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Peer-To-Peer News - The Week In Review - June 19th, ’21
June 19th, 2021
YouTube Isn’t the Music Villain Anymore
YouTube seems to have shown that it’s possible to both upend an industry and help make it stronger.
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YouTube has long been the most popular music service in the world. What’s changed is that YouTube isn’t the Darth Vader of the music industry anymore.
For years, some artists and suits at record companies loved the zillions of clicks that music videos got on YouTube, but they complained that the site, owned by Google, didn’t generate enough money for them or didn’t do enough to stop rip-offs.
Those grievances haven’t gone away entirely, but they have mostly gone quiet. Why? A big reason is that YouTube figured out ways to generate enough cash to make many people in the music world happy — or at least content enough for now.
The question is whether YouTube has achieved a lasting peace or a temporary one. If it persists, YouTube might have achieved something that few internet companies have: a relatively healthy relationship with an established industry that it simultaneously helps and disrupts.
Let me step back to the years when YouTube was in the music industry’s doghouse. The industry powers regularly trotted out a public relations shorthand, the “value gap,” for what they said was YouTube’s paltry financial contribution to the music industry relative to the popularity of music on the site. They were fond of pointing to figures showing that vinyl records generated more income for the music business than YouTube did.
Mostly, YouTube made musicians, songwriters and record labels money the Google way: It sold advertisements in or adjacent to music-related videos and split the cash with the people and companies behind the songs. The power brokers in the industry said it was peanuts.
Fast forward to last week, when YouTube disclosed that it paid music companies, musicians and songwriters more than $4 billion in the prior year. That came from advertising money and something that the industry has wanted forever and is now getting — a cut of YouTube’s surprisingly large subscription business. (YouTube subscriptions include an ad-free version of the site and a Spotify-like service to watch music videos without any ads.)
The significance of YouTube’s dollar figure is that it’s not far from the $5 billion that the streaming king Spotify pays to music industry participants from a portion of its subscriptions. (A reminder: The industry mostly loves Spotify’s money, but some musicians say that they’re shortchanged by the payouts.)
Subscriptions will always be a hobby for YouTube, but the numbers show that even a side gig for the company can be huge. And it has bought peace by raining some of those riches on those behind the music. Record labels and other industry powers “still don’t looooove YouTube,” Lucas Shaw, a Bloomberg News reporter, wrote this week. “But they don’t hate it anymore.”
The YouTube turnabout may also show that complaining works. The music industry has a fairly successful track record of picking a public enemy No. 1 — Pandora for awhile, Spotify, YouTube, and more recently apps like TikTok and Twitch — and publicly browbeating it or playing one rich company against another to get more money or something else they wanted.
It’s not YouTube’s turn in the hot seat anymore, but I don’t know if it’s for good. Mark Mulligan, a music industry analyst and consultant, and my colleague Ben Sisario told me that some of the same old gripes are bubbling below the surface. Music power players still believe that YouTube pays far too little per click compared with other digital music services. And they fear that YouTube devalues songs everywhere because it doesn’t do enough to stop pirated versions.
But just maybe, YouTube has shown that it’s possible for digital companies to both upend an industry and make it stronger. That’s a rarity. Think about the resentment that many news organizations and websites have about Facebook and Google, restaurants’ uneasy reliance on food delivery apps and Netflix’s awkward marriages with entertainment companies. Maybe time and cash can achieve a measure of peace.
Can Streaming Pay? Musicians Are Pinning Fresh Hopes on Twitch.
The gaming platform is becoming increasingly attractive to artists, who can earn money by cultivating fan tribes that express their loyalty through patronage.
Each weekday at 8:30 a.m., after getting his twin 2-year-olds dressed, fed and set up with their nanny, Matthew K. Heafy decamps to an unoccupied bedroom in his home in Orlando, Fla., and flicks on three computers, three cameras and a battery of guitar equipment in preparation for his morning livestream shredfest.
Heafy, the guitarist and lead singer of the metal band Trivium, is one of the most dedicated musicians on Twitch, the livestreaming platform that began a decade ago as a gaming haven but has grown into an always-on smorgasbord of entertainment — one that has proved especially attractive to musicians during the pandemic. Twitch, which is owned by Amazon, attracts an average of 30 million visitors a day, and its users watched more than one trillion minutes of content last year, according to the company.
Livestreaming apps are a dime a dozen these days. But what makes Twitch stand out, particularly for music, is how it fosters connections between performers and their audience, and allows those connections to be efficiently monetized. Fan interactions — which pour across the screen in a river of song requests, inside jokes and “emotes” (Twitch-specific emoticons) — are as much a part of the show as the artist onscreen, conveying the sense of a tightly knit, mutually supportive community.
Since January 2018, Heafy, 35, has kept a strict Twitch regimen, streaming nearly every weekday at 9 a.m. and 3 p.m. For up to three hours at a clip, he practices guitar riffs — pedagogically breaking down his technique for student-fans who inquire in the chat — jams with his band and plays first-person shooter games. Heafy has about 220,000 followers on Twitch, and well over 10,000 people may be watching him at any moment; all that attention, he said, keeps him motivated.
“Even if I don’t feel like practicing, I know people are going to be there who want to hear a couple hours of their favorite Trivium songs,” Heafy said. “So I make sure I’m there to make their day good.”
CENTRAL TO TWITCH’s popularity among musicians is its economic model, which is quietly revolutionizing the business by providing an alternative to the winner-take-all system of on-demand services like Spotify, Apple Music and YouTube.
Those platforms have become the default consumption mode by making virtually every song in existence available free or for a small subscription fee. As a technological feat and a consumer offering, they are nearly miraculous. But as revenue-sharing systems, they have come under fire from critics who accuse them of devaluing music to a point where only superstars can make a living wage from recordings. According to Spotify’s own figures, 97 percent of artists there generated less than $1,000 in payments last year. (Spotify points to the growing number of musicians earning large sums as a sign of its value.)
Twitch, by contrast, is an alternate universe where even niche artists can make thousands of dollars a month by cultivating fan tribes whose loyalty is expressed through patronage. With its interactive chat threads and internal economy of channel subscriptions and “bits” (donations), Twitch would seem to fulfill the long-hyped but elusive promise of creative commerce on the internet. Yet the platform may work well for only some kinds of artists. (It is enormously labor-intensive.) Its relationship with rights holders is strained. And though it got a boost during the pandemic, Twitch may soon face a reckoning once artists and their fans emerge from their cocoons and return to in-person events.
But for those making a living on the platform, it has been a revelation. Its potential was highlighted in a recent report by Will Page, the former chief economist of Spotify, which compared musicians’ earnings and audience reach on Twitch versus on-demand audio services like Spotify and Apple Music. The numbers, while anecdotal, are striking.
According to Page’s report, Laura Shigihara, a composer of video game music, last year earned an average of about $700 a month from audio platforms but $8,000 a month on Twitch, where she sings and plays piano in a cozy room filled with anime-style stuffed creatures. In 2019 and 2020, Heafy’s four-man band, Trivium, collected an average of $11,000 a month from the audio services while his own Twitch channel generated nearly as much (just under $10,000) from an audience that was about one-tenth the size. The band Aeseaes, a married couple in Austin, Tex., that specializes in acoustic covers, earned 70 percent of their income in 2019 and 2020 from Twitch; just 6 percent came from audio streaming services and Bandcamp, the online indie music store.
“There’s just something about being able to directly support an artist that you are enjoying, and being able to see that support accepted by that artist and get an immediate thanks,” said Travis of Aeseaes, who plays bass and makes the microphones that he and his wife, Allie, who sings and plays guitar, use for their streams. (Both are in their early 30s, and use only their first names professionally.)
Tracy Patrick Chan, Twitch’s head of music, said that of the musicians who can earn $50,000 a year there, their median viewership — the number of people watching their streams at any given time — is only 183. By comparison, it may take 5 million to 10 million streams to yield the same payout from major audio streaming platforms, according to most estimates of those services’ per-stream rates.
“What the artists on Twitch are showing you is that you just need a passionate audience and they will be there to support you,” Chan said. The commerce comes in the form of subscriptions — at $5, $10 or $25 a month — as well bits and links to third-party donation and fund-raising sites like Patreon.
As it grows, Twitch appears increasingly capable of supporting a broad middle class of musicians, a concept that has been a P.R. talking point for digital services for years. Twitch is able to do it by gamifying the artist-fan relationship and by channeling audience payments directly to musicians. (Twitch takes a cut of 50 percent or less from subscriptions, and shares revenue from bits with streamers.) This contrasts with the so-called pro rata method of royalty distribution used by most on-demand audio services, where all the money contributed to a platform is divided by the total number of clicks. That system equalizes rates but also means that users subsidize a lot of music they never listen to, and the high-yield “head” of the distribution curve — superstars like Drake and Dua Lipa — benefits most.
“Twitch’s focus isn’t the head or tail, it’s growing the torso — the body of middle class artists in between,” Page said. “It’s a pivot away from the traditional hit-or-miss blockbuster model where hits hit big time and misses miss out badly.”
Li Jin, a venture capitalist who specializes in the world of social media influencers, sees Twitch as a pioneer in what has become a quickly spreading trend in the broader “creator economy” online. Content creators of all kinds are finding ways to monetize small but devoted audiences, and platforms are competing to serve them — like Substack newsletters, Twitter’s new Super Follows feature and Apple’s podcast subscriptions.
“You can’t just offer one way for creators to monetize, because their fans are heterogeneous; they all have different degrees of intensity of fandom,” Jin said. Creators need “a range of different ways to monetize different subsets of their audience.”
BEING A SUCCESSFUL music livestreamer, however, is hard work.
Travis and Allie of Aeseaes (pronounced “A.C.S.,” an abbreviation of their channel name: a_couple_streams) quit their office jobs five years ago to focus on Twitch. Unlike many who use it for behind-the-scenes glimpses of their creative process, Travis and Allie put on the equivalent of an intimate stage show, with mood lighting and a dedicated camera on one of their snuggling cats; the only chatter is their effusive thank yous to contributors.
Aeseaes gets more than 5,000 viewers for each broadcast, with close to 1,000 tuning in at any given moment, and their channel has maintained well over 1,000 paying subscribers each month for the last two years, according to a data report the couple shared with The New York Times. That success allows Travis and Allie to devote themselves full-time to making music at home.
But to keep their business going, and to maintain engagement, they must churn out content regularly, going online three times a week for about three hours at a time. “Since the beginning, we’ve known that streaming on Twitch is kind of an endurance run,” Allie said.
Page compares running a Twitch account to operating a taxi: It only makes money if the meter is running. And long rides are the most lucrative.
The vastness of Twitch’s audience means that streamers must seize every opportunity for broader reach. This month, Danielle Allard, a 31-year-old a musician and professor in Ottawa, Ontario, who began experimenting with livestreaming a year ago, learned that a planned 6 a.m. set would be featured on Twitch’s home page — the equivalent of prime-time TV promotion.
Allard awoke at 4, got her equipment ready, brewed some tea and went online — for nearly seven hours, playing originals, Cranberries and Chris Isaak covers, and some wailing kazoo solos. By the end, she was tearful and seemed nearly delirious with joy. Her stream, which usually gets a few hundred watchers at a time, brought in 408 new subscribers and 1,659 followers, sending her over the 10,000 mark. (Top gaming accounts have well over five million followers.)
Speaking about an hour after her stream ended — and still not having eaten — Allard praised the generosity of her fans, whom she calls “dinos.” Their contributions, she said, net her a few thousand dollars a month.
She has an album and an EP on audio streaming platforms. Do they bring in any money? “Oh, goodness no,” she said.
For both musicians and Twitch executives, it is no coincidence that such an artist-friendly system was developed far from the reach of the music industry.
In the gaming world, the line between performer and fan is blurred, and all contact and communication can be monetized through the sale of virtual goods. Gamers’ devotion can be staggering. According to Midia Research, which studies online media, the average Twitch user spends nearly 16 hours a week on the platform, compared to about six hours each for users of YouTube and Spotify, and two for TikTok.
Sara Clemens, Twitch’s chief operating officer, and a former top executive at Pandora — a company that took severe criticism from artists over its payout rates — said that the transition to digital music platforms stripped fandom of most of its visual emblems of tribal belonging, and paradoxically ended up separating fans from the artists they love, even as their music became more accessible than ever. Twitch, Clemens said, restores that connection.
“Emotes and subscriber badges on Twitch are about membership,” Clemens said. “They’re the new T-shirt, they’re the new tattoo.”
ONE SIGN OF Twitch’s success in challenging the status quo is that it is now in the music industry’s legal cross hairs.
Last year, as the pandemic sent musicians to Twitch in droves, the site was served with thousands of copyright infringement notices from record companies. Twitch has licenses that allow its users to perform songs live, but it generally does not have permission for the music contained in saved on-demand videos.
After receiving takedown notices, Twitch removed clips that contained unlicensed music, as required by law. But the company also responded with a surprising blog post in November in which it apologized — not to the complaining copyright holders, but to its armies of streamers. “We could have developed more sophisticated, user-friendly tools awhile ago. That we didn’t is on us,” the company wrote.
Music industry lawyers have kept up the pressure. This month, at the same time that it announced a copyright infringement lawsuit against the gaming platform Roblox, the National Music Publishers’ Association said it would continue serving takedown notices to Twitch.
“It’s inexcusable that they don’t just license their music platform, as other companies like YouTube, Facebook and TikTok do,” said David Israelite, the chief executive of the music publishers’ group.
A spokeswoman for Twitch said it is in discussions with music rights holders, and added that “we continue to work with them to establish potential approaches that would be appropriate for the Twitch service and our entire community.”
For many musicians, however, Twitch’s status as an industry outlier is exactly the point.
RAC, the producer and performer whose real name is André Allen Anjos, began using Twitch after his touring plans were scuttled by the pandemic. (He announced a new album and tour on March 11, 2020.) He streams from his home studio in Portland, Ore., and keeps a lively dialogue going with his viewer chat, joking and answering questions and shouting out friends and supporters by their alphanumeric handles.
That is standard Twitch etiquette. But RAC, 36, who has been outspoken in his opposition to the traditional music business, views Twitch as part of an evolving new model in which artists maintain control, have direct contact with their audiences and can experiment freely with pricing. As he sees it, Patreon, cryptocurrencies and NFTs are all key parts in music’s future, with his own career as example.
“The old model is just dead for me at this point,” RAC said. “I feel like we’re entering a new phase, and I see Twitch as being an integral part of that.”
TWITCH’S MUSIC STREAMS exploded during the pandemic. According to the company, music viewership has grown by 550 percent over the last year. Part of its branding outreach has been through deals with shuttered music venues, hosting streams by indie bands at clubs like Brooklyn Steel in New York. Those have helped keep the live infrastructure working when it was otherwise dead, said Jim Glancy of The Bowery Presents, the company behind Brooklyn Steel and other venues throughout the Northeast.
But while Glancy is positive about Twitch, he expressed a skepticism common among music insiders about livestreaming’s continuing role in the concert world, where in-the-flesh contact is everything.
“If you have an artist on tour playing 30 venues, and 18 of them are wired and trying to sell a stream but the artist is doing the same set every night, is that a business?” Glancy asked.
Still, Glancy expects livestreaming to be integrated with concerts, somehow, and other players are making the same bet. Live Nation is equipping more than 60 venues to allow streaming, and new players like Flymachine are planning concert-livestream hybrids whose social interactivity owes something to Twitch.
And the musicians? Heafy, of Trivium, said he expects viewership to go down a little as fans stay at home less. But he has already integrated Twitch into his working life to a degree that seems compulsive, and he is not ready to stop.
“I’m going to keep it to the same exact thing — 9 a.m. and 3 p.m., Monday through Friday,” he said. “Every show, every soundcheck, every vocal warm-up; every day off, me playing games in the hotel room.”
“I look at it as part of my life now,” he added. “And I want to keep doing this for as long as I can.”
Media Consumers may be Reaching Limit of Streaming Services
A British research company may have discovered a magic number for American media consumers — and it’s seven.
That’s seven streaming services, paid or free, that consumers are willing to subscribe to before the hassle of keeping track of log-ins and passwords just becomes too much, said Maria Rua Aguete, senior research director at the London-based media consultancy OMDIA.
For the past few years, OMDIA has been monitoring the average number of streaming services that online homes subscribe to, and it rose steadily from around 5 to 7.23 in the United States last November. But the latest survey, completed in April, showed that number had dropped to 7.06.
“It’s not that people want to watch less,” Rua Aguete said. “But people don’t like to keep so many streaming services and log-ins.”
If true, if seven is indeed the number where many consumers will draw the line, that has enormous business implications. It increases the importance of aggregators, or services where people can seamlessly collect their services, and make it harder for new companies to get into the business. It can also be the impetus for big business deals, like last month’s announced merger between Discovery and WarnerMedia.
That’s also a boost to the established companies. Netflix is the most popular paid streaming service, with 57% of online households in the U.S. subscribing to it. Amazon Prime, Hulu, Disney+ and HBO Max are the other leaders, OMDIA said. YouTube is tops among free services.
Meanwhile, in broadcast television last week, NBC’s “America’s Got Talent” was the most popular program.
ABC was the most-watched network in prime time, averaging 3.1 million viewers. CBS had 2.9 million viewers, NBC had 2.7 million, Fox had 2 million, Univision had 1.3 million, Ion Television had 980,000 and Telemundo had 910,000.
TNT led the cable networks with an average of 2.13 million viewers. Fox News Channel had 2.12 million, ESPN had 2.1 million, MSNBC had 1.33 million and HGTV had 1.18 million.
ABC’s “World News Tonight” led the evening news ratings race, averaging 7.6 million viewers last week. The “NBC Nightly News” had 6.1 million and the “CBS Evening News” had 4.8 million.
For the week of June 7-13, the most popular prime time programs, their networks and viewerships:
1. “America’s Got Talent,” NBC, 7.22 million.
2. “60 Minutes,” CBS, 6.51 million.
3. “Celebrity Family Feud,” ABC, 4.84 million.
4. NBA Playoffs: Phoenix at Denver (Sunday), TNT, 4.22 million.
5. NBA Playoffs: Utah at L.A. Clippers (Saturday), ABC, 4.11 million.
6. “New Amsterdam,” NBC, 4.1 million.
7. NBA Playoffs: L.A. Clippers at Utah (Thursday), ESPN, 4.07 million.
8. “NCIS,” CBS, 4 million.
9. “The Good Doctor,” ABC, 3.99 million.
10. NBA Playoffs: Phoenix at Denver (Friday), ESPN, 3.96 million.
11. “United States of Al,” CBS, 3.92 million.
12. “America’s Funniest Home Videos,” ABC, 3.87 million.
13. “Young Sheldon,” CBS, 3.84 million.
14. NBA Playoffs: Brooklyn at Milwaukee (Thursday), ESPN, 3.79 million.
15. “The Bachelorette,” ABC, 3.77 million.
16. NBA Playoffs: Denver at Phoenix (Monday), TNT, 3.69 million.
17. “The Chase,” ABC, 3.66 million.
18. NBA Playoffs: Atlanta at Philadelphia, (Tuesday), TNT, 3.628 million.
19. NBA Playoffs: L.A. Clippers at Utah (Tuesday), TNT, 3.626 million.
20. “The Neighborhood,” CBS, 3.621 million.
ECJ Strengthens Protection of Copyrights in Online File Sharing Platforms
The European Court of Justice has strengthened the protection of copyrights for material on online file sharing sites. Anyone who makes copyrighted material available to other users on such a platform must expect their IP address, name and address to be forwarded to the rights holder. This is permissible under certain conditions, the highest EU court decided on Thursday in Luxembourg. However, the rights holder’s request for information must be justified, proportionate and not abusive.
Specifically, it is about so-called peer-to-peer networks, in which several computers are connected together with equal rights. This can be used as an online file sharing platform – for example, by dividing a video file into many snippets and storing it decentrally on different computers. The segments can, however, be reassembled by other members of the network without any problems, so that files protected by copyright can also be played back.
In the judgment, the ECJ emphasized that making a file accessible in this way is a “public reproduction” under EU law. On the other hand, it is “made accessible” if a user “with full knowledge of the consequences of his behavior” gives others access to protected works. EU law does not prohibit the systematic storage of IP addresses of peer-to-peer network users whose Internet connections are said to have been used for illegal activities. With the ruling, the court wanted to ensure a high level of protection for intellectual property, the court said.
Pai’s Legacy Lives on for Now as Biden Fails to Nominate Democrat to FCC
Biden's failure to fill empty FCC slot has consumer advocates increasingly worried.
President Joe Biden's failure to break the Federal Communications Commission's 2-2 partisan deadlock is reaching a "critical point," 57 advocacy groups wrote in a letter to Biden and Vice President Kamala Harris Friday.
Nearly five months after his inauguration, Biden has not yet nominated a Democratic FCC commissioner to fill the empty fifth slot. Democrat Jessica Rosenworcel has been leading the commission as acting chairwoman, but she lacks the majority needed to do anything opposed by the FCC's two Republicans, such as reinstating net neutrality rules and reversing former Chairman Ajit Pai's deregulation of the broadband industry. Even a step like raising the FCC's broadband-speed standard—which hasn't changed in over six years—will likely require a party-line vote because Republicans prefer a low speed standard for the FCC's annual report on how many Americans lack modern broadband access.
In early April, over 100,000 people signed a petition urging Biden to quickly break the FCC deadlock. Advocacy groups are frustrated that they are still waiting. Why Biden is taking so long is unclear.
"Given the legislative calendar and the diminishing number of days for hearings and confirmation votes, we have reached a critical point to guarantee the agency charged with ensuring affordable communications access can do its work during your administration," the groups wrote in their new letter.
Senate takes months to approve nominees
Senate Republicans cemented the 2-2 deadlock in December 2020 by confirming a Trump nominee during the lame-duck session before Democrats took control of the White House and Senate. If not for that confirmation, the FCC would have had a 2-1 Democratic majority heading into Biden's presidency.
Even if Biden were to nominate someone today, months could go by before the FCC has a Democratic majority because of the lengthy Senate confirmation process. For example, Biden nominated Lina Khan to the Federal Trade Commission on March 22, and she is expected to finally receive a confirmation vote on the Senate floor this week.
Even once there is a Democratic majority, complicated rule-makings could take a long time. During Obama's second White House term, FCC Chairman Tom Wheeler took office in November 2013, made his first net neutrality proposal in April 2014, and led a vote to impose net neutrality rules in February 2015. The rules took effect in June 2015.
Biden’s broadband goals
Biden in March proposed spending $100 billion to deploy high-speed Internet access to all who lack it in the US, with municipal broadband providers getting priority access to that funding. He also promised action to lower prices, saying that ISPs charge too much. But he's already cut his spending plan to $65 billion in the face of opposition from Republicans and private ISPs such as AT&T. They want to maintain the status quo in which private ISPs get most of the government funding and face little competition or pressure to lower their rapidly rising prices.
The advocacy groups' letter praised Biden for recognizing the problems in the US broadband market but said he must act more quickly:
The emergency funding allocated and deployed through COVID-19 economic relief legislation and the billions proposed in the American Jobs Plan to close the digital divide are crucial measures. Time and again, your administration has demonstrated a deep understanding that broadband access is critical to education, work, health and wellbeing, and can literally be a matter of life and death.
Yet, as we move toward the second half of 2021 with no nomination for the fifth and final commissioner, the Federal Communications Commission remains below full capacity, which is incompatible with the goal of delivering open, affordable and reliable high-speed broadband to every home. This is all the more urgent given the fact poor families and people of color are disproportionately disconnected from high-speed Internet access, compounding grave inequalities that were made worse during the pandemic.
Restoring net neutrality
The groups that signed the letter include Demand Progress, Fight for the Future, Free Press Action, Public Knowledge, Institute for Local Self-Reliance, Mozilla, National Consumer Law Center, National Digital Inclusion Alliance, National Hispanic Media Coalition, Consumer Reports, Electronic Frontier Foundation, Communications Workers of America, American Library Association, and various others.
The groups told Biden that a fifth commissioner will allow the FCC to "reclassify broadband Internet access as a Title II service to ensure fair and equitable access for everyone and to reinstate strong net neutrality protections." A 3-2 Democratic majority would also be able to "remedy previous neglect of the Lifeline program that supports low-income access to communications; create rules to make our nation's networks more reliable and resilient; help guide the deployment of new broadband infrastructure built with federal dollars to make it as effective as possible; approve emergency waivers for E-rate funded infrastructure to be opened up for remote education; [and] meet the challenge of the 2018 Broadcast Ownership Quadrennial Review and halt the dangerous trend towards consolidated ownership in broadcasting by reasserting principles of localism, competition, and ownership diversity."
The letter concluded:
The FCC, as an expert agency with a mandate from Congress, has the singular ability to act as an empowered advocate to ensure affordable and reliable communications for all. The pandemic showed us the unshakable image of children doing their classwork from fast-food parking lots using borrowed WiFi. We cannot let those students or any family wait any longer. We urge the administration to not lose any more time and to nominate a fifth commissioner who is dedicated to bringing open, affordable and reliable Internet access to all and fulfilling all of these vital goals.
Microsoft’s Smith Says Secret Subpoenas Hurt U.S. Tech Companies
Smith said he expects to see additional regulation on the biggest technology companies in both the U.S. and Europe.
Emily Chang and Dina Bass
Microsoft Corp. President and Chief Legal Officer Brad Smith criticized secret data subpoenas sent by the government to cloud providers like his company and Apple Inc., saying gag orders on requests for personal information undermine freedoms and are hurting U.S. technology companies in Europe.
Last week the New York Times reported that during the administration of former President Donald Trump , the U.S. Department of Justice demanded records from Apple relating to two Democrats on the U.S. House Intelligence Committee. CNBC reported Microsoft received a confidential request for the personal emails of a Congressional staffer. Both companies were under nondisclosure orders that prevented them from talking about or alerting the subjects of the data seizures.
The U.S. government should change the rules so that people whose data is being demanded can be informed and choose whether to file a legal challenge to the subpoenas, Smith said Monday in an interview with Bloomberg Television. Microsoft in 2016 filed a case against the DOJ related to the gag orders, and a year later the department issued new guidelines it said would scale back the practice of these kinds of confidential requests.
Microsoft President Brad Smith speaks with Emily Chang on “Bloomberg Technology.”
“If we fail to do so, we undermine longstanding fundamental freedoms in the country and, frankly, for those of us in the tech sector, we’re put in the middle,” Smith said. “This should be an issue where the government has to go most of the time to the individuals whose information they are seeking.”
It’s a concern that has been raised with the Biden administration by European leaders, Smith said. “They want to see new assurances and safeguards that the U.S. government isn’t going to go to a U.S. court to ask a U.S. company to turn over data that belongs to Europeans, and until we get that sorted out it is basically holding back in our view the tech sector in Europe.”
In the interview, Smith said he expects to see additional regulation on the biggest technology companies in both the U.S. and Europe. Last week, House Democrats and Republicans introduced a series of bills that would place significant new constraints on how tech platforms run their businesses and give antitrust enforcers more legal authority. One proposal would require Amazon.com Inc., Apple and other U.S. technology giants to sell or exit key businesses. Smith said aspects of some of the bills “absolutely” would apply to Microsoft. Still, other parts mainly relate to some of the Redmond, Washington-based company’s rivals.
“In many ways where this is going is a particular focus on technology platforms that serve as gatekeepers -- they not only serve as a platform like an operating system, but people need to go through them to sell their commerce, whether it’s a product that’s on Amazon, or an app, say, in the Apple App Store, or through a service like Google search,” he said. “That’s where we’re going to see more and more government focus.”
Smith also said Microsoft, the world’s largest software maker, will continue to engage with co-founder Bill Gates on certain issues, if that contact can be handled responsibly. In the wake of Gates’s announcement that he and his wife, Melinda French Gates, are divorcing, reports have surfaced about potentially inappropriate conduct by Gates toward Microsoft employees.
The company has said it received a complaint in 2019, while Gates served on Microsoft’s board, that he attempted to start a romantic relationship with an employee in 2000. The Microsoft board investigated, a probe that wasn’t concluded because Gates opted to step down as a director last year. Gates still serves as an adviser to Microsoft Chief Executive Officer Satya Nadella, and in that capacity he participates in occasional product reviews, including in meetings with other employees.
“You’ll see us continue to talk to Bill in an appropriate way on issues that matter,” Smith said, citing the example of climate change -- Microsoft has an aggressive carbon-reduction goal, and Gates has written a book about the topic and is investing billions in the industry. “Where there are opportunities for us to work together in an appropriate way, in a way that’s sensitive to all of the issues that people have raised, we will continue to benefit from his advice.”
Germany Seeks to Fine Operators of Telegram Messenger App
German authorities have launched proceedings against Telegram that could see the messenger app’s operators fined for failing to abide by laws requiring social media sites to police their users’ actions.
German magazine Der Spiegel reported over the weekend that officials believe use of the Telegram app has reached a threshold where it can be treated in the same way as Facebook, Twitter and TikTok when it comes to requiring cooperation with German authorities.
A Justice Ministry spokeswoman confirmed Monday that authorities have written to Telegram’s operators in the United Arab Emirates over its failure to provide a channel for raising complaints and a contact person in Germany.
“The company now has the opportunity to respond,” the spokeswoman, Rabea Boennighausen, told reporters in Berlin.
Der Spiegel reported that the company could face fines of up to 5.5 million euros ($6.7 million) if it doesn’t comply with the requirements.
Telegram didn’t immediately respond to a request for comment.
Telegram, which was founded by Russian brothers Nikolai and Pavel Durov, has grown in popularity in Germany in recent years, including among right-wing groups and those opposed to the government’s response to the coronavirus pandemic.
The Germany parliament passed the Network Enforcement Act in 2017 with the stated goal of ensuring that the country’s existing limits on speech, including the long-standing ban on Holocaust denial, can be enforced online.
Opponents have argued that the law risks stifling free speech.
Security Flaw Found in 2G Mobile Data Encryption Standard
Cybersecurity researchers in Europe say they have discovered a flaw in an encryption algorithm used by cellphones that may have allowed attackers to eavesdrop on some data traffic for more than two decades.
In a paper published Wednesday, researchers from Germany, France and Norway said the flaw affects the GPRS - or 2G - mobile data standard.
While most phones now use 4G or even 5G standards, GPRS remains a fallback for data connections in some countries.
The vulnerability in the GEA-1 algorithm is unlikely to have been an accident, the researchers said. Instead, it was probably created intentionally to provide law enforcement agencies with a “backdoor” and comply with laws restricting the export of strong encryption tools.
“According to our experimental analysis, having six correct numbers in the German lottery twice in a row is about as likely as having these properties of the key occur by chance,” Christof Beierle of the Ruhr University Bochum in Germany, a co-author of the paper, said.
The GEA-1 algorithm was meant to be phased out from cellphones as early as 2013, but the researchers said they found it in current Android and iOS smartphones.
Cellphone manufacturers and standards organizations have been notified to fix the flaw, they said.
Newly Discovered Vigilante Malware outs Software Pirates and Blocks Them
Most malware tries to steal stuff. Vigilante, by contrast, takes aim at piracy.
A researcher has uncovered one of the more unusual finds in the annals of malware: booby-trapped files that rat out downloaders and try to prevent unauthorized downloading in the future. The files are available on sites frequented by software pirates.
Vigilante, as SophosLabs Principal Researcher Andrew Brandt is calling the malware, gets installed when victims download and execute what they think is pirated software or games. Behind the scenes, the malware reports the file name that was executed to an attacker-controlled server, along with the IP address of the victims’ computers. As a finishing touch, Vigilante tries to modify the victims’ computers so they can no longer access thepiratebay.com and as many as 1,000 other pirate sites.
Not your typical malware
“It’s really unusual to see something like this because there’s normally just one motive behind most malware: stealing stuff,” Brandt wrote on Twitter. “Whether that’s passwords, or keystrokes, or cookies, or intellectual property, or access, or even CPU cycles to mine cryptocurrency, theft is the motive. But not in this case. These samples really only did a few things, none of which fit the typical motive for malware criminals.”
Once victims have executed the trojanized file, the file name and IP address are sent in the form of an HTTP GET request to the attacker-controlled 1flchier[.]com, which can easily be confused with the cloud-storage provider 1fichier (the former is spelled with an L as the third character in the name instead of an I). The malware in the files is largely identical except for the file names it generates in the web requests.
Vigilante goes on to update a file on the infected computer that prevents it from connecting to The Pirate Bay and other Internet destinations known to be used by people trading pirated software. Specifically, the malware updates Hosts, a file that pairs one or more domain addresses to distinct IP addresses. As the image below shows, the malware pairs thepiratebay.com to 127.0.0.1, a special-purpose IP address, often called the localhost or loopback address, that computers use to identify their real IP address to other systems.
By mapping the domains to the local host, the malware ensures that the computer can no longer access the sites. The only way to reverse the blocking is to edit the Hosts file to remove the entries.
Brandt found some of the trojans lurking in software packages available on a Discord-hosted chat service. He found others masquerading as popular games, productivity tools, and security products available through BitTorrent.
There are other oddities. Many of the trojanized executables are digitally signed using a fake code signing tool. The signatures contain a string of randomly generated 18-character uppercase and lowercase letters. The certificate validity began on the day the files became available and is set to expire in 2039. Additionally, the properties sheets of the executables don’t align with the file name.
When viewed through a hex editor, the executables also contain a racial epithet that’s repeated more than 1,000 times followed by a large, randomly sized block of alphabetical characters.
“Padding out the archive with purposeless files of random length may simply be done to modify the archive’s hash value,” Brandt wrote. “Padding it out with racist slurs told me all I needed to know about its creator.”
Vigilante has no persistence method, meaning it has no way to remain installed. That means people who have been infected need only to edit their Hosts file to be disinfected. SophosLabs provides indicators of compromise here.
Ukraine Police Seize Cash in Raids on Major Ransomware Gang
Jim Heintz and Frank Bajak
Ukrainian police have carried out nearly two dozen raids targeting alleged associates of a Russian-speaking ransomware gang it blamed for a half billion dollars in cyberattacks and extortion that hit the United States and South Korea especially hard.
A police statement on Wednesday said 21 raids were conducted on the homes of suspects affiliated with the Clop ransomware syndicate in Kyiv and elsewhere, with computer equipment and about 5 million hryna ($185,000) in cash seized.
Six defendants carried out attacks on U.S. and Korean companies — for which they face up to eight years in prison for violating computer crime and money-laundering laws, the statement said. It did not say whether any suspects were detained, and said the investigation was ongoing. The Clop dark web leak site remained online hours after the raids were announced, suggesting the gang’s internet infrastructure might still be intact.
The most potent ransomware gangs operate with Kremlin tolerance, based out of reach of Western law enforcement. Russia neither prosecutes not extradites them. Trying to persuade its president, Vladimir Putin, to change that was a priority of U.S. President Joe Biden in their meeting Wednesday in Geneva. It’s not clear whether Biden made any headway.
Video posted by the Ukrainian police showed Korean police taking part in this week’s raids, where cash, cell phones and cars were also seized. The police statement said four Korean companies hit by the gang with the ransomware — which scrambles data that can only be unlocked with a software key obtained by paying the criminals — had paid ransoms. It said the gang targeted U.S. universities, including Stanford Medical School and the University of Maryland.
Wednesday’s raid “is a continuation of the much more aggressive posture that law enforcement has taken against ransomware gangs this year,” said analyst Allan Liska of the cybersecurity firm Recorded Future. “It really does feel like law enforcement has figured out how to attack the ransomware scourge, and hopefully, will slow down the attacks.”
After last month’s attack on the Colonial Pipeline affected fuel shipments to the U.S. East Coast, the White House began taking ransomware criminals as seriously as it does terrorists, and many are now lying low. The author of the Colonial attack went into hiding and a different group, Avaddon, suddenly announced its retirement. Cybersecurity analysts caution, however, that such retirements are not new and can be a ruse to thwart law enforcement while the criminals reconstitute and create new products with different brands.
And while some arrests have been made and ransomware infrastructure disabled in recent months, no kingpins have been snared.
Clop is among the more prolific ransomware gangs, known for extorting victims by threatening to publish data stolen from them. It has published the names of 65 victims to its dark web extortion site since August, said Liska.
In some cases, Clop has extorted victims with data it may not have obtained directly but purchased instead from third party cyberthieves. It’s what security researchers suspect happened in the case of the Universities of Colorado and Miami, the rail transport company CSX Corporation, the Kroger grocery and pharmacy chain, the Canadian aircraft maker Bombardier and the prominent law firm Jones Day. That data was stolen in the hack of a software tool made by the California firm Accellion, used to manage large email attachments.
Bajak reported from Boston
US Antivirus Software Creator Fights Extradition from Spain
Detained antivirus software entrepreneur John McAfee testified in a Spanish court Tuesday as part of his fight against extradition to the United States, where he is wanted on tax-related criminal charges that carry a prison sentence of up to 30 years.
McAfee, 75, appeared from prison via videolink at a hearing in Spain’s National Court. He argued that the charges against him are politically motivated and said he would spend the rest of his life in prison if he was returned to the United States, according to a report by private Spanish news agency Europa Press.
A Spanish judge is set to rule in coming days on whether he should be extradited.
McAfee was arrested last October at Barcelona’s international airport on a warrant issued by Tennessee. A judge ordered at that time that McAfee should be held awaiting the outcome of a hearing on extradition.
Tennessee prosecutors have charged McAfee with evading taxes after failing to report income made from promoting cryptocurrencies while he did consultancy work, as well as income from speaking engagements and selling the rights to his life story for a documentary.
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