbaum's friend Chrissy Quantrille discovered an impostor had taken her photos off her MySpace profile, set up a fake page and even used it to establish a romantic virtual relationship with a boy in California.

"It was creepy," said Quantrille, who tried to contact the offender -- "What are you doing?" -- and sent a message to the duped boyfriend. She and her friends filed a form asking MySpace to take down the fake page, which it did within two days.

New fake sites of Quantrille and her friends reappeared three weeks ago, prompting some to move to Facebook, where users have to register using a school or business e-mail, making it feel safer.

MySpace going mainstream also attracts unwanted attention.

Dell'Aria said teachers at her previous high school started logging onto MySpace and reading students' profiles, apparently monitoring the pages for signs of alcohol or drug abuse.

"I was shocked and kind of annoyed, and it was kind of an invasion of privacy," she said. Although no one got in trouble, word spread like wildfire, and many of her classmates reset their privacy settings to block unapproved users from accessing their pages, she said.

Liana Castro, a junior in the literary media department of Duke Ellington School of the Arts in Washington, said having an online social life intesified the drama in her real life.

She routinely heard from people who complained they weren't designated as one of her top eight friends. "People would be like, 'why am I not in your top eight?' " With 279 online friends, Castro caught so much grief she changed the site so it only listed four family members.

Her profile also landed her in hot water when a boy she didn't like kept asking to be her online friend. "I kept deleting the message," she said. "He got mad."

Watching as their peers deal with such fallout, some vow not to engage in the phenomenon at all.

Evan Hansen, a sophomore at Falls Church High School, said he didn't buy into the MySpace hype and is waiting for the craze to die.

"Over time, people are going to get sick of talking to people on the computer," he said. "I just think people will want to spend more time with each other -- without the wall of technology."

GooTube's Porn Opportunists: The Expanding World of Upload-It-Yourself Smut
Violet Blue

People have been making amateur porn and uploading it to YouTube since its inception; after all, it's human nature to sexualize any new technology. Smart online sites like Second Life, while not a sex site, take this need to sexualize as a grown-up given. In their architecture and business model, they just sort of budget in that adult users will use a certain percentage of their world for sex, and set up all the necessary precautions to make this a safe and sane (and even fun) experience for everyone, and easily avoided if you prefer real estate to RealDolls. According to Linden Labs/Second Life's Catherine Smith, "All 'adult content' is confined to Mature sims in Second Life and takes place behind closed doors."

But in the aftermath of Google's acquisition of YouTube, YouTube's methods of trying to control questionable content and Terms of Use (TOU) enforcement are emerging as clumsy at best, and highly exploitable at worst. Even so, YouTube's policies on porn and adult content have opened up a whole new market for an ever-growing roster of upload-it-yourself smut sites, while raising some interesting questions about businesses whose TOU and operational models turn a blind eye to the inevitable intersection of sex and technology.

Lawyer and executive director at The Stanford Law School Center for Internet and Society Jennifer Granick adds: "Internet regulations tend to be ill-defined and confusing, and as a result, they are discriminatorily enforced. Companies have to guess whether they are going to be targets for regulators or law enforcement. As a result, general-interest content companies like YouTube or Google Images will choose to ignore regulations that special-interest content companies like a pornography video or photo site believes it must comply with."

As content delivery evolves, porn, as an extension of human sexual expression, follows. The Flickr spin-off sites are a great example: Flickrchicks, Adult Flickr, FlickrBooty (all defunct) and several others made up for what Flicker's TOU couldn't, or wouldn't, deliver (yet appeared on the site, regardless). These sites essentially skimmed Flickr for hotties to repost in babelog-style form and pull in affiliate click-through revenue, many knowing full well that the pictures they link to have a limited life span.

Many businesses have flourished where others decidedly feared to tread, rather than creating a healthy, inclusive and lucrative business structure. Where Google's AdSense wouldn't go, AdBrite mopped up the revenue. And when PayPal decided that grown-up money was filthy lucre, a whole host of adult transaction services were eager to Dumpster-dive for PayPal's sizable leavings.

Similarly, early this year sites like (NSFW) HotTube.wordpress. com and (NSFW) DudeTube.blogspot. com sprang up in the tradition of the Flickr spin-off babe sites, making the most of YouTube's easily accessed user-submitted content and its inconceivably exponential growth rate. Simply sifting through YouTube for porn and coming up with the goods over and over again and then reposting the juicy finds was enough to make these sites merit repeat visits for viewers. And knowing the content was against YouTube's TOU, sites like DudeTube often posted video embeds with the title "not around for long," acknowledging the temporary nature of the amateur offerings, whether the videos were explicit or not, with the understanding that YouTube's policies and policing were often bizarrely erratic and only a YouTube employee's judgment call away from removal.

By summer, YouTube had proved itself simply unreliable for a number of users -- not just for porn, but for being a content-delivery system for anyone whose content might get flagged by concerned or malevolent users and yanked by a YouTube customer service department that seemed to be in over their heads.

Similarly, Internet video site Veoh, which had been a smart, rational, useful place to upload and watch hard- and soft-core video, abruptly changed its TOU in June and no longer allowed adult content to be uploaded to its network -- all video deemed "pornographic (which shall include any depictions of nudity)." Veoh then did what many people have been wondering aloud about YouTube, and they scrubbed their site clean of anything that smelled like copyright infringement -- at least at the time.

Enter sites like (NSFW) Xtube.com, and the new era of porn-loving video sharing, user-submitted communities. Like YouTube (in fact, a lot like YouTube), Xtube has a similar user interface for viewers and uploaders alike, as do the more recently hatched competition (NSFW) YuVuTu.com (Caution: some users are experiencing malware installs) and (NSFW) PornoTube.com.

These sites have quickly filled with thousands of amateur and professional porn (and soft-core) clips featuring dozens of straight, gay and "everything" categories. Same flash upload/encode systems, same tagging systems, same pseudo-social network connecting users and favorites, and nearly identical options for easy URL grabbing and video player embeds for porn-happy bloggers.

For the founders of these sites, it was a no-brainer to build a smart, sex-positive YouTube clone. Steve Jacobs from YuVuTube said, "YouTube clearly missed a trick when they decided not to include adult material, as that is more likely to be monetizable. We started YuVuTu simply because we saw that YouTube and its competitors were staying out of adult. We felt that amateur productions can compete with professional productions far better than in any other genre (sport, comedy, action movies, music videos, etc.), so it's obvious to us that the YouTube model of user-generated content will be most successfully applied to adult content." Jacobs added, "The jury is still out as to whether YouTube has a viable business model."

Lance Cassidy, marketing director of Xtube, explained how YouTube's market practically demanded the delivery system ASAP: "YouTube was rockin' it and no one had an answer to them for the adult industry. We were actually not sure we would be first on the scene and hesitated, but once we looked, we were shocked and hurried to it." Though it may seem like YouTube's sex clones rushed to fill a gap in the market in typical dot-boom style, their business models have been built from the start to openly deal with adult content, making direct eye contact with many issues that could streamline TOU enforcement on nonporn sites like YouTube -- and not just in terms of avoiding dreaded uploads of underage or otherwise illegal content.

For example, from the outset Xtube has actively partnered with adult companies and porn auteurs to offer free DVD previews, circumventing the lure of copyright-infringing uploads from users. They also offer options for filmmakers to sell streaming clips to users, providing a nice one-two of both free and monetized content options outside ad-revenue models. Xtube also has the most stringent user interface for actively managing and explaining copyright permissions and age-of-consent 2257 documentation as requirements within the user interface for upload, explicitly making users responsible for legality of content.

Having a reliable content-delivery system for porn makes all of our hard drives smile -- but being realistic about your users and what they'll want to do with your content-delivery system makes everyone happy, from censorship to legalities to contributing to a more-needed-than-ever healthy attitude toward human sexual expression. Building your tech in keeping with the way people will use it will always make more sense than trying to change human behavior. Just don't actually call it GooTube, OK?


100,000,000 Websites

November 2006 Web server survey

There are now more than 100 million web sites on the Internet, which gained 3.5 million sites last month to continue the dynamic growth seen throughout 2006. In the November 2006 survey we received responses from 101,435,253 sites, up from 97.9 million sites last month.

The 100 million site milestone caps an extraordinary year in which the Internet has already added 27.4 million sites, easily topping the previous full-year growth record of 17 million from 2005. The Internet has doubled in size since May 2004, when the survey hit 50 million.

Blogs and small business web sites have driven the explosive growth this year, with huge increases at free blogging services at Google and Microsoft. Domain industry juggernauts Go Daddy (U.S.) and 1&1 Internet (Germany) have also seen strong demand for low-priced domain names and shared hosting accounts.

The first Netcraft survey in August 1995 found 18,957 hosts, with the NCSA web server dominating with 57 percent market share, leading CERN (19%) and a newcomer named Apache (3.5%). Microsoft's Internet Information Server launched in February 1996, and by the survey's fifth birthday the server market was largely divided up between Apache and IIS. This month Apache leads with 60.3% market share, with Microsoft at 31.0% and Sun at 1.7%.

Previous milestones in the survey were reached in April 1997 (1 million sites), February 2000 (10 million), September 2000 (20 million), July 2001 (30 million), April 2003 (40 million), May 2004 (50 million), March 2005 (60 million), August 2005 (70 million). April 2006 (80 million ) and August 2006 (90 million).

Must-Have Browser Upgrades
Rob Pegoraro

Your view of the Web is in for a change -- in some cases, whether you like it or not.

This can happen with either of two new browsers. One's the second major update to Mozilla Firefox in a year. The other is more of a surprise: It comes from the company that sat out the last half decade of browser innovation, Microsoft. And it will be automatically installed on Windows XP machines starting next week.

Don't be alarmed. If you're still using Internet Explorer 6, much less any older version, you need this upgrade. You've been stuck with a browser that lends you too little help in staying on top of the Web, and out of trouble on it.

Competing browsers, such as Firefox, Opera and Safari, have provided solutions for those problems for years. As a result, Firefox in particular has carved a chunk out of IE's once-overwhelming market share.

But some users can't or won't make the effort to download and install new software. So now Microsoft will do it for them. Starting Wednesday, its new, Windows XP-only Internet Explorer 7 ( http://www.microsoft.com/ie ) will be automatically installed on their computers through XP's Windows Update mechanism. (The one exception: An illegitimate copy of XP that fails Microsoft's "validation" test can't get this version of IE.)

Microsoft's mandatory upgrade is a gutsy, perhaps pushy move. Unlike almost every other patch or bug-fix sent through Windows Update, IE 7 brings major new features and a new front end. This update forcefully yanks an obsolete browser into the 21st century -- which may confuse some IE vets.

Users of other browsers, however, may feel right at home. Like them, IE 7 offers tabbed browsing, which cures screen gridlock by letting you view multiple Web pages in one window, and a search shortcut at the top right that sends a query to your choice of search engines. It also can subscribe to free Web feeds, which spare your keyboard's refresh key by letting Web sites tell you when they've posted new items.

Microsoft has made its own tweaks to these borrowed features. For example, if you've opened so many pages in tabs that you're getting lost, clicking a "Quick Tabs" button fills the window with miniature views of each open page. And when you preview a Web feed by clicking on an orange icon in IE 7's toolbar, a little search form lets you peek into its archives to see how often a topic of interest has been covered.

Internet Explorer 7 can also look out for "phishing" sites, the phony pages that impersonate banks and credit card issuers: If desired, it will check every new page against a blacklist of known phishing offenders, then block your access to any site on it. Meanwhile, IE 7 highlights legitimate financial sites that use encryption to keep out online snoops by putting a big lock icon in the address bar.

(It's a sad comment on the state of the Web these days that a browser's selling point can be how well it bars you from parts of the Web.)

IE 7 adds further defenses against browser hijacking -- attempts by sites to force-feed your computer hostile software by exploiting flaws in the browser. But since it continues to support one of the most popular hijacking targets, Microsoft's ActiveX technology, it still presents a bigger target than other browsers.

The Web may look a little sharper overall in this browser, thanks to its improved support for Web standards. And when you print pages, IE automatically resizes them so they don't get cropped at the sides. You can also resize a page on the screen by clicking on a magnifying glass icon.

But none of those features will be as immediately noticed as IE 7's new interface. This browser, like many recent Microsoft releases, ditches traditional text menus in favor of toolbar buttons that sometimes double as drop-down menus. This sleek design takes up much less space, but it also lacks consistency and bumps some often-used functions, like the home-page button, to odd locations.

In any case, if you've been using IE 6 for years, you may not know where to click when IE 7 lands on your computer.

But rebelling against this forced upgrade by turning off automatic updates in XP is not a good idea. You need Microsoft's security fixes far more than you need to avoid disruption from a new browser. Besides, you can better express any disapproval by switching to the new Firefox 2 (available for Win 98 or newer, Mac OS X 10.2 or newer and Linux at http://www.mozilla.com/ ).

This free, open-source browser, used by a growing minority of users, may once have had the reputation of being a cult favorite among geeks, but compared with IE 7, it's a much easier upgrade. Its interface features a lineup of menus and toolbars that any IE user would recognize, but it also offers all the power-browsing features that IE 7 has added -- and then some.

For instance, if you close a tab by mistake, Firefox lets you undo it to bring that page back up. Its Web-search form allows some search engines, such as Google and Yahoo, to complete search terms for you, based on what other users have looked for. Firefox allows a choice of RSS-feed readers, both other programs and such sites as Google Reader or Bloglines. Like Microsoft's new browser, Firefox includes a phishing filter -- although it missed a couple of phishing sites that IE 7 flagged.

Firefox 2.0 can also spell-check what you type into Web forms. And if the browser shuts down accidentally (as it did when my laptop crashed with a "blue screen of death" Thursday night), it will restart where you left off, with the same set of pages you had open before.

That capability alone makes Firefox 2 worth the upgrade.

Firefox also fits better for an often-overlooked group of users -- everybody still running pre-XP versions of Windows. By releasing IE 7 only for XP, Microsoft has given them the clearest signal possible: Goodbye and good luck.

This can be a lot of change to deal with for people who haven't had to adjust to a new browser in this decade. But it should be welcomed. It's called competition, and it's about time it returned to the browser market.

Do You Want More Frickin' Pirates?

How frustrating is it, particularly if you're tech savvy, to be willing to shell out good money for digital content, only to be stymied by the fact that this online service isn't available yet in your country?

I'm sure many users across Asia are experiencing this, just as I'm sure that many Internet users are using BitTorrent and other peer-to-peer apps to download files, many of them illegally.

By denying users a legal alternative for downloading content, are companies just encouraging more people to become pirates?

I'm really torn over this, because while years ago I made a public stand against piracy and stopped buying bootleg discs of any form -- whether games, apps, music or movies -- I also think DRM as it exists today is mostly stupid. And what's an even more bitter pill to swallow is that even when you're willing to play by the rules, it so happens they don't want you to be part of the game.

Case in point: the iTunes store still isn't available in the Philippines. Sure, if I use a credit card with a billing address in the US or the other countries where the iTunes store is available, I can purchase content even if I'm in the Philippines. But we're trying to do things legally, right?

PayPal recently became available in the Philippines, though in limited form -- you can send money, but can't receive funds. PayPal, however, still isn't a solution for buying content from iTunes, because your PayPal account must originate from a country where the iTunes store is available. D'oh!

Which is why I feel like yelling at these companies: What do you want us consumers to do? It's a chicken-and-egg problem. As a gaming journalist, I've heard the same reason being given for why, say, the Sony PlayStation 2, Microsoft Xbox and Nintendo GameCube were never officially launched in the Philippines. And yup, as of this writing, the Xbox 360 still hasn't been officially launched in the Philippines. Of course, they'll cite the problem of piracy and the supposed lack of demand for original products.

But you know what? A sizeable number of people in the countries you're dismissing do want and can afford to buy original content. Yet you're making it harder for us by not even investing in an official presence in our countries and facilitating legal means of acquiring your products and services.

Forget the pirates. You wouldn't get money from them anyway. There will always be people who will prefer pirated goods -- and they're not just the people who are actually poor. If poverty were the only reason for piracy, then it would be non-existent in a country like Singapore, or heck, the US itself.

Think about it: we're choosing to patronize original goods, in spite of the ready availability of bootlegs. I think vendors are underestimating the purchasing power of this segment of the population. Of course, it would help if they lower the prices of originals, and this has actually been happening in Asia. Compare the prices of the Asian versions of Xbox 360 titles with the US editions, for example.

Once upon a time, during the days of the original Napster, nobody thought people would pay to download digital music when you could get the files for free via P2P. Then iTunes came along with a pricing that hit the sweet spot and a user-friendly way to download these tunes.

Which is why it's sad that, until now, Apple is still denying users in many countries the right to easily purchase content from the iTunes store. If I sound frustrated, well, I happen to be really excited over the hot new NBC series Heroes, and was more than willing to pay US$1.99 per episode to download them from iTunes.

Again, what do you want consumers to do?

More and more people are exchanging files on P2P. We know there's a huge demand for the content, and that the technology is readily available.

Heck, we don't even have to go as far as P2P -- like many people, I spend more time viewing clips on YouTube than I do watching TV. We know a lot of the content that's online on YouTube violates copyrights, though of course now YouTube is forming partnerships with different content providers and Google has 1.65 billion dollars worth of reasons to make sure it goes the legal route.

I know there aren't easy answers. We can expect more battles over copyrights and consumer rights. But the burden is now on companies to provide legal alternatives that satisfy this seemingly insatiable desire for digital content.

After all, it doesn't matter how many of us are willing to buy, if you have nothing to sell.

RIAA Targets University

The University of Maryland is confronted with a wave of copyright infringement claims by the RIAA. In one month they received 130 letters, almost a tenfold of what they receive on average.

The biggest spike was in September, probably to scare newcomers, and students who returned form their summer break, but in October they still received a considerably higher number of complaints than the monthly average.

Students are an easy target for the RIAA because they do not have the money to fight back. The often offer the students to settle for $3000 or $4000, leaving the students broke, but avoiding a real case. This trick seems to work well for the RIAA, they easily collect money without having to proof (they have no clue) that the defendant is actually someone who engaged in peer to peer file sharing of copyrighted music without authorization

Sometimes it looks like the RIAA willingly selects their targets based on their bank account. They try to avoid the mistake the MPAA made earlier this year by suing millionaire Shawn Hogan who allegedly downloaded a Film on BitTorrent. Hogan, however, was not easily scared by the MPAA and said “$100,000 in legal fees is a small price to pay to challenge the MPAA’s tactics. They’re completely abusing the system, I would spend well into the millions on this.”

ACLU Withdraws Lawsuit Challenging Patriot Act

The American Civil Liberties Union has dropped a three-year-old lawsuit challenging the constitutionality of the USA Patriot Act, months after Congress rewrote parts of the law.

The ACLU said Friday it is withdrawing the lawsuit because of "improvements to the law."

Beeson, the New York-based associate legal director of the ACLU, said in a written statement.

The Justice Department said it is pleased with the ACLU's action.

"The Patriot Act is a legitimate and important tool that has better helped law enforcement fight terrorism while simultaneously protecting our valued civil liberties," Justice spokeswoman Tasia Scolinos said in Washington.

The Justice Department argued last month that amendments approved by Congress in March had corrected any constitutional flaws in the Patriot Act.

The lawsuit, filed in July 2003 on behalf of the Muslim Community Association of Ann Arbor, Mich., and five other nonprofit groups, was the first legal challenge to Section 215. That part of the Patriot Act lets federal agents obtain such things as library records and medical information.

The ACLU said the revisions allow people receiving demands for records to consult with a lawyer and challenge the demands in court.

No Internet at United Nations 'Internet' Summit
Declan McCullagh

You'd think that of all places that should have speedy and reliable Internet access, a United Nations summit on the Internet would be high on the list.

Not quite. The organizers of the summit, held at a luxury resort hotel on the Athenian Riveria not far from the city center, couldn't even provide a working Internet connection.

The wireless connection in the main conference hall appeared briefly before dying and leaving attendees bereft of the Net on Monday. Trying to connect to the base station yielded only a "could not connect to the network" error.

It was no better on Tuesday -- by that time, the conference organizers apparently gave up and took the connection offline completely.

Free Software and World Peace
Terry Hancock

Somebody recently noted that, what with all the bombing and killing and tyrannical madness going on in the world, how can we waste all this time talking about free software? Surely there's more important stuff to worry about?

Well, they’re absolutely right that there are bigger problems in the world. When I get a chance to do something more direct about it, I plan to. So far, it looks like voting is about it, though.

On the other hand, you can’t trivialize peacetime matters. Peace is more important than stopping war. It’s the thing we need to protect when we deal with the evils in the world.

Regrettably, peace usually works the soft and slow way, while war is swift and always seems like the simpler solution. Hence our constant error in trying to make wars to stop wars. It is always a mistake to try to stop the processes of peace just because war seems more urgent. Because peace is what actually stops wars.

Free software does, in my opinion, make significant strides forward in creating long-term peace for humanity. A web, constructed of free software now connects us all, enemies and friends alike—and people who used to be enemies are becoming friends. Or perhaps only their children are.

This is the real thing that those “evil internet chat rooms” are doing to our children: they are connecting them. They’re allowing people who wouldn’t talk to each other before the chance to do so in relative safety, unencumbered by distance. They’re allowing them to come to terms with each other on a personal, down-to-Earth level like nothing else can. It makes a difference when you know that the “foreigner” with the odd skin color and the funny-looking clothes has a name and a pet hamster named “Rodrigo”.

The thing breeding in those internet chat rooms is surely the power-mongerers of the world’s worst nightmare: it’s a new generation of people who are beginning to think of their race as “Human” and their nation as “Earth”. I’m not saying we’re there yet, but there is something happening. Something that happens through shared experiences and exchanged knowledge. Something personal that treaties and laws and propaganda ministers can’t get to. People are talking to each other.

There’s a forum on the internet that I have visited where Hindi and Muslim Kashmiris hurl insults at each other, pretty much incessantly. But they are talking to each other. I regularly converse with people from all over the English-speaking world, and also with a few people from Japan, Russia, Germany, France, Sweden, India, Italy, and Brazil (a Brazillian made some important contributions to a project I’m still working on, while my main collaborator is Swedish—so some of these relationships have been significant, productive experiences), not to mention Guam and Iceland.

It’s also largely on the internet that the knowledge of treachery and deceit in governments has been disseminated, because it’s a nearly unsuppressable press with few chokepoints that would-be tyrants can throttle. And when they do try, as they are trying, it is largely through free software that work-arounds are made.

Free software is also hard at work, leveling the economic playing field for developing economies trying to modernize, without finding themselves under the thrall of developed nations’ software corporations. It’s free software that’s showing that sophisticated technology needn’t be equated with powerful, centralized control, and that sharing doesn't have to forced by a command economy in order to work.

GNU/Linux is making affordable embedded devices (whether they are the OLPC laptops or just mobile phones) that can be deployed to more people in more remote locations, in order to empower those people with the ability to speak back and to solve their own problems in their own way on their own terms, using their own resources, instead of falling deeper and deeper into World Bank debt or some other form of debt-slavery imposed by developed-world power holders.

Happy, well-fed, well-educated, hopeful people do not become suicide bombers and neither do they elect fear-mongerers. So if you really want to stop the violence and bring back sanity, then the best way to do it is to do whatever it takes to make people in even the most far-away lands happy, well-fed, well-educated, and hopeful. It’s not just humanitarian and altruistic, it’s also enlightened self-interest. And you could make worse choices than free software as a means of furthering that goal.

EU Exec Praises ICANN Work on Internet
Derek Gatopoulos

A top EU official praised the United States' commitment to pull back from its historic oversight of the Internet as a worldwide conference on the network's future opened Monday.

EU Information Society Commissioner Viviane Reding said she hoped last month's deal would lead to eventual independence for the Internet Corporation for Assigned Names and Numbers, the non-profit agency in charge of the Internet's key traffic-management technologies.

"We are very satisfied with the work of ICANN. What Europe was objecting was the government oversight of ICANN," Reding told The Associated Press. "I think ICANN is doing a perfectly good job as it is. Just leave it alone."

Ahead of a U.N. summit on information technology last year, Europe insisted that the U.S. government cede responsibility of policing the Internet to some sort of new combination of governments and the private sector. The United States ultimately kept sole control - through ICANN - and agreed to this week's forum instead.
Last month, the Commerce Department said it would retain oversight of ICANN for another three years, although it agreed to be less actively engaged. Reding called that "the first step in the right direction."

"We do not need governments to have hands on ICANN. That's why we have discussed this for years with the Americans in order to leave ICANN free, to leave ICANN independent, without government oversight," she said. "We will monitor very closely what will happen in the next months and years and hope that ICANN can be independent."

The United States and other governments, she added, should focus instead on threats like spam and cybercrime.

Some 1,200 academics, policy makers, technology experts, user representatives and other delegates are attending the Internet Governance Forum, which runs through Thursday in this resort near Athens. Discussion topics are expected to include ways to ease current U.S. control of the Internet and improve international cooperation to fight Internet crimes like banking fraud and child pornography.

"This is an opportunity for a dialogue of a very large scale," Greek Prime Minister Costas Karamanlis said in opening the forum. "Everyone's input is needed to keep the Internet free and safe."

Event organizers said the forum would not make recommendations but was aimed purely at starting a long-term dialogue and making such discussions more inclusive.

In an interview Friday, the U.N.'s top Internet official, Nitin Desai, predicted that Asia will drive a massive online expansion by the end of the decade, propelled by improved cell phone technology and expansion of computer-sharing schemes within communities.

"The big expansion in the Internet in the next five years is going to take place in developing countries," Desai said. "A lot of it in countries which are not English speaking ... where people don't even know the Latin alphabet, for instance, China."

Desai, a special adviser to the U.N. secretary-general, called on better cooperation between government and law-enforcement agencies to prevent overly restrictive Web policing, adding that the billion Internet users who are decent citizens should not be punished for the transgressions by the few.

"Criminals travel on the road. Therefore let's have a rule which says no one should get on the road without first checking at the police station. Would you do that? Of course you wouldn't. ... The important thing is not to overreact."

Desai described the Athens forum, which organizers plan to turn into an annual event, as a global "town hall meeting" that would bring together professionals who rarely talk to one another, at a time when the profile of the average Internet user is changing.

"This is a medium which in five years' time will have users who are not your classical Internet users. These are not research professionals in developed countries. ... It's going to be a lay user. It's going to be a user in China, in Arabic speaking countries, in India," he said.

Desai said Web-enabled cell phones would have a massive impact in the developing world.

"Once you get that, the cost of access won't be more than the cost of using a mobile phone," he said. "India is talking in terms of half a billion people having mobile phones, in a matter of barely five years."

Greek organizers said the next IGF meetings would be held in Brazil next year, in India in 2008 and Egypt in 2009.

IBM Still Profits From Giant Mainframes
Brian Bergstein

Cheap little servers handle so much of the Internet's dirty work that giant computers known as mainframes, which debuted 50 years ago and often cost more than $1 million, are supposed to be passe.

When Hoplon Infotainment, a startup video game company in Brazil, let it be known that it uses a mainframe to operate its signature online game, "People would actually take a step back and say, `What? Did I hear correctly?'" said Tarquinio Teles, Hoplon's CEO.

Yet mainframes are inspiring new ways of doing things at organizations like Hoplon. The trend is driven by and anxiously watched at IBM Corp., which makes the vast majority of the world's remaining mainframes and continues to be hugely reliant on them.

After dropping nearly 8 percent in 2005, IBM's mainframe revenue is up 10 percent this year. That includes a 25 percent gain in the most recent quarter. Mainframes were IBM's fastest-growing hardware segment after the microchip division, which is enjoying a nice ride making microprocessors for the top three video game consoles.

IBM does not release precise figures, but analysts estimate mainframe revenue at roughly $2.3 billion in the first nine months of 2006. While that is a small chunk of IBM's overall sales of $65 billion so far this year, mainframe revenue is especially precious because the machines drive huge software and maintenance deals, making them IBM's most profitable line of hardware.

Of course, the huge third-quarter boost is unlikely to be sustained. IBM is benefiting from having released two new mainframes in the past year, and sales eventually should taper until an upgrade comes, at least a year from now. Such ups and downs are typical: Unisys Corp., a much smaller vendor, has seen mainframe sales drop this year, but spokesman Brian Daly said the numbers strengthened in the third quarter with the release of a new model.

Still, for IBM to be having success with mainframes at all is somewhat surprising. Because if you were to break modern computing history into its simplest terms, it would go something like this: There was the centralized-mainframe era, and then there was the distributed-computing era. And the former ended a while ago.

Mainframes emerged in the 1950s as room-sized hubs that did it all. They crunched numbers, administered transactions, ran simulations and stored data.

By the 1980s and '90s, however, information technology was flourishing with flexible and smaller pieces of hardware that took on traditional mainframe duties. Cheaper server computers could calculate stuff and serve up Web pages. New communications gear ferried information around networks. Separate storage machines made more efficient use of memory. Millions of desktop computers flowered.

Sun Microsystems Inc., a leading maker of servers, denigrated mainframes as "dinosaurs," prompting IBM to call its next mainframe line the "T-Rex."

As mainframes ceased to be the center of gravity, they mainly lived on in government agencies, banks or complex networks like airline travel systems. Many such places needed mainframes' heavy-duty security and processing ability, but others were locked into the specialized programs they had written in mainframes' unique language.

"Where the mainframe still has a long-term home is running long-term code," said John Parker, chief information officer for A.G. Edwards & Sons Inc., a financial services firm that recently dropped its French-made mainframe but still runs key functions on a mainframe operated by a third-party hosting service. "Every industry has it, in my experience."

Since inertia is not growth, the market for mainframes and servers costing more than $500,000 dropped from $19 billion in 2000 to less than $12 billion last year, according to analysts at IDC.

One huge challenge has been the machines' old-school reputation. Programming mainframes still involves typing code on a green screen, much like early versions of DOS, the operating system that dominated PCs before the visual "windows" approach.

To try to encourage younger software developers to write programs for the machines, IBM recently announced a $100 million effort to simplify and modernize mainframe programming. Earlier it began encouraging customers to run Linux, Java and other low-intensity software on mainframes, in hopes of keeping the machines from falling deeper into specialized niches.

IBM also is trying to get creative in luring customers. In April it launched a "business-class" mainframe that costs $100,000 and up, targeted at smaller companies that want mainframes' high level of security and reliability.

One key pitch is that mainframes can do so many tasks at once that they are more energy efficient and take up less space than a comparable cluster of smaller servers.

"For every application, many times it takes five servers in a distributed environment," said Jim Stallings, who runs IBM's mainframe division. "Many customers are saying, `I can't deal with the complexity.'"

The University of Toronto recently bought a business-class mainframe to manage enrollment and other administrative functions. Eugene Siciunas, director of computing services, said the main attraction was flexible pricing.

The university saved money upfront by selecting a mainframe that runs at less than top capacity. Then on days when computing loads are heavier, the school can buy a short-term boost of extra processing power. Network managers call IBM, which remotely tunes the mainframe to deliver better performance.

Hoplon, the Brazilian company, is using a mainframe's processing might to build a complex "massively multiplayer" online game. But rather than shelling out precious startup capital to own a mainframe, Hoplon is remotely accessing one stashed in an IBM data center in Brazil. The same machine manages a retirement fund for IBM's Brazilian employees and handles operations for a building-tools manufacturer.

Charles King, an analyst with Pund-IT Inc., said IBM has had to adopt such sales methods to "maintain the platform's viability."

"The company has done a good job of continuing to gain leverage out of the mainframe," King said. "For a platform that a lot of folks have claimed is essentially moribund or headed into a very dark, bad future, it's got remarkable legs."

Computing, 2016: What Won’t Be Possible?
Steve Lohr

Computer science is not only a comparatively young field, but also one that has had to prove it is really science. Skeptics in academia would often say that after Alan Turing described the concept of the “universal machine” in the late 1930’s — the idea that a computer in theory could be made to do the work of any kind of calculating machine, including the human brain — all that remained to be done was mere engineering.

The more generous perspective today is that decades of stunningly rapid advances in processing speed, storage and networking, along with the development of increasingly clever software, have brought computing into science, business and culture in ways that were barely imagined years ago. The quantitative changes delivered through smart engineering opened the door to qualitative changes.

Computing changes what can be seen, simulated and done. So in science, computing makes it possible to simulate climate change and unravel the human genome. In business, low-cost computing, the Internet and digital communications are transforming the global economy. In culture, the artifacts of computing include the iPod, YouTube and computer-animated movies.

What’s next? That was the subject of a symposium in Washington this month held by the Computer Science and Telecommunications Board, which is part of the National Academies and the nation’s leading advisory board on science and technology. Joseph F. Traub, the board’s chairman and a professor at Columbia University, titled the symposium “2016.”

Computer scientists from academia and companies like I.B.M. and Google discussed topics including social networks, digital imaging, online media and the impact on work and employment. But most talks touched on two broad themes: the impact of computing will go deeper into the sciences and spread more into the social sciences, and policy issues will loom large, as the technology becomes more powerful and more pervasive.

Richard M. Karp, a professor at the University of California, Berkeley, gave a talk whose title seemed esoteric: “The Algorithmic Nature of Scientific Theories.”

Yet he presented a fundamental explanation for why computing has had such a major impact on other sciences, and Dr. Karp himself personifies the trend. His research has moved beyond computer science to microbiology in recent years. An algorithm, put simply, is a step-by-step recipe for calculation, and it is a central concept in both mathematics and computer science.

“Algorithms are small but beautiful,” Dr. Karp observed. And algorithms are good at describing dynamic processes, while scientific formulas or equations are more suited to static phenomena. Increasingly, scientific research seeks to understand dynamic processes, and computer science, he said, is the systematic study of algorithms.

Biology, Dr. Karp said, is now understood as an information science. And scientists seek to describe biological processes, like protein production, as algorithms. “In other words, nature is computing,” he said.

Social networks, noted Jon Kleinberg, a professor at Cornell, are pre-technological creations that sociologists have been analyzing for decades. A classic example, he noted, was the work of Stanley Milgram of Harvard, who in the 1960’s asked each of several volunteers in the Midwest to get a letter to a stranger in Boston. But the path was not direct: under the rules of the experiment, participants could send a letter only to someone they knew. The median number of intermediaries was six — hence, the term “six degrees of separation.”

But with the rise of the Internet, social networks and technology networks are becoming inextricably linked, so that behavior in social networks can be tracked on a scale never before possible.

“We’re really witnessing a revolution in measurement,” Dr. Kleinberg said.

The new social-and-technology networks that can be studied include e-mail patterns, buying recommendations on commercial Web sites like Amazon, messages and postings on community sites like MySpace and Facebook, and the diffusion of news, opinions, fads, urban myths, products and services over the Internet. Why do some online communities thrive, while others decline and perish? What forces or characteristics determine success? Can they be captured in a computing algorithm?

Social networking research promises a rich trove for marketers and politicians, as well as sociologists, economists, anthropologists, psychologists and educators.

“This is the introduction of computing and algorithmic processes into the social sciences in a big way,” Dr. Kleinberg said, “and we’re just at the beginning.”

But having a powerful new tool of tracking the online behavior of groups and individuals also raises serious privacy issues. That became apparent this summer when AOL inadvertently released Web search logs of 650,000 users.

Future trends in computer imaging and storage will make it possible for a person, wearing a tiny digital device with a microphone and camera, to essentially record his or her life. The potential for communication, media and personal enrichment is striking. Rick Rashid, a computer scientist and head of Microsoft’s research labs, noted that he would like to see a recording of the first steps of his grown son, or listen to a conversation he had with his father many years ago. “I’d like some of that back,” he said. “In the future, that will be possible.”

But clearly, the technology could also enable a surveillance society. “We’ll have the capability, and it will be up to society to determine how we use it,” Dr. Rashid said. “Society will determine that, not scientists.”

U.S. Justice Dept. Probing Sony Unit
Hans Greimel

Sony Says U.S. Justice Department Is Probing SRAM Sales at Its Electronics Unit

Sony said Tuesday the U.S. Department of Justice is probing its electronics unit as part of an industrywide investigation into sales of a particular type of memory chip. The news could spell more trouble for a company already stung by sinking profits, a global battery recall and product delays.

The Japanese company received a subpoena from the Justice Department's antitrust division seeking information about Sony's static random access memory, or SRAM, business, company spokesman Atsuo Omagari said.

"Sony intends to cooperate fully with the DOJ in what appears to be an industrywide inquiry," the company said in a short statement.

Separately, EU antitrust regulators said Tuesday they had raided several chip makers in Germany in October as part of a price-fixing investigation regarding SRAM chips.

Earlier in October, U.S.-based chipmaker Cypress Semiconductor Corp. said its SRAM operations were also under investigation by the U.S. Department of Justice.

SRAM is a kind of computer memory that is faster and more reliable than the more extensively used DRAM, or dynamic random access memory. Unlike DRAM, SRAM can keep its data without power, but it is also more expensive.

SRAM is found in relatively small quantities in personal computers. It's also used in disk drives, communications equipment and networking gear.

In 2005, Sony sold 3.3 billion yen ($27.7 million) worth of SRAM. The product is made by outside manufacturers for Sony, which in turn sells the memory chips to other electronics makers, Omagari said. He declined to provide other details about the investigation.

A separate DOJ investigation into price-fixing among DRAM companies has so far resulted in more than a dozen charges against individuals and more than $731 million in fines against Samsung Electronics Co., Elpida Memory Inc., Infineon Technologies AG and Hynix Semiconductor Inc.

The new probe could add to a growing list of headaches for Sony, which has been battered by a worldwide recall of lithium-ion laptop batteries on fears they could overheat and burst into flames. The recall affected almost every major laptop maker in the world, including Dell Inc., Apple Computer Inc. and Lenovo Group Ltd.

Just last week, Sony Corp. said profit plunged 94 percent in the July-Sept. quarter.

Sony shares, which have fallen about 15 percent since May, fell 57 cents, or 1.37 percent, to close at $40.98 Tuesday on the New York Stock Exchange.

Are You an Average YouTube User?
Kelvin Beecroft

We’ve been doing some heavy number crunching at Mashable Labs lately, so just for kicks we wanted to know what an average YouTube user looks like. We started by seeding a list with usernames of 100 active users on YouTube, like lonelygirl15. Then we grabbed the usernames of all their subscribers and added those to the list. Once we had a list of generally active users together we went out and grabbed their profile info. So bear in mind this is an active subset of the total users, not a random sample.

From a sample of 41,000 active user profiles we collected some rather unsurprising statistics. Based on the profile info supplied, the age of an average YouTuber is 27, with 20% being 35 or older - a bit more mature, perhaps, than the kids over at MySpace. Be aware, however, that finding the age of social networking users is a challenge - this method involves simply grabbing the reported age from the profile, which is only 100% accurate if everyone tells the truth. Other methods are problematic, too - this weekend Nielsen NetRatings suggested that one-third of YouTube’s audience is over 45. They’re measuring audience, not registered members - they use some downloadable software to do that. Do the kids log out of their parent’s profiles before going to YouTube? It’s hard to tell.

They’re pretty busy watching videos, though. If the average video is 2 minutes then these guys are spending some quality time in front of YouTube: one hour and 18 minutes every day.

What about extreme YouTubers? We found those too. It’s not really possible to watch 20,105 videos a day, but we found users who are doing just that - we think something funny’s going on there. But channel views, nearly 5 million – yep, lonelygirl15. Really, how many people are lonely on YouTube? A username says a lot about a person but we only found 13 that wanted to put lonely somewhere in their username. 178 think of themselves as happy while 1030 like to include the word angel. Finally, who you associate with says much about your character and less than 4% of YouTubers have a website link back to MySpace.

We should add the disclaimer that this data is a bit of fun, and really just some preliminary musings before we start looking deeper at the YouTube data we’re collecting.

Digital Mudslinging

As the 2006 elections near, smear tactics are going high-tech in a bid to sway Net-surfing voters

Negative campaigning is nothing new during election season. But it has taken on a whole new digital dimension this year. In heated races around the country, candidates are finding new ways to bash opponents through social networks such as MySpace (owned by News Corp. (NWS)) and with new tools such as the online video site YouTube, which wasn't even around in the 2004 election.

And the more the sites grow in popularity, the more efficiently and cheaply a candidate can get a message across. "The nature of the Internet allows for some amount of anonymity, your message spreads around a lot quicker than a debate speech or a TV ad, and there are no regulations by the [Federal Election Commission]," says Julie Barko Germany, deputy director for George Washington University's Institute for Politics, Democracy & the Internet.

Witness the YouTube effect on the Senate race in Virginia between George Allen, the Republican incumbent, and Democratic challenger Jim Webb. Allen held a comfortable lead over Webb until one of Webb's camera-toting aides captured footage of Allen making a racial slur during a campaign stop in Breaks, Va. The incident was quickly posted on YouTube, where it temporarily held the site's No. 1 ranking and swiftly gained national notoriety. Allen has since taken a steep drop in popularity among voters. A seat Republicans previously counted as a sure thing has now become the focus of a hotly contested race.

Microsites and Belly Laughs Online aspersions can be particularly effective when they're draped in humor. A lot of Net surfers are more likely to forward a video clip or flock to a site if there's a guffaw in the payoff. "Negative campaigns work and that's why people always do them," says Rebecca Donatelli, chairwoman of Campaign Solutions, a consulting firm that coordinates online campaigns for Republican candidates. "But if you're going to say something negative, you should try to do it with a sense of humor."

Campaign Solutions is working on behalf of Republican Senator Rick Santorum of Pennsylvania, creating a series of microsites aimed at needling Santorum's opponent, Bob Casey Jr., a Democrat. "The point was to poke fun at Bob Casey and to raise some ire," she says. Campaign Solution's Detective Site and Western Site, both of which can be accessed from WheresCasey.com, use playfully themed graphics to drive home what Santorum believes to be Casey's Achilles' heel: a history of conspicuous absence from public dialogue.

Virginia Davis, spokeswoman for the Santorum campaign, says the microsites have worked particularly well with a younger demographic. Along with profiles on MySpace, Facebook, and videos on YouTube, she says interactive components of Santorum's 2006 campaign targeted constituents age 18 to 35 by "appealing to people who think politics are boring." Not to be left out of the online political scene, Casey has a sleekly designed Web site with a focus on different ways to take action, such as recruiting friends and writing to news editors.

From a Distance In California, polls show that State Treasurer Phil Angelides lags well behind Governor Arnold Schwarzenegger in voter support—but that's not stopping Angelides from tapping a variety of experimental online resources. The challenger set up BSBuddies.com, a site where users play an animated game of building their own personalized Schwarzenegger action figure. The game is designed to focus on what Angelides considers a poor Schwarzenegger record on issues such as education. "Too Cool for School" Arnold, for example, promises to "raise tuition and fees" and "cut financial aid by two billion dollars." The Angelides campaign initially linked to the game from its main page, but it recently removed the link and there's no indication on the microsite that the challenger and his team are the creators. The anonymity of the Web, as permitted by the Federal Election Commission's lax policies regarding the Internet, allows candidates like Angelides to portray their opponent in a negative light without coming off as mudslingers themselves.

Negative campaigns can backfire through any medium—but they do so all the more quickly and virally on the Web. Just ask Bob Corker, who's challenging Harold Ford for the Tennessee U.S. Senate seat. Corker pulled a TV ad attacking Ford amid criticism that it played on racial stereotypes. Corker tried to distance himself from the ad, which features a white woman bragging that she met Ford "at a Playboy party." But the ad has lived on with a vengeance on YouTube (recently purchased by Google (GOOG)).

Let Them Sling Mud Constituent-generated media, as exemplified by political blogs of recent years, has proved that smear campaigning isn't limited to the politicians themselves. Now, online social networks put the mud in the hands of voters.

That may come as especially good news for Democrats. New data from Nielsen//NetRatings show that Republican candidates have a larger constituency on the Internet—36.6% of users 18 and older, compared with 30.8% of users who support Democrats. But the most popular social-networking sites strongly tend toward Democrat and liberal-leaning users. On MySpace, 31.5% of members identify themselves as Democrats, whereas 23.9% say they're Republican. On Facebook, 49.9% of members are Democrats, while just over a quarter, 26%, are Republican.

Embracing social networks may be especially effective for Democrats in parts of the country where young voters are regarded as a key swing demographic, such as in Iowa's third congressional district. There, Democratic incumbent Leonard Boswell and Republican challenger Jeff Lamberti both have Facebook profiles. But among the site's users, Boswell has 76% of the support, compared with 24% for Lamberti.

The Nedheads In the Connecticut U.S. Senate race between Democrat Ned Lamont and incumbent Joseph Lieberman, Lamont supporters calling themselves "Nedheads" created a group on YouTube that has attracted more than 2,000 members and created nearly 500 videos in support of their favored candidate, which in many cases attack Lieberman's policies. One Nedhead post is a music video of "The Find Joe Song," which calls Senator Lieberman a "bottom feeder" who has "bought the race."

A potential pitfall of letting supporters get involved is losing control of the candidate's image or message, be it positive or negative (see BusinessWeek.com, 5/31/06, "A Vote for MySpace"). That wasn't a concern for Lamont's campaign, says Tim Tagaris, the campaign's Internet communications director. "The Nedheads came about organically, and we support meaningful opportunities for people to give their feedback like that," he says.

Bob Barker Retiring After 50 Years on TV
Sandy Cohen

Bob Barker is heading toward his last showcase, his final "Come on down." The silver-haired daytime-TV icon is retiring in June, he told The Associated Press Tuesday.

"I will be 83 years old on December 12," he said, "and I've decided to retire while I'm still young."

He'll hang up his microphone after 35 years as the host of "The Price Is Right" and 50 years overall in television.

Though he has been considering retirement for "at least 10 years," Barker said he has so much fun doing the show that he hasn't been able to leave.

"I've gone on and on and on to this ancient age because I've enjoyed it," he said. "I've thoroughly enjoyed it and I'm going to miss it."

Reaching dual milestones, 50 years on television and 35 with "Price," made this an "appropriate" time to retire, Barker said. Besides, hosting the daily CBS program — in which contestants chosen from the crowd "come on down" to compete for "showcases" that include trips, appliances and new cars — is "demanding physically and mentally," he said.

"I'm just reaching the age where the constant effort to be there and do the show physically is a lot for me," he said. "I might be able to do the show another year, but better (to leave) a year too soon than a year too late."

Leslie Moonves, president and CEO of CBS Corporation, said Barker has left an enduring mark on the network, calling his contribution and loyalty "immeasurable."

"We knew this day would come, but that doesn't make it any easier," Moonves said in a statement. "Bob Barker is a daytime legend, an entertainment icon and one of the most beloved television personalities of our time."

Barker began his national television career in 1956 as the host of "Truth or Consequences." He first appeared on "Price" on Sept. 4, 1972 and has been the face of the show ever since.

A CBS prime-time special celebrating the show's longevity and Barker's five decades on TV was already under way, a network spokesman said.

To kick off his retirement, Barker said he will "sit down for maybe a couple of weeks and find out what it feels like to be bored." Then he plans to spend time working with animal-rights causes, including his own DJ&T Foundation, founded in memory of his late wife, Dorothy Jo, and mother, Matilda.

He said he'd take on a movie role if the right one came along, but filmmakers, take note: "I refuse to do nude scenes. These Hollywood producers want to capitalize on my obvious sexuality, but I don't want to be just another beautiful body."

Freemantle Media, which owns "Price," has been looking for Barker's replacement for "two or three years," Barker said. And he has some advice for whoever takes the job: learn the show's 80 games backwards and forward.

"The games have to be just like riding a bicycle," Barker said. "Then he will be relaxed enough to have fun with the audience, to get the laughs with his contestants and make the show more than just straight games, to make it a lot of fun."

As for his fans, Barker said he "doesn't have the words" to express his gratitude.

"From the bottom of my heart, I thank the television viewers, because they have made it possible for me to earn a living for 50 years doing something that I thoroughly enjoy. They have invited me into their homes daily for a half a century."

But when it comes to saying his final TV goodbye, Barker said he'll do it the same way he does each day on "Price": "Help control the pet population. Have your pets spayed or neutered."

Ex-Leader of Computer Associates Gets 12-Year Sentence and Fine
Michael J. de la Merced

The former chief executive of Computer Associates International, Sanjay Kumar, was sentenced yesterday to 12 years in prison for orchestrating a $2.2 billion accounting fraud at the software company. He was also fined $8 million.

Because he pleaded guilty in April to securities fraud and obstruction of justice charges, Mr. Kumar, 44, had faced a maximum sentence of life imprisonment.

The judge, I. Leo Glasser, of the Federal District Court in Brooklyn, described such a punishment as excessive. But he repeatedly rebuked Mr. Kumar for helping inflate the company’s sales figures in 1999 and 2000, as well as lying to federal investigators and authorizing a bribe to a potential witness.

“This shocked the conscience of this court, and I dare believe it shocked the conscience of any reasonable person,” Judge Glasser said.

The sentence came down after a nearly two-hour hearing in which Mr. Kumar again apologized to the court.

“I stand before the court today to accept full responsibility for my actions,” said Mr. Kumar, wearing a tie and charcoal gray suit. “I deeply regret the actions I took.”

Joining Mr. Kumar in the courtroom were his wife, father and two sisters, as well as a phalanx of lawyers. His two daughters stayed home. Upon hearing the verdict, neither Mr. Kumar nor his family betrayed any emotion.

Kirby D. Behre, a partner at the law firm of Paul, Hastings, Janofsky & Walker and a former federal prosecutor, said he considered Mr. Kumar’s sentence stiff but just. “It’s a far cry from a life sentence, but it’s still a decade behind bars,” Mr. Behre said.

Mr. Kumar is the latest convicted chief executive to receive a lengthy prison sentence in recent years.

Jeffrey K. Skilling, the former chief executive of Enron, was sentenced last week to 24 years and four months in prison, while Bernard J. Ebbers last year received 25 years in prison.

Mr. Kumar’s fine, the judge said, has been deferred until restitution is determined next year. Mr. Kumar is scheduled to report to prison on Feb. 27.

At the hearing, his main lawyer, John P. Cooney Jr., requested that Mr. Kumar serve his prison term at the Federal Correctional Institution in Fairton, N.J., a medium- and minimum-security prison 40 miles west of Atlantic City. After the hearing, Mr. Cooney said his client had not yet decided whether to appeal the sentence.

The four-year investigation of Computer Associates, now CA, centered on backdated contracts that artificially inflated profits. Computer Associates, based in Islandia, N.Y., entered into a deferred prosecution agreement to avoid indictment in 2004; in it, the company agreed to pay $225 million to a shareholder restitution fund and agreed to government monitoring for two years.

Seven other Computer Associates executives have pleaded guilty to fraud charges. Stephen Richards, the company’s former top salesman, pleaded guilty in April alongside Mr. Kumar; he is to be sentenced on Nov. 14.

The second-largest provider of software for mainframe computers, Computer Associates had tremendous success during the 1990s, largely under the leadership of Mr. Kumar and the company’s founder, Charles B. Wang.

Mr. Kumar was compensated handsomely in return: in 1998, he netted a $330 million bonus, one of the largest paydays of any American executive.

Once hailed as a Horatio Alger success story, Mr. Kumar arrived in the United States at the age of 14 after his family fled Sri Lanka. Joining Computer Associates in 1987 at the age of 25, Mr. Kumar earned promotions quickly: he became president and chief operating officer in 1994, and in 2000 he assumed the role of chief executive. Two years later, he added the title of chairman after Mr. Wang resigned.

But as the government’s investigation stepped up, Mr. Kumar came under scrutiny. He stepped down as chairman in April 2004, taking the title of chief software architect, until he finally severed all ties to the company two months later.

Details have since emerged of the dubious accounting practices that helped fuel Computer Associates’ once-soaring stock price. For instance, the company rolled sales figures from new quarters into previous earnings figures, a practice employees called the 35-day month. Prosecutors also said that Mr. Kumar repeatedly lied to the Federal Bureau of Investigation and his own lawyers, and that he approved a $3.7 million payment to silence a potential witness.

“This was the most brazen and comprehensive obstruction in the modern era of corporate crime,” said Eric Komitee, the assistant United States attorney in charge of the case.

At the sentencing, Mr. Cooney detailed Mr. Kumar’s philanthropic efforts as he sought to win leniency for his client: donations to tsunami relief in Sri Lanka; girls’ education programs in Kenya; emergency medical support to victims of the 1998 embassy bombings, also in Kenya; and programs to help scientists track elephant herds in Africa.

But Judge Glasser said that federal sentencing guidelines did not permit him to consider charity work in determining punishment.

The judge also questioned several statements by Mr. Kumar and his lawyer that suggested the former executive had fully accepted responsibility for his actions. The judge cited the timing of Mr. Kumar’s guilty plea — two weeks before his trial was to have begun — as well as Mr. Kumar’s continued denial that he erased potentially incriminating data from a laptop computer.

Jennifer Hallahan, a spokeswoman for Computer Associates, said the company sought to move beyond the Kumar era.

“We are a dramatically different organization than we were more than two years ago, when Mr. Kumar left the company,” she said.

She added that the company was still seeking to obtain any “ill-gotten gains” from former executives.

Compulinx CEO Arrested For Identity Theft
Chris Gonsalves

Federal law enforcement officials Tuesday arrested the well-known CEO of White Plains, N.Y.-based MSP provider Compulinx on charges of stealing the identities of his employees in order to secure fraudulent loans, lines of credit and credit cards, according to an eight-count indictment unsealed by the U.S. Attorney's office in White Plains.

Terrence D. Chalk, 44, of White Plains was arraigned in federal court in White Plains, along with his nephew, Damon T. Chalk, 35, after an FBI investigation turned up the curious lending and spending habits. The pair are charged with submitting some $1 million worth of credit applications using the names and personal information -- names, addresses and social security numbers -- of some of Compulinx's 50 employees. According to federal prosecutors, the employees' information was used without their knowledge; the Chalks falsely represented to the lending institutions, in writing and in face-to-face meetings, that the employees were actually officers of the company.

Terrence Chalk is also charged with racking up more than $100,000 in unauthorized credit card charges. If convicted, he faces 165 years in prison and $5.5 million in fines, prosecutors say. Damon faces a maximum sentence of 35 years imprisonment and

No one was answering the phones at Compulinx Wednesday morning, and the company's Web site was not responding. Terrence Chalk, a member of Westchester County Business Council's Hall of Fame, is well known in the channel as an early adopter of the managed services model and innovator of the "coopetition" model, which helped bring other service providers into the MSP space.

"We've seen a lot of different companies in the channel try to get into managed services, and a lot of them want to partner with us to reach some of those opportunities," Chalk told VARBusiness last year. "Having a network of partners expands your prospects."

Compulinx was known as Computek until 2004, when it acquired Linx Logic, formerly part of Ernst & Young Technologies. The company developed its own proprietary software platform for hosting customers' networks, dubbed Manage:Now, and moved on to launch its own partner program that allows other resellers to team on managed-services projects.

Compulinx also manages a massive IT infrastructure, which includes four data centers, more than 300 servers and a whopping 40 TB of storage. Any disruption to Compulinx's operations would seemingly be troubling for the company's partners and customers, but as of Wednesday morning, few were commenting.

Compulinx was among the seminal members of Ingram Micro's VentureTech Network (VTN) organization, which bolsters the profile of some 300 SMB solution providers nationwide. A spokesperson for Ingram Micro Wednesday said Compulinx was "moved out of VTN well over a year ago" and was also no longer listed with the Ingram Micro Services Network as of January 2005.

Ingram wasn't alone in giving Compulinx a seal of approval over the years. CMP Technology's own Institute for Partner Education & Development (IPED), in conjunction with Babson College, named Compulinx a Channel Elite member last year.

Chalk's attorney, Mayo Bartlett of White Plains, said Wednesday afternoon that he hadn't spoken to his client about the potential technology fallout for Compulinx' clients. Bartlett added that he hoped the Compulinx business could continue uninterrupted despite the CEO's legal woes.

3 Americans Arrested by F.B.I. in Identity Thefts
Tom Zeller Jr.

At least three Americans and 11 Polish nationals have been arrested in the last month in a crackdown on an online black market in which users buy and sell credit card numbers, bank account log-ins and other personal information, federal investigators say.

The three Americans have been identified as Dana Carlotta Warren, 29, of Atlanta and Zanadu Lyons, 24, and Frederick T. Hale, both of Columbus, Ohio. The charges included conspiracy to commit bank fraud, identification fraud, identity theft and other violations in what the F.B.I. described as a plot linking those arrested in the United States and those in Poland.

The F.B.I. and federal prosecutors are expected to announce the arrests of two more Americans today.

The arrests follow a two-year operation in which the F.B.I. worked with Polish investigators to identify suspects trading in or enabling the use of stolen consumer information.

Warrants were also being served in Romania as part of a continuing investigation, an F.B.I. spokesman, Paul Bresson, said.

The proliferation and sale of stolen consumer data on the international black market, particularly through online forums, has been a nagging problem for law enforcement, given the restrictions in national legal systems.

But the assistant director of the F.B.I.’s Cyber Division, James Finch, suggested that this was slowly changing.

“We are sharing evidence and using sophisticated techniques like never before,” Mr. Finch said in a statement. “Cybercriminals will no longer be able to hide behind borders to conduct their illicit business. There will be no safe haven for cybercrime.”

LimeWire Linked to Identity Theft

The Denver District Attorney issued a security warning to users of LimeWire after discovering the file-swapping software was linked to dozens of cases of identity theft.

The DA's office revealed it was investigating a case where LimeWire, a peer-to-peer file transfer service similar to Kazaa or Gnutella, was allegedly used to gain access to personal and financial information from individuals and businesses from around the country from about 75 different targets. It's unclear if the software opened a security hole in users' computers or if information was scooped out of directories mistakenly left open to LimeWire's file-trading function.

"It appears that the file-sharing program was exploited to enable someone sitting at a computer in Denver to illegally access everything - every file, every document - on computers across the country," a spokesman for the DA said in a statement. "The investigation is continuing, and we are urging people who use LimeWire or other file-sharing software to ensure that their computer security is up to date including adequate firewall security, antivirus software, and other measures."

Officers located the files when executing a search warrant on a run-of-the-mill identity theft case in a Denver apartment. It is unclear if this is the first use of the software to gain access to private information, or if it's simply the first time authorities discovered LimeWire being used to find personal information.

Starbucks Loses Laptops With Worker Data
Elizabeth M. Gillespie

Starbucks Corp. said Friday it had lost track of four laptop computers, two of which had private information on about 60,000 current and former U.S. employees and fewer than 80 Canadian workers and contractors.

The data, which includes names, addresses and Social Security numbers, is about three years old, dating prior to December 2003, said Valerie O'Neil, a spokeswoman for the Seattle-based coffee retailer.

The company has not received any reports that anyone's personal information has been compromised.

"We have no reason to believe these laptops are in the hands of someone who wants to misuse them," O'Neil said. "We just want to make every effort to protect our partners."

O'Neil said Starbucks was in the process of notifying those affected, including an estimated 8 percent of its current work force, which numbers about 135,000 worldwide.

Starbucks has been looking for the laptops since early September after discovering they were missing from a closet in the corporate support center at its south Seattle headquarters, O'Neil said.

The company waited several weeks to disclose it had lost the laptops, O'Neil said, because "we wanted to make sure we were thorough before we notified people."

In a letter to those potentially affected, Starbucks urged people to monitor their financial accounts for suspicious activity and said it was offering free credit protection services to help them do that.

"Please know that we are exploring all avenues to locate these laptops, including reaching out to law enforcement agencies," the letter stated.

O'Neil said Starbucks was reinforcing its corporate policies and updating procedures on protecting the personal information of its employees to prevent such data loss from happening again.

Asked if there were any secret recipes on the missing computers, O'Neil chuckled and said, "I don't know of any."


Starbucks information security help line: 1-800-453-1048.

How to Hack a Window XP Admins Password
Quinn Zerfas

This is a cool little trick I’ve picked up in my travels and decided to share it with you fine and ethical individuals =). Log in and go to your DOS command prompt and enter these commands exactly:

mkdir temphack
copy logon.scr temphack\logon.scr
copy cmd.exe temphack\cmd.exe
del logon.scr
rename cmd.exe logon.scr

So what you just told windows to backup is the command program and the screen saver file. Then you edited the settings so when windows loads the screen saver, you will get an unprotected dos prompt without logging in. When this appears enter this command that’s in parenthesis (net user password). So if the admin user name is Doug and you want the password 1234 then you would enter “net user Doug 1234″ and now you’ve changed the admin password to 1234. Log in, do what you want to do, copy the contents of temphack back into system32 to cover your tracks.

Seagate to Encrypt Data on Hard Drives
May Wong

Seagate Technology LLC hopes its new security system for the hard drive will become the most formidable barrier between computer data and thieves.

The world's largest hard drive maker says its DriveTrust Technology, to be announced Monday, automatically encrypts every bit of data stored on the hard drive and requires users to have a key, or password, before being able to access the disk drive.

Technology that protects the hard drive — the computer's storehouse of data — differs from most security products launched in the past several years. Such products typically put firewalls around computer networks, encrypt data files or defend the operating system from invasions.

Protecting the hard drive itself offers another layer of protection and might stop thieves from purloining confidential information from lost or stolen laptops. Errant notebook computers have cost government agencies and corporations millions of dollars and put sensitive data — including customer credit cards or social security numbers — on the street, possibly in criminal hands.

“I believe other companies will be following suit and it will become an industry standard,” said John Monroe, a research vice-president at Gartner Inc.

Laptop computers with DriveTrust-based hard drives would prompt users to type in a password before booting up the machine. Without the password, the hard drive would be useless, Seagate officials said.

Even data-recovery specialists would not be able to help if the assigned password somehow gets lost, said Scott Shimomura, a senior product marketing manager at Seagate.

“That's the trade-off: Anytime you introduce backdoors or holes to circumvent the security, then you've created vulnerability,” Mr. Shimomura said.

Seagate said it has already implemented the technology into one of its drives for laptops and another for digital video recorders.

Though DriveTrust is proprietary, Seagate may eventually allow other storage companies to integrate it into their own products. Seagate will offer development tool sets for other companies to create additional security layers to work with DriveTrust.

“We believe the entire industry will benefit from it,” Mr. Shimomura said.

Canada #2 in Maintaining Personal Privacy
Katie Fretland

Germany and Canada are the best defenders of privacy, and Malaysia and China the worst, an international rights group said in a report released Wednesday.

Britain was rated as an endemic surveillance society, at No. 33, just above Russia and Singapore on a ranking of 37 countries' privacy protections by London-based Privacy International.

The United States did only slightly better, at No. 30, ranked between Israel and Thailand, with few safeguards and widespread surveillance, the group said.

The study ranks countries on various privacy-related issues. These include whether they have a written constitution with specific mention of privacy, the use of identity cards and biometrics, electronic surveillance including closed-circuit TV cameras, interception of communication, access of law-enforcement agencies to private data, surveillance of travel and financial transactions, and global leadership in promoting privacy.

On a scale of one to five, Canada scored three or higher in all categories.

Canada received the highest ranking of five for its legal limits on the keeping of private data. It scored four in constitutional and statutory protection, privacy enforcement, ID cards and biometrics, leadership in promoting privacy and democratic safeguards.

The watchdog organization tracks surveillance and privacy violations by governments and corporations, said director of Privacy International Simon Davies. It studied the reach of governments in their use of video surveillance in private locations, workplace monitoring and identity protection, among other areas.

“The aim is not to humiliate the worst-ranking nations, but to demonstrate that it is possible to maintain a healthy respect for privacy within a secure and fully functional democracy,” said Mr. Davies.

Efforts to quash terrorism have eroded individual privacy protections since the Sept. 11, 2001, attacks on the United States, human rights activists say. Governments around the world have imposed security and immigration legislation that invades people's private lives, they say.

In the United States, President George W. Bush's administration has come under fire for its warrantless domestic wiretapping program, which monitors international phone calls and e-mails to or from the United States involving people suspected by the government of having terrorist links.

The New York Civil Liberties Union says there has been a staggering increase in surveillance of lawful activities with little concern for the civil liberties implications, said executive director Donna Lieberman.

In 1998, the union conducted a survey of video surveillance in Manhattan and found more than 2,300 cameras in use. Last year, a similar study found more than four times that number in just 20 per cent of Manhattan, Ms. Lieberman said.

S. Arutchelvan, a Malaysian activist based in Kuala Lumpur, said privacy has not been sufficiently protected since the government stepped up efforts over the past five years to track down suspected Islamic militants, dozens of whom have been detained without trial.

“We believe there has been encroachment on privacy, such as the tapping of phones and other methods through telecommunications, in the name of fighting terrorism,” Mr. Arutchelvan said.

Chinese legal activist Xu Zhiyong said strict Internet controls have resulted in fewer protections for Internet users in China.

The Communist government has set up an extensive surveillance and filtering system to prevent Chinese people from accessing material considered obscene or politically subversive.

Lawyers and academics raised awareness of privacy violations in China after a 2003 incident in which a couple was detained in the northwestern Shaanxi province for possession of pornographic videos.

“In the past few years, authorities have been making some positive changes to respect the privacy of individuals,” Mr. Xu said. “But when it comes to the Internet, the government feels it must supervise users and that results in less privacy protection.”

Privacy International's rankings of 37 countries, with the best at No. 1. Some countries are tied.

1. Germany

2. Canada

3. Belgium

3. Austria

5. Greece

6. Argentina

6. Hungary

8. France

8. Poland

8. Portugal

8. Cyprus

12. Finland

13. Italy

13. Luxembourg

13. Latvia

13. Estonia

13. Malta

18. Denmark

18. Czech Republic

18. Ireland

18. Lithuania

18. New Zealand

18. Slovakia

24. Australia

24. Spain

26. Slovenia

26. Netherlands

28. Israel

28. Sweden

30. United States

31. Thailand

31. Philippines

33. Britain

34. Singapore

34. Russia

36. Malaysia

36. China


Britain is 'Surveillance Society'

Fears that the UK would "sleep-walk into a surveillance society" have become a reality, the government's information commissioner has said.

Richard Thomas, who said he raised concerns two years ago, spoke after research found people's actions were increasingly being monitored.

Researchers highlight "dataveillance", the use of credit card, mobile phone and loyalty card information, and CCTV.

Monitoring of work rates, travel and telecommunications is also rising.

Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader.

There are up to 4.2m CCTV cameras in Britain - about one for every 14 people.

But surveillance ranges from US security agencies monitoring telecommunications traffic passing through Britain, to key stroke information used to gauge work rates and GPS information tracking company vehicles, the Report on the Surveillance Society says.

It predicts that by 2016 shoppers could be scanned as they enter stores, schools could bring in cards allowing parents to monitor what their children eat, and jobs may be refused to applicants who are seen as a health risk.

Produced by a group of academics called the Surveillance Studies Network, the report was presented to the 28th International Data Protection and Privacy Commissioners' Conference in London, hosted by the Information Commissioner's Office.

The office is an independent body established to promote access to official data and to protect personal details.


4.2m CCTV cameras
300 CCTV appearances a day
Reg plate recognition cameras
Shop RFID tags
Mobile phone triangulation
Store loyalty cards
Credit card transactions
London Oyster cards
Electoral roll
NHS patient records
Personal video recorders
Hidden cameras/bugs
Worker call monitoring
Worker clocking-in
Mobile phone cameras
Internet cookies
Keystroke programmes

The report's co-writer Dr David Murakami-Wood told BBC News that, compared to other industrialised Western states, the UK was "the most surveilled country".

"We have more CCTV cameras and we have looser laws on privacy and data protection," he said.

"We really do have a society which is premised both on state secrecy and the state not giving up its supposed right to keep information under control while, at the same time, wanting to know as much as it can about us."

The report coincides with the publication by the human rights group Privacy International of figures that suggest Britain is the worst Western democracy at protecting individual privacy.

The two worst countries in the 36-nation survey are Malaysia and China, and Britain is one of the bottom five with "endemic surveillance".

Mr Thomas called for a debate about the risks if information gathered is wrong or falls into the wrong hands.

"We've got to say where do we want the lines to be drawn? How much do we want to have surveillance changing the nature of society in a democratic nation?" he told the BBC.

"We're not luddites, we're not technophobes, but we are saying not least don't forget the fundamental importance of data protection, which I'm responsible for.

"Sometimes it gets dismissed as something which is rather bureaucratic, it stops you sorting out your granny's electricity bills. People grumble about data protection, but boy is it important in this new age.

"When data protection puts those fundamental safeguards in place, we must make sure that some of these lines are not crossed."

'Balance needed'

The Department for Constitutional Affairs (DCA) said there needed to be a balance between sharing information responsibly and respecting the citizen's rights.

A spokesman said: "Massive social and technological advances have occurred in the last few decades and will continue in the years to come.

"We must rise to the challenges and seize the opportunities it provides for individual citizens and society as a whole."

Graham Gerrard from the Association of Chief Police Officers (Acpo) said there were safeguards against the abuse of surveillance by officers.

"The police use of surveillance is probably the most regulated of any group in society," he told the BBC.

"Richard Thomas was particularly concerned about unseen, uncontrolled or excessive surveillance. Well, any of the police surveillance that is unseen is in fact controlled and has to be proportionate otherwise it would never get authorised."

Music Downloading's New Deal
Catherine Holahan

Free file-sharing services are considering ad-supported business models—but first, they need to win over music label foes

The threat of recording industry lawsuits has certainly given pause to peer-to-peer music file-sharing services. Few have dared show their servers on U.S. soil since the Supreme Court in 2005 ruled Grokster and Morpheus could be sued, declaring open season on companies that enable users to swap copyrighted files. On Oct. 30, even News Corp.'s (NWS) MySpace—a social-networking site known for allowing all manner of freedoms—cracked down on the use of copyrighted music, licensing technology from Gracenote that allows the site to review and block songs uploaded to the site.

But the practice of what the recording industry considers illegal music downloading is alive and thriving, thanks to lax copyright protections abroad and the experience of a generation that grew up swapping songs over superfast Internet connections. And lately it's finding a new lifeline: a business model."

This year, 300 million to 500 million files were pirated each day, according to Artistdirect, a New York company that tracks illegal downloads through its MediaDefender service, and in some cases, attempts to block them. "The user base has been chased around the Internet because the companies keep getting shut down…but this is a really stubborn, persistent phenomenon," says Eric Garland, CEO of BigChampagne, an online media measurement firm.

International Lawbreakers

Many of the new sites have cropped up in countries such as Russia and in parts of Asia, where digital copyright laws are not as clear or strictly enforced as in the U.S. The recording industry is trying to fight the overseas sites by adopting the same legal tactics that worked in the U.S. The Federation of the Phonographic Industry, a lobby group representing Eaton Vance Michigan Municipal Income Trust (EMI) and Warner Music Group (WMG), has threatened to sue the operators of Russian site Allofmp3.com, for allegedly violating copyright laws.

The site owners, however, are undeterred by the specter of litigation. Even an October announcement by U.S. officials that Allofmp3's actions could cost Russia entry into the World Trade Organization hasn't shut down the service, which charges 15 cents to 30 cents per song, compared with 99 cents a song from Apple Computer's (AAPL) iTunes Music Store.

So why can't the recording industry stop the illegal music downloading? Part of the problem has to do with culture. For a generation of music downloaders, file swapping isn't the same as stealing a CD from a store. It is seen as a legitimate social-networking phenomenon and, in some cases, a way to get even with an industry viewed as having gotten fat off of consumers.

Going Legit

However, some so-called pirate sites are voluntarily moving to the side of the Recording Industry Association of America and others in the industry. They are doing this not because of the threat of lawsuits, but because of the promise of money—namely, a share in the billions of advertising dollars moving online. To do that, they need to strike licensing agreements. Erstwhile pirate sites such as Qtrax, owned by Brilliant Technologies, are working with the recording industry to become advertiser-supported networks. The goal is to make money off of the millions who have become accustomed to free music by making users pay for songs with their time (see BusinessWeek.com, 10/9/06, "Free Downloads—After This Message").

Qtrax isn't alone in pursuing ways to let users get free songs in exchange for sitting through advertising and music news. MediaServices, the parent company of Allofmp3, is exploring such a model, according to spokesman Ilya Levitov. "We're still at the phase of alpha testing," says Levitov. "When the product is ready there'll be special software which a person will download, and naturally there will be advertising on the player which will be played on the computer." eDonkey, one of the biggest so-called pirate sites, is also looking into an ad-supported model (see BusinessWeek.com, 10/24/05, "A Hard Ride for eDonkey"). But going legit isn't easy for sites that once fostered illegal downloading. The music industry doesn't exactly want to embrace former foes, especially when there are sites such as SpiralFrog, which also plans an ad-supported business model—but doesn't have a history of sparring with the recording industry (see BusinessWeek.com, 9/5/06 "Meet the iTunes Wannabes"). Pirate sites that have experimented with other models after being sued by the RIAA have largely failed to be profitable. Napster (NAPS), which became a subscription service, is still losing money (see BusinessWeek.com, 8/3/06, "Napster on the Block?").

Industry Advantages

Brilliant Technologies CEO Allan Klepfisz says he voluntarily shut down the original Qtrax after four months, without any threat of suit, because he didn't want to sour a relationship with the industry he would eventually need as a partner. "We wanted to close it down and build a more legitimate model," he says. Qtrax is set to relaunch as an ad-supported model in January and now has licensing deals with most major labels, says Klepfisz.

Licensing is only half the battle. The next step is to convince users accustomed to free peer-to-peer networks to bother to come to sites that work in the same manner but want to deliver advertising or pitches to buy the song for 99 cents. SpiralFrog CEO Robin Kent believes users will gladly pay with their time and sift through some advertising for a guarantee that the file they are downloading is the real McCoy. "They don't mind advertising. They have grown up with advertising all their lives," says Kent.

Besides, users on peer-to-peer networks are already wasting a lot of time weeding out corrupt files on their favorite sites. Firms such as Artistdirect are hired by labels and movie studios to post dummy files and advertising on peer-to-peer networks in the guise of illegal downloads. When a user searches for an Artistdirect client's material, they are swamped with fake files that, after waiting to download, either don't do anything or deliver an advertiser-supported message with the artists or song involved. For example, in June, Artistdirect released a Jay-Z video supported by Coca-Cola (KO). The company is currently using decoying and redirecting measures with 20,000 popular music and movie titles.

Future Advertising

Qtrax's Klepfisz is not only confident users will come to free sites—he believes ad-supported models will become the dominant method of delivering music. After all, most online content, including news and video, is available for free, thanks to advertiser support. Much TV programming has been advertiser-supported for its entire existence. "It seems to us that it might be difficult for the music industry to carve itself out as the one area that isn't advertiser-supported," says Klepfisz. "We see ourselves as a very essential bridge between paying for music and a future when music is advertiser-supported."

Klepfisz's future may not be that implausible considering that pay-per-download sites have largely failed to be profitable (see BusinessWeek.com, 11/21/05, "Online Music's Elusive Bottom Line"). Even Apple only sells about 15 songs a year per iPod, on average. Meanwhile, American consumers are listening to more music than ever before, according to Jupiter Research's Mark Mulligan. "They have access to more music than any generation before, but they are spending less," says Mulligan.

The peer-to-peer sites are clearly part of the reason. If the record companies can't beat them out of existence, it makes sense to try joining them and collect whatever compensation they can get from advertisers. BigChampagne's Garland says the peer-to-peer model may even become profitable through a subscription service, providing the legitimate versions have the same enormity of selection available on the LimeWires of the world. "I think it is very clear that the draw for tens of millions of people is the social-networking aspect of this and, beyond that, the exhaustive, unlimited title availability. If you can dream of it, it is somewhere out there in somebody's collection."

Big Labels Are F*Cked, and DRM is Dead - Peter Jenner
Andrew Orlowski

Interview Few people know the music industry better than Peter Jenner. Pink Floyd's first manager, who subsequently managed Syd Barrett's solo career, Jenner has also looked after T.Rex, The Clash, Ian Dury, Disposable Heroes and Billy Bragg - who he manages today. He's also secretary general of the International Music Managers Forum.

And he doesn't pull his punches.

The major four music labels today are "fucked", he says. Digital music pricing has been a scam where the consumer pays for manufacturing, distribution, and does all the work - and still has to pay more. Labels should outsource everything except finance and licensing.

But he's also optimistic that for almost everyone else - indie labels, musicians, songwriters and budding entrepreneurs - as well as network providers - the future's going to be pretty bright. The Big Four know that the DRM era is nearly over - and within two or three years, he predicts, "most countries" in the world will have a blanket licensing regime where we exchange music freely, for a couple of quid a month.

In the future, he also suggests, artists, co-ops and managers will raise their own investment on behalf of artists - and pick and choose their marketing teams.

Jenner is organising a conference (http://www.musictank.co.uk/bts_conference.htm) in London on November 15 to discuss these issues. Billed as an "Urgent Blue Sky Debate", for once a music event may live up to its billing. Earlier this year, France almost voted to legalise P2P and bring in a blanket license - the necessary stepping stone to the future.

While Jenner elaborated on these in a report for MusicTank recently - it's only available to the public for a fee. So we were delighted when he dropped by Vulture Central yesterday to lift the lid on the business. Strong language follows.

You said that at In The City, the big label executives have lost their faith in DRM - they don't believe in it any more.

They don't. Not anymore.

And that was done by Sony BMG - what the fuck was that [rootkit DRM] about? The other was iTunes - and they've seen how kids don't like it. The unitary payment doesn't suit the technology, it doesn't suit how they're actually using downloads - which is to explore and move around. You don't want to pay a dollar for each track when you want to explore music.
And they're pretty crappy services, too. eMusic works, but when the others time-bomb the songs it's more annoying than the per-machine restriction. Because it's suddenly robbing you of something you had.

Oh yes.

And three years later you go, "Oh, shit!" - You basically have to pay twice for it.

Yes, that's outrageous. You've got to provide stuff that people can keep, and they don't mind paying you $3 a month for.

So how long can the big labels keep up this charade?

Earlier I was talking about the ground moving underneath the industry. At In The City people are beginning to realise they have to do something. So I think in two or three years blanket licenses will be with us in most countries.

And France nearly voted for it this year.

Yes, it got shot down - but the people who shot it down really shot themselves in the foot. They tried to get away from being too unpopular by saying "it's like a parking fine" - and the court said no - if it's an infringement of copyright, it's an infringement of copyright, and there's a huge fine.

So of course they can't enforce the law - it's completely unenforceable.

With the DRM, I think they've realised it just isn't working. People don't like the CDs, they find their way around it; they don't like the DRM, they don't use the DRM services; they resent - as you say - having subscriptions wiped.

So do you think a blanket license will be introduced bottom-up through industry agreement, or top-down as in France - where there was some political leadership? It just isn't on the mainstream media, or think tanks' radar just yet. And I don't see much political leadership.

No, the political people have to be just well informed enough so they don't fuck it up, and they have to be encouraged to help it. I think it would be wonderful if the government could lock everyone in a room - the music industry, the unions, the performers, the record companies, the publishers, the ISPs - and tell them you can't be let out until you sort it all out.

They won't do that, but I think some way will be found to get that result.
So it's a fear of losing the distribution channels?

They won't have any control over distribution. A blanket license is a blanket non-license, really - it's simply saying "we won't sue you". But if you have commercial services exploiting music, we will want to pay you more. You're licensing the anarchy.

It's interesting where we'll end up drawing the line between commercial and non-commercial, but in the end the numbers will be so huge it'll iron itself out. Someone from England might pull in a lot of hits from Spain - but again, it doesn't matter. I don't then worry how they'll pass the money to each other, but it'll all come out in the wash.

Like it does today with collection societies?

I saw some reaction to the first step - "Value Recognition Right" here in the UK, and very few people seemed to understand it - especially not from the value-for-money point of view.

It was a very important first move but it was also a bit clunky. "Value Recognition Right - what's that? You're inventing a new right to make people pay - but you're also suing people - huh?"

But if you say that if mobile phones and ISPs want to distribute music in a non-commercial fashion, then they should pay for that right.

And if you swear that you're not going to listen to any music, you're not going to pay. It's going to be very hard for you not to pay, and the network is keeping an eye on you to see you don't download any music. And if you do without a license, we'll sue the hell out of you - because you've been offered a cheap deal like the TV license.

That's a lot cheaper than a TV license.

And fairer. If you don't have a computer, you don't have the internet, you don't have a 3G phone - and you don't listen to music - you're not going to pay!
They had to do it I think, and it was necessary to flush out critics who have no realistic alternative - other than that artists should go begging...

The "freedom" people are telling us I have to go out and sell more T-shirts - it's an argument I find tremendously insulting.
To me if someone gets some earning from their creativity it's one less person who's going to spend their life on a production line, or in a cubicle

Well, all the people who are writing this have salaries
Or they're rich tenured American professors.

They're getting paid very nicely, thank you. No, I certainly agree.

I don't think the positivehello side of Recognition Rights came in. Here's some place you won't be sued - you can do what you like with it - explore the world's music, share it, download it.

So the Big Four can't give up control?

Well, they know that they've built their power around their monopoly, and their manipulation of the market, and that's how they cover up their incompetence - by being "the only people who know how to buy stuff in", and so on. They've spent a lot of money establishing it.

And it's only through distribution, through black boxes, and their control of the existing copyright regime.

But it's not just that. You've also got this incredibly complicated rights structure. They've got to sweep it away online - they don't need to fuck with it offline - but they need to say there will be payment for music, and it's for the [artists] to claim under some kind of regulation.

We can have an 'OfRoy' - an office of royalties, or whatever you want to call it. Someone just to keep an eye on things to see people aren't be shafted, and that there's arbitration in the long run.

Doing it through the courts is just too complicated - it just becomes nit-picking. What we are doing today with radio, PRS, is actually riddled with holes. Money gets lost, misattributed, deductions are taken for this or that - but we can all live with it. It's not some malicious plot. It's just compounded human error.
For readers who've never heard of the black boxes, what are they?

Any money that comes in through collective payment and you don't know who it belongs to for any reason - or you can't pay it to them because you don't know where they are - goes into what's called the black box.

Which everyone in the collection societies insists doesn't exist. You ask Fran [Richard, ASCAP] about the black box and he will give you the most fantastic bullshit. He'll say "We don't have a black box".

Of course he has a black box. With the best will in the world you cannot distribute all the money accurately.

In a blanket license system, there'll be huge black boxes, and we'll have to learn to hold the money for a long time. People will learn to register, then we can work out how to deal with the black box fairly - rather than giving it to people who know it's there. That's what's happened in the past, really.

We don't talk much about it - so no one know who's got it. And the people who get it don't say much about it - it's not top of their conversation at music conferences. They don't come in and say "we cleaned up on the black box". What they will say, is "our market share was fantastic." That's because it's divided up by market share. It's non-attributable income and it doesn't have go to the artist - it goes straight to the bottom line.

The industry dreams of black boxes! (laughs)
But now it's going to be in the collection agencies' hands - or some intermediary.

If it's the publishing side, you get 50/50 at least, or 70/30 if you have a modern or newish record deal. And that 50 per cent is not recuperable against any advance. It's the same with PPL - you get some substantial proportion of the income. [The PPL is a members' society that collects royalties from public performances and and divides them between the recording rights holder and musicians] It's not quite as much as they try and tell you get, but it's quite a lot. So it's another income.

But it's quarterly and they can't wait to get rid of the money. The agencies know the regulators are watching them closely and can come in and ask "what are these pools of money you have here?" The EU watches them very closely.

So in collection agencies, while money can get systematically stolen, it's like petty theft. It's like retail losses from shoplifting. The agencies are really just shoplifters, but the major labels are burglars, and the worst of them are like armed robbers!
You mention Clive Rich [Sony BMG] in your report who modernised the recording contract - but that cut the rate for songwriters, didn't it?

No, I don't think it cut the rate for songwriters. I think it kept the rates online very low - but it was much clearer, much simplified and absolutely a move in the right direction. But you see, because of the stock market, they're obsessed with "margin".
If you're talking about your margin you should be doing things completely differently. They should be talking about their bottom line. But they talk about "unit margin" because that's what analysts look at.

That's true. It's a house joke at The Register when we cover earnings calls that the analysts have this Pavlovian response. I've been on calls where a company's sales have fallen 50 per cent and all the analysts ask about is "margin" Er, guys, what about your sales drop!

What's important is what's your bottom line, for Christ's sake.

The blanket licensing thing is obviously going to slash your unit margin. The record companies have increased their margin on downloads, because the costs have been ripped out. So they've cut the artists royalties and raised their margin.

But because they've replaced an album with a single they've helped destroy the retail industry, they're now in a position where they're completely fucked.

No one's got any sympathy or love for them, because they've systematically been shoring up their figures in the short run - squeezing money into Universal to make up for their catastrophies; Warner Brothers have been coping with huge debt; EMI have been desperately trying to hold their stock price up so somebody would buy them; BMG has been wondering how the fuck they're going to pay somebody back money for whatever it was, so they don't go public - and Sony are in a terminal mess.

So all of them have been draining profit. It's "get the money in, boys, get the money in. "

So they've raped them. They've raped their whole business model, and no one's got the time or energy to think about their business.

Then you've got people like Barney [Wragg] at Universal, their new technology man, and they've got these High Priests of DRM in there.
One thing you strongly hint at is that the distinction between royalties for a physical thing, and performances, is out of date and needs to be rethought.

The difference between a download and a stream now is now purely just a question of what you want to call it. Both are streams, both can be downloaded and it's whether you want to call it a download and charge for a download.

The record companies have managed to establish, and I think incorrectly and it should be challenged, that a download is a replacement for a sale. Here's what they're saying - it's a mechanical, so it's the same as selling a record. Then the logic goes on: a download is a certain technical process that puts it onto your machine. So anything which does that is a download. Therefore, anything delivered in that way is a sale: so we'll pay you as a sale.

Which then means you've got to track everything. It's not discriminating - it's not looking at what people are using the music for. It's creating an artificial distinction so they can distinguish the payment of royalties. So you get paid 15 per cent of the dealer price net of some things - whether they call it "packaging deductions", or "new technology", or "Mid-Price", or some combination of those.

They have all sorts of ways of slicing down the royalty rate. And the net result is that if you're getting only five per cent of the dealer price actually paid to you - as the person who made the record - you're doing well. The writers, because they've got the publishers fighting for them, get more. They went to tribunal recently and got eight per cent of the dealer price. So if you wrote your own song you might get 11 per cent of the dealer price, and that's top money. If you allow for the Paul McCartneys, maybe 15 per cent. But that's tops for a big label.

Now, if you're an independent, you get in the region of 35 per cent of the dealer price, because they go 50/50. And that's what gives the game away.

And all your net is a payment to an aggregator - maybe 15 per cent, and paying the distributor, and paying the publisher. So instead of five per cent of dealer price you're going to get maybe 20 per cent of dealer price. It's a huge difference!

If you say it's a performance, however, it's a neighbouring right, it might be argued that it goes through PPL, in which case you get 50 per cent with many less deductions. So a performance split between members of the band, sessions musicians - a complicated formula but it goes to the musicians.
In your report you suggest that a blanket license for digital will really begin to change relations fundamentally. You mention managers, and artists co-ops. Can you elaborate?

The key things that the record companies do are probably finance and distribution. Well, distribution is much easier because of the net. There's also marketing - and that's really finance. Then you have an issue of these complex rights - so who do you back? Do you put your money into the record or into the whole game? And I think everyone's moving into putting money into the whole game.

You can envisage a different investment model - imagine estate agents for IP. Someone wants to come in and invest £100,000 in Billy Bragg. And he goes to someone and someone says "Sure, Billy Bragg, it's safe to give him £100,000"...
I can't see it working. We might live in four or five houses in a lifetime and there's only one Billy Bragg career for Billy.

There's one career - but the logic is sound. If you turned over 50,000 and made a 50,000 profit, he'd be safe

You can look up the recording part of it, and chop that up. Or you can just promote the brand. I think you call them consultants rather than estate agents. That way you're asking what is the key element of the equation - and the key is to "own the fans" - and the person who owns the fans is the artists. So it may be the best person to invest in is the management - you'll get the best return on your investment - and you can see what the manager did last year. Or they can say, Peter Jenner - I know what he does. Let's let him go out and find the promotion people and the marketing people.

I like the idea of doing co-ops to raise the money, too. If I give money to you to write a book, that's fairly high risk. If I lend it to 100 people that's much lower risk - someone's going to come through and I'll get my money back. The industry understands these issues. And you're less likely to rip each other off.

Small businesses working together strengthens the market.
There are intangible things about physical music we're only just discovering we value. I'll tell you something. Have you noticed that digital people are pretty twitchy people. Recently I was reunited with all my old vinyl and it's much more sociable than running it off a computer or an iPod. People appreciate each other's company more, and appreciate the music more - we grow more patience and it's lovely. The tyranny of the playlist, of interactivity is horrible - it's a curse.

Well, without sounding like a clever clogs, I always said this was going to be a streaming media, which has even less interactivity.

Like what we're listening to now it washes over me. That's fine. I see music as a commodity as being the driver. There's far more casual access to music and for those people, you need all of the music. It's no good just having Sony's catalog. While for the fans, they want more from one artist. They want to get close to the artist, they want better packages. Real fans might want many versions of a song from a demo, to the final version, to the mash-up version, as many as 20 - it's a continuum. And you can give them it now. You've got that sort of market for the fanatics - they want the live recoridng, the backstage photos, the singer's blog when he's on the road.

That's a complicated bundle of rights - it's about bundles. You can't sell that individually, but it's a bundle. And people will want to give your their money.
And mobile?

The real game in town is not online. It's a skirmish. The real game is mobile phones. If your mobile phone is a portable computer, which has got all the facilities of an iPod and a radio, and a TV, with some limits on their memory but as time goes it'll have huge memory. But you need access to everything.

If You're Going To Sue For Copyright Infringement, First Make Sure You Own The Copyright
Contributed by Mike

Shawn Hogan has received plenty of attention in the last year for his decision to fight the MPAA over the lawsuit they filed against him, claiming he had shared the movie Meet the Fockers via a file sharing program. The problem? Hogan didn't actually share the movie, has never downloaded it, and actually owns the DVD of the movie in question.

The MPAA made it clear that if he just paid them $2,500, they would forget the whole thing -- which certainly has the feel of extortion. So, Hogan decided to fight the case in court to prove they were wrong, and said he wouldn't let them back out and run like they've done in other cases. All this, despite the fact that it would probably cost him over $100,000 in legal fees. Hogan decided it was worth it on principle. However, in preparing for the case, it looks like Hogan and his lawyer discovered that the studio might not actually have the rights to the movie.

The explanation is a little confusing, but it appears that there are two separate organizations involved: Universal City Studios Productions LLLP and Universal City Studios LLLP (you can see why this gets confusing). The first (we'll call them "Productions") is the one who sued Hogan. However, it was the other ("plain old Studios") who filed the copyright registration.

So, in preparing for the case, Hogan and his lawyers went looking for proof that plain old Studios had transferred the copyright to Productions -- which they got. The problem, however, is that the notice transferring the rights happens to occur two months before plain old Studios actually registered the copyright. In other words, they handed over the rights before they even got them -- making the whole thing a bit of a mess.

Apparently, it's messy enough that Hogan and his lawyer hope to have the whole case dismissed. Unfortunately, having such a case dismissed on what appears to be a (stupid and careless) technicality won't help much in dealing with other cases where people are falsely accused (assuming this thing isn't that common) -- but it should save Hogan a lot in legal fees.

Either way, it's yet another example of the somewhat reckless abandon with which the industry seems to file these lawsuits. Why bother making sure (a) the person did it or (b) you own the copyright before suing? That takes all the challenge out of suing your customers.

Tuesday, November 7th Is Election Day.

Don't Forget To

Until next week,

- js.

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