Peer-To-Peer News - The Week In Review - July 31st, '04

[JackSpratts]

Quotes Of The Week

"[We are] stunned that RealNetworks has adopted the tactics and ethics of a hacker to break into the iPod." – Apple Computer


"They have been saying that Blockbuster would disappear since it started in the mid-1980's, but these new technologies are always additive." - Scott Hettrick


"Disney recently provoked an uproar when it prevented its subsidiary Miramax from distributing Michael Moore's film Fahrenheit 9/ 11. As a senior Disney executive told The New York Times: 'It's not in the interest of any major corporation to be dragged into a highly charged partisan political battle.' Follow the logic, and you can see what lies ahead: If the only media companies are major corporations, controversial and dissenting views may not be aired at all.

"Naturally, corporations say they would never suppress speech. But it's not their intentions that matter; it's their capabilities. Consolidation gives them more power to tilt the news and cut important ideas out of the public debate. And it's precisely that power that the rules should prevent." – Ted Turner









Judge Blocks Sales Of Unlicensed DVD Chips
John Borland

A California judge has ordered a multimedia chipmaker to stop selling versions of its products that were used in DVD-copying devices.

The Motion Picture Association of America said Monday that it had found chips from ESS Technology, based in Fremont, Calif., inside a device that allowed DVDs to be copied. Los Angeles County Superior Court Judge Maureen Duffy-Lewis issued an order Friday that blocked the manufacturer from selling its chips to any other device maker producing similar products.

"By selling chips to unlicensed manufacturers, ESS was effectively enabling wholesale piracy," Dan Robbins, the MPAA's chief technology counsel, said in a statement.

The case is part of Hollywood's ongoing battle to keep DVD-copying technology off the market and the Internet, despite widespread availability of underground software that will break through the discs' copy protection.

Earlier in the year, the MPAA successfully stopped the sale of 321 Studios' DVD X Copy, which had sold nearly 1 million copies online and in retail outlets like CompUSA. Previously, it had sued to stop the distribution of DeCSS, code that can be used to work around DVD encryption.

Any hardware manufacturer that makes DVD players needs to have permission from a Hollywood technology group called the DVD Copy Control Association in order to be able to decrypt the information stored on DVDs. ESS' customer, unnamed by the MPAA, did not have that right, the group said.
http://news.com.com/2100-1025-5284190.html


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Reverse engineered encryptions

RealNetworks Says Files Can Play on iPod
Allison Linn

SEATTLE - RealNetworks Inc. says it has created technology that allows songs purchased through its online music services to be played on Apple Computer Inc.'s popular iPod
player, just a few months after complaining that Apple was rebuffing attempts to form an alliance.

In an interview Friday, RealNetworks chief executive Rob Glaser said he did not know how Apple would react to the new technology. Apple, based in Cupertino, Calif., did not return numerous phone calls from The Associated Press seeking comment.

Glaser said the new system, called Harmony Technology, will let people securely transfer music bought using RealNetworks' music download services to an iPod or virtually any other portable music player.

Previously, music purchased through RealNetworks' music download services could most easily be played on devices that supported its copyright protection technology. By the same token, the easiest way to get digital music onto the iPod player was through Apple's iTunes Music Store, which uses its own system. The same held true for devices that supported Microsoft's Windows Media Player anti-piracy technology.

Microsoft said it could not immediately comment on the system.

Glaser said the new the system works by essentially translating the various anti-piracy technologies, to make the players' systems compatible with RealNetworks' system. RealNetworks said it was not concerned that the system would be illegal.

"We are making it so that consumers can buy music once and play it anywhere," Glaser said.

A test version of Harmony will be available Tuesday on Real's Web site.

In April, Apple chairman Steve Jobs rebuffed Glaser's request for a meeting to discuss an alliance between the companies, prompting complaints from RealNetworks representatives about why Apple didn't want to make its popular system more open.

There is already a way to make songs from RealNetworks' online music services play on the iPod, but it is cumbersome. To do so, a user would have to burn the songs from a computer to a CD, download them back onto the computer in a different format and then put them on the player.

Phil Leigh, an analyst with Inside Digital Media in Tampa, Fla., said he was surprised to hear that Real had developed the technology, since Apple has been careful about guarding its popular - and proprietary - system.

He said the new system could be a potential boon for RealNetworks, because customers would be able to buy whatever player they want without worrying about whether it would work with Real's service. But he said it would only be a success if it was easy and reliable.

"The question is, 'How well does it work?'" he said.
http://www.siliconvalley.com/mld/sil...al/9242507.htm


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Study: Song Downloads To Hit A High Note

Music downloads could be on an upswing this year.
Dinesh C. Sharma

Sales of digital tunes in 2004 in the United States will reach $270 million, more than double the takings from the previous year, according to a report released by JupiterResearch on Monday.

That revenue will rise to $1.7 billion, or 12 percent of total consumer spending on music, by 2009, the research firm projected.

While healthy sales of digital downloads have brought cheer to the U.S. music industry, which has seen four years of sliding sales for compact discs, the growth in the niche is not enough to make up for the shortfall, JupiterResearch said.

In the short term, downloading will continue to be used by consumers as a way to check out music before buying a CD, the report's authors said. In the longer term, they predict, revenue from digital subscription services will outgrow revenue from digital downloads.

"The so-called celestial jukebox is in sight," David Card, a senior analyst at JupiterResearch, said in a statement. "But for now, it will appeal to music aficionados. The U.S. music industry must manage digital music as one of a series of incremental revenue streams, one that is in the same scale as licensing (like ring tones, games and advertising)."

Shipments of MP3 players in the United States will more than double this year to more than 5 million and will continue to rise at that rate for the next several years, JupiterResearch said. Hard drive-based, low-end devices will drive the growth, as 77 percent of buyers of portable music players surveyed by the research firm said they would want no more than 1,000 songs on a player at any given time.

The digital music market is dominated by Apple Computer's iPod player, which is linked to an online music store, iTunes. On Monday, RealNetworks released software, named Harmony, that enables people to play music from its downloads store on iPods. The move gets around Apple's refusal in the past to provide licenses to companies looking to make their software compatible with Apple's device.
http://news.com.com/2100-1027-5284030.html


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EDonkey Carts Load Of Criticism
Jefferson Graham

Sam Yagan's critics call him a pirate, an illegal operator and an encourager of child pornography because of his free online file-swapping service.

Yagan begs to differ. He's the president of New York- based MetaMachine, owner of eDonkey, where the latest music and movies are available at no charge. And all he wants is the entertainment industry to stop fighting him and instead use his giant audience — an average 2.2 million — to sell media with him. But on his terms.

"The peer-to-peer community is massive," he says. "Show me another technology on this scale that's been litigated or legislated out of business. You can't make us go away."

Yet some in Congress hope to do just that. The Senate Judiciary Committee held hearings Thursday to discuss a bill aimed at making peer-to-peer companies directly liable for copyright infringement. The bill is a response to a recent court win by P2P companies Grokster and Morpheus that said they weren't liable for copyright infringement — but their users were. Record labels and Hollywood studios are appealing the decision.

Bolstering the bill are its many high-profile co-sponsors, including Sen. Majority Leader Bill Frist, R-Tenn., Sen. Minority Leader Tom Daschle, D-S.D., and Hillary Rodham Clinton, D-N.Y.

Opponents include technology companies Intel, Google, Yahoo and Cnet Networks. They say the bill is written so broadly it could make them liable for inducing consumers to engage in copyright infringement — not just the P2P networks.

If the bill passes, "We'd have to figure out whether we need to close down (or) move abroad and keep doing what we're doing," Yagan says.

Unlike competitors, eDonkey is incorporated in New York and pays taxes here. That should account for something, Yagan says. (Kazaa is incorporated on the small island of Vanuatu; Grokster is headquartered in Nevis,West Indies; and Earthstation 5 is run from the Jenin refugee camp in Palestine.)

Kazaa is being sued by the Recording Industry Association of America and its international counterparts. The RIAA this week settled its lawsuit against Israel's iMesh, one of the longest-running P2P firms, since 1999, for $4.1 million, and the company promises to take down unauthorized files by year's end.

Yagan calls it a "good sign" that the labels made a deal with a P2P company, but says, "I'm curious to know if there will be any files shared and downloaded for free. How will iMesh keep their user base if they do this?"

He has offered to sell licensed music and movies on eDonkey. But Hollywood and the record labels aren't interested because he would put licensed content next to free stuff. Yagan says his audience would disappear overnight if he did it any other way. However, RIAA President Cary Sherman says, "Financially supporting a network where 99% of the traffic is illegal does not make sense."

Yagan hears the word "illegal" often, but he doesn't agree with the assessment. "The software provided by P2P companies is not illegal," he says. He notes that copyright law says works cannot be infringed. "I produce software," Yagan says. "The software does not infringe. Are there people who use the technology to infringe? I'm sure there are."

Indeed, eDonkey is a haven of copyrighted material. Do a search for any current movie —Spider-Man 2, Anchorman, Fahrenheit 9/11 — and multiple copies pop up. Same for songs: all the latest from hitmakers Usher, Alicia Keys and Janet Jackson.

Internet measurement firm BigChampagne says 1 billion songs were available for free on P2P services in June, the same month Apple announced it had sold 100 million songs to users since April 2003.

A different start

Yagan majored in economics at Harvard University and co-founded study guide company Sparknotes, now owned by Barnes & Noble. An old friend of software designer Jed McCaleb, he signed on with eDonkey when McCaleb was looking for a way to make the service profitable.

The labels say P2P firms make millions of dollars from advertisers and spyware program vendors. Yagan says the money he reaps from advertising is a modest amount that pays for its five-person staff and 14th Street office in New York.

Unlike Kazaa, Grokster and other P2P firms, eDonkey users can choose whether to opt in for the ad programs. Most users agree to take them, Yagan says.

EDonkey has been downloaded by more than 50 million people and is even more popular in Europe, he says.

"Kazaa is on the decline," adds Andrew Parker, chief technology officer of London- based Internet measurement firm CacheLogic. "EDonkey is faster to use, has more content, doesn't have as much ad and spyware and is available in more languages, which is why it's so popular worldwide."

EDonkey's speed shows in its technology. It downloads bits of files simultaneously, and then seamlessly puts them into one file after they reach your computer. The name eDonkey is meant to spotlight its specialty in big files. The donkey is carrying a big load for you.

The donkey has nothing to do with politics. But ironically, while senators debate P2P's merits, their parties are supporting it in advertising. Both the Democratic and Republican national committees are advertising on eDonkey for President Bush's and Sen. John Kerry's presidential campaigns.
http://www.usatoday.com/tech/news/20...-edonkey_x.htm


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Judge: RIAA Can Unmask File Swappers
Declan McCullagh

A federal judge has handed a preliminary victory to the recording industry by granting its request to unmask anonymous file swappers accused of copyright infringement.

U.S. District Judge Denny Chin ruled Monday that Cablevision, which provides broadband Internet access in Connecticut, New Jersey and New York, can be required to divulge the identities of its subscribers sued over copyright violations.

This ruling is the latest decision to clarify what legal methods copyright holders may use when hunting down people who are trading files on peer-to-peer networks. Courts have spent the last few years grappling with how to reconcile Americans' right to be anonymous with the entertainment industry's own right to sue people who violate copyright law.

Chin, in Manhattan, said that the implicit guarantee of anonymity in the Bill of Rights is an insufficient shield in this case: "Such a person's identity is not protected from disclosure by the First Amendment."

Lawyers following the case said it is significant because Chin's ruling is the most detailed so far in any of the many "John Doe" lawsuits brought by the Recording Industry Association of America. Chin said that while file swapping "qualifies as speech" to some degree, the RIAA's member companies had overcome the hurdle posed by the First Amendment and could compel "disclosure of the Doe defendants' identities."

Paul Levy, an attorney at the nonprofit group Public Citizen, said that "the nice thing about the ruling is that (the judge) recognizes the First Amendment interests at stake here and he applies a balancing test." Levy, who filed a friend-of-the-court brief opposing the RIAA, said that Chin's analysis ensures that companies filing a copyright infringement lawsuit must prove they have a real case and aren't merely on a fishing expedition for someone's name.

Stanley Pierre-Louis, a senior vice president for legal affairs at the RIAA, said in an e-mail statement: "Judge Chin's ruling makes it abundantly clear that those who engage in copyright infringement over the Internet, whether on peer-to-peer networks or otherwise, should not expect to remain anonymous."

Investigators working with the RIAA had traced the Internet addresses of 40 suspected peer-to-peer pirates to Cablevision's network. RIAA lawyers sent a subpoena to Cablevision, which turned over the names of the "John Doe" defendants in February.

Chin said he was willing to consider the First Amendment aspects anyway--even after the names were divulged--because the RIAA could have been "ordered to return the information and prohibited from using it" if the outcome of Monday's ruling had been different.

Aden Fine, an attorney at the American Civil Liberties Union, said: "It's not a victory or a defeat. The important part of the opinion is that it emphasizes that accusations saying an individual is engaged in illegal speech don't mean the First Amendment provides no protections." The ACLU and the Electronic Frontier Foundation had also filed amicus briefs against the RIAA.

The RIAA turned to "John Doe" lawsuits after a federal appeals court ruled late last year that the association could no longer rely on the Digital Millennium Copyright Act's turbocharged subpoenas to unmask suspected pirates.

The DMCA contains provisions for unmasking file swappers without a judge's approval, but a federal appeals court in Washington, D.C., barred those methods from being used. While that decision is not technically binding on other areas of the country, it is influential. RIAA litigators appear to have decided that filing "John Doe" lawsuits with unnamed defendants is a less risky legal strategy.
http://zdnet.com.com/2100-1104-5285605.html


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French ISPs To Block File Sharing
Dinah Greek

The war against file sharers spreads across Europe. French ISPs have clubbed together to block P2P users from downloading music files.

Free, Noos, Club-Internet, Wanadoo and Tiscali France have all signed a government-backed charter to crack down on music swappers.

The charter, which has also been signed by record labels, will use a series of measures to stamp out music swapping.

The first step will be to send warnings to subscribers identified by music groups as having downloaded music illegally.

ISPs said they will remove copyrighted tracks posted by subscribers and pass on subscriber details to music labels when asked.

If all else fails, the ISPs said they would suspend internet accounts, but only on the decision of a judge, according to French news agency AFP.
http://www.vnunet.com/news/1156997


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My Beef With Big Media

How government protects big media--and shuts out upstarts like me.
Ted Turner

In the late 1960s, when Turner Communications was a business of billboards and radio stations and I was spending much of my energy ocean racing, a UHF-TV station came up for sale in Atlanta. It was losing $50,000 a month and its programs were viewed by fewer than 5 percent of the market.

I acquired it.

When I moved to buy a second station in Charlotte--this one worse than the first--my accountant quit in protest, and the company's board vetoed the deal. So I mortgaged my house and bought it myself. The Atlanta purchase turned into the Superstation; the Charlotte purchase--when I sold it 10 years later--gave me the capital to launch CNN.

Both purchases played a role in revolutionizing television. Both required a streak of independence and a taste for risk. And neither could happen today. In the current climate of consolidation, independent broadcasters simply don't survive for long. That's why we haven't seen a new generation of people like me or even Rupert Murdoch--independent television upstarts who challenge the big boys and force the whole industry to compete and change.

It's not that there aren't entrepreneurs eager to make their names and fortunes in broadcasting if given the chance. If nothing else, the 1990s dot-com boom showed that the spirit of entrepreneurship is alive and well in America, with plenty of investors willing to put real money into new media ventures. The difference is that Washington has changed the rules of the game. When I was getting into the television business, lawmakers and the Federal Communications Commission (FCC) took seriously the commission's mandate to promote diversity, localism, and competition in the media marketplace. They wanted to make sure that the big, established networks--CBS, ABC, NBC--wouldn't forever dominate what the American public could watch on TV. They wanted independent producers to thrive. They wanted more people to be able to own TV stations. They believed in the value of competition.

So when the FCC received a glut of applications for new television stations after World War II, the agency set aside dozens of channels on the new UHF spectrum so independents could get a foothold in television. That helped me get my start 35 years ago. Congress also passed a law in 1962 requiring that TVs be equipped to receive both UHF and VHF channels. That's how I was able to compete as a UHF station, although it was never easy. (I used to tell potential advertisers that our UHF viewers were smarter than the rest, because you had to be a genius just to figure out how to tune us in.) And in 1972, the FCC ruled that cable TV operators could import distant signals. That's how we were able to beam our Atlanta station to homes throughout the South. Five years later, with the help of an RCA satellite, we were sending our signal across the nation, and the Superstation was born.

That was then.

Today, media companies are more concentrated than at any time over the past 40 years, thanks to a continual loosening of ownership rules by Washington. The media giants now own not only broadcast networks and local stations; they also own the cable companies that pipe in the signals of their competitors and the studios that produce most of the programming. To get a flavor of how consolidated the industry has become, consider this: In 1990, the major broadcast networks--ABC, CBS, NBC, and Fox--fully or partially owned just 12.5 percent of the new series they aired. By 2000, it was 56.3 percent. Just two years later, it had surged to 77.5 percent.

In this environment, most independent media firms either get gobbled up by one of the big companies or driven out of business altogether. Yet instead of balancing the rules to give independent broadcasters a fair chance in the market, Washington continues to tilt the playing field to favor the biggest players. Last summer, the FCC passed another round of sweeping pro-consolidation rules that, among other things, further raised the cap on the number of TV stations a company can own.

In the media, as in any industry, big corporations play a vital role, but so do small, emerging ones. When you lose small businesses, you lose big ideas. People who own their own businesses are their own bosses. They are independent thinkers. They know they can't compete by imitating the big guys--they have to innovate, so they're less obsessed with earnings than they are with ideas. They are quicker to seize on new technologies and new product ideas. They steal market share from the big companies, spurring them to adopt new approaches. This process promotes competition, which leads to higher product and service quality, more jobs, and greater wealth. It's called capitalism.

But without the proper rules, healthy capitalist markets turn into sluggish oligopolies, and that is what's happening in media today. Large corporations are more profit-focused and risk-averse. They often kill local programming because it's expensive, and they push national programming because it's cheap--even if their decisions run counter to local interests and community values. Their managers are more averse to innovation because they're afraid of being fired for an idea that fails. They prefer to sit on the sidelines, waiting to buy the businesses of the risk-takers who succeed.

Unless we have a climate that will allow more independent media companies to survive, a dangerously high percentage of what we see--and what we don't see--will be shaped by the profit motives and political interests of large, publicly traded conglomerates. The economy will suffer, and so will the quality of our public life. Let me be clear: As a business proposition, consolidation makes sense. The moguls behind the mergers are acting in their corporate interests and playing by the rules. We just shouldn't have those rules. They make sense for a corporation. But for a society, it's like over-fishing the oceans. When the independent businesses are gone, where will the new ideas come from? We have to do more than keep media giants from growing larger; they're already too big. We need a new set of rules that will break these huge companies to pieces.
http://www.washingtonmonthly.com/fea...07.turner.html


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Skype Unveils Deals With Companies For Expansion Of Peer-To-Peer Phone Program
Matt Moore

STOCKHOLM, Sweden (AP) -- The creators of Skype, the peer-to-peer program that lets computer users make free calls to each other anywhere in the world, are going one step farther in their bid to compete with traditional telecom companies, releasing a new version that lets users dial regular phones from a computer.

Skype Technologies SA, a privately held Luxembourg-based company, said Friday that it had struck deals with providers COLT, iBasis, Level 3 and Teleglobe to launch SkypeOut, a soon-to-be-launched prepaid service.

Skype co-founder Niklas Zennstrom said SkypeOut would be released later this year, but didn't say when or how much it would cost users.

The basic Skype program, offered as a free download over the Internet, lets people use their computers as telephones to call others equipped with Skype software. It incorporates a technology known as Voice over Internet Protocol.

A similar version, Skype Plus, is planned for later this year, and will let people collect voice mail and receive calls from regular telephones. SkypeOut goes a step farther by letting Skype computers call regular phones.

"We will now move quickly and offer SkypeOut calls to landline and mobile phone numbers around the world," said Zennstrom, who also co- created the song-swapping program Kazaa.
http://www.mlive.com/newsflash/busin...lash-financial


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Plantronics Enters Partnership With Skype
Chandler Harris

SANTA CRUZ — Seeking to become the preferred headset maker in what could be the next communication technology phenomenon, Plantronics recently formed a partnership with Skype, an Internet telephone company that allows users to make phone calls anywhere in the world, free.

The agreement puts Plantronics as the preferred headset manufacturer for Skype and in the future a range of Plantronics headsets will be made available with a free trial of Skype’s premium services.

It took months for Plantronics executives to land a deal with the Luxembourg-based company, but in London Plantronics sealed the deal for exclusive licensing, marketing and distribution of headsets for Skype.

"When you combine voice and data you get a really powerful system," said Matt Miller, director of product marketing for Plantronics. "You can go into Starbucks and work on your laptop with wireless Internet, and you can use your PC to talk to anybody in the world at a coffee shop."

Skype was created by Niklas Zennstrom and Janus Friis, whose previous brainchild was Kazaa, the peer-to-peer file sharing network that has spurred lawsuits from the entertainment industry. Kazaa’s founders have since sold Kazaa and moved their peer-to-peer concept into the telecommunications field, where anyone with a computer and high speed connection can talk through a computer to any other Skype user in the world, without paying anything.

Since its inception in August 2003, Skype has been downloaded more than 12 million times by users from more than 170 countries. Skypes popularity has been growing faster than other popular programs such as Hotmail, Kazaa and instant messaging, said Kelly Larabe, Skype representative.

"Niklas talks about it all the time, that there’s been evolutions in phone technology, but there hasn’t been a major disruption until now," Larabe said.

Skype works much like Internet instant messaging. Users download the free software, select a user name, then create an address book of other Skype users. Whenever a person from the address book is online, Skype will notify other Skype users who are online.

Skype technology uses voice over Internet protocol, or VoIP, which records a voice, puts it into a digital packet, then sends it out over the Internet to be reassembled by another computer.

However, unlike traditional telephones that can call at any time, Skype calls can only be made only when two users are online at the same time. And for now, calls can only be made through computers without using traditional phone lines. But that is expected to change this summer when Skype plans to offer "Skype Out" where Skype users can call anyone on a regular phone line and pay for the minutes used. The charge for minutes used will be less than a traditional long distance telephone, Larabe said.

Plantronics is expecting the Skype phenomenon to continue to grow in popularity and that more handheld phones will be replaced by Plantronics headphones that plug into a computer.

Plantronics found through its own research that 58 percent of recent Plantronics communication headset users purchased a headset to have phone conversations across the Internet.

"With faster processors and much better software, Skype is making a very viable alternative to home phones, and you’re saving a lot of money," Miller said.
http://www.santacruzsentinel.com/arc...ries/02biz.htm


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RIAA: You Need To Get A Life!
John Ginn

The iPod people must make their stand against the recording industry

The following is a message to the Recording Industry Association of America, more commonly known as the RIAA: If I can't put it on my iPod, you've got nothing I want.

Wow, is that a simple concept, or what? That's right RIAA, if I can't put it on my iPod, it ain't happening, my friend. The CD is as dead as Marley's Ghost, get over it. The digital age is here; come on in, the water's fine.

It's been awhile since I've written about the RIAA. A year and a couple of months at least. In late April of 2003, I wrote about the launching of Apple's iTunes Music Store, in which I predicted the emergence of a whole new distribution model for the music industry. For years, the model had been in place to a certain degree: a large portion of music distribution had been turned into digital files being traded on peer to peer networks online. What was missing was the exchange of money in the transaction, a way for artists to get paid for the work they produce, and a way for them to protect, to the extent that it is possible, their ownership of their work.

Apple's iTunes store seemed to be the answer to many of these issues. The digital files it sold had digital rights protections included for artists, but they were also loosely structured enough that most "fair use" consumer issues would also be protected. It also gave consumers more control in that, with rare exceptions, they were allowed to download and pay for only the tracks that they wanted. No more having to buy a whole CD just to listen to one cut from the disc.

By just about any measure, the ITMS has truly been a revolutionary success. Its introduction spawned many imitators, but ITMS remains the market leader. Albums have debuted on ITMS, as well as exclusive bonus tracks. By April of 2004, in its first year, the store had moved 75 million songs; and with the recent addition of markets in Great Britain, France and Germany, the tally is closing in on 100 million songs.

But (you knew there was a but coming; there's always a "but" lurking around the corner in any discussion of the RIAA) the picture is not as rosy as I had hoped it would be. In my 2003 article, I foolishly declared that the RIAA's war against consumer trends was over. To a point I think that is still correct; it is hard to remember now what a sea change ITMS was. The RIAA had been fighting such a model to the bitter end.

But my idea that the RIAA was done fighting? Well, as Fonzie famously said in that Happy Days episode, "I was ... I was ... I was wrrrrrrrrrrrrr ..."

If anything, in the months following the opening of ITMS, the RIAA stepped up the battle even more, taking file traders to court, suing little kids in an appalling attempt to terrorize other little kids. Bullies, cowards!

Continuing their weird and unsupportable assertion that each and every downloaded file was a lost sale, they claimed that the kids (many of the kids having no money to spend) were costing them billions in lost profits. This despite plenty of counter evidence, some from the artists themselves, that file sharing actually increased sales by allowing fans to discover music they might otherwise have never heard.

The RIAA can crunch numbers all they want from now until Britney Spears records a tribute album to Paul Robeson, but they will never be able to produce a "lost revenue" number that actually makes sense. It's a waste of time, a downloaded file is not a lost sale, and can't be tallied as such. There are way too many variables left out of the equation: downloaded files that led to the listener to search out the CD and purchase it being the most obvious one, followed by downloaded files that the listener thought were so bad that they cleared it from their hard drive with all due speed. There are, no doubt, that portion of downloaders who have no intention ever of buying any music. Still, the "lost sale" scenario-building has so many logical fallacies built-in that it is literally pointless; and yet it seems to be the RIAA's overwhelming obsession. Surely it would be better to address the things that can be known?

Tops on that list is the one fact that consumers have consistently told the RIAA: CDs cost too much. They cost way too much. The price of CDs is the number one cause of any supposed "lost sales," and yet it is the one area that the RIAA refuses to address, preferring to obsess over non-numbers rather than genuine real-world numbers.

So what's all this have to do with your iPod, you ask? Thanks for asking and getting me back on track. Senate Bill S.2560 is what it's about, "A bill to amend chapter 5 of title 17, United States Code, relating to inducement of copyright infringement, and for other purposes; to the Committee on the Judiciary." Recently, Senator Orrin Hatch took the floor to introduce proposed changes that would make certain technology, software and hardware manufacturers liable for prosecution for the behavior of some of the people using their technology.

The theory here is that these companies are "inducing" children to break the law, thus causing irreparable harm to children. This is not satire on my part, this is the language Hatch uses again and again. He compares the technology companies to "Fagins" and the children as hapless little Oliver Twists, forced to do the bidding of the techies. "Honest, Guv'nah! ‘Twas he who made me do it. I'm just a poor ‘armless little urchin, I am."

You can read Hatch beating the metaphor yourself at http://thomas.loc.gov. Search S.2560 and follow a couple of links, and you'll find it. I'd print the actual link, but it's way too long. Suffice it to say that you always know someone's on their last desperate argument when they roll out the old weepy "Who will think of the children?" routine.

This is not to say that the bill can't do harm. In spite of Hatch's and the other bill sponsors' assertions to the contrary, the description of what exactly constitutes "inducement" does seem rather broad to my non- attorney eyes. It is easy to see where, given this law, the RIAA could use it as a weapon in court to sue pretty much whomever they wanted. Is Apple, with its iPod, inducing children to steal music? Let's take it to court to find out! Many articles have speculated that Apple could be forced to stop making the iPod.

As I said at the start, RIAA, and you really need to hear this, because this is not just me talking, if I can't put it on my iPod, then you've got nothing I want. If you are that worried about "the children (sob)" then quit suing children in court. This fantasy you have that you will maintain total control of music is delusional and harmful and not even in your best interest; nurture and build the market you have while there is still time!

And as to all the little Oliver Twists out there, I don't want to induce you to anything — stealing music is bad — however, given no other choice, by legislation that continues relentlessly to constrict your options, you need to fight like hell, fight ferociously like spitting-mad cornered wolverines, against corporate bodies like the RIAA who see you as nothing but soulless obeying consumerbots, and would have you defined as such in the law of the land.

Fight them, fight them!

http://www.gazettetimes.com/articles...ewind/ginn.txt


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Who's a Pirate? Russia Points Back at the U.S.
C. J. Chivers

ZHEVSK, Russia, July 24 - The bazaar in this industrial city shows why Western companies regard Russia as a land of piracy.

Bootlegged copies of new American movies - "King Arthur,'' "Troy'' and "Spider-Man 2'' - sell for $3. Photoshop CS, a $600 program in Western stores, fetches $2.75.

Markets like this, found throughout Russia, have been a longstanding subject of diplomatic complaint. Washington contends Russian intellectual-property pirates cost the United States more than $1 billion a year.

Now Russia is striking back. A Russian industry and product designer are asserting that the United States has been abetting intellectual-property pirates to suit its own needs, by directing copies of Russian merchandise around the world.

The complaint is not about software or music. It makes no mention of movies or video games. It is about the Kalashnikov assault rifle, the most prolific firearm ever made.

"We see a great number of products which are named after Kalashnikov, my name,'' said Mikhail T. Kalashnikov, the weapon's original designer. "They are buying Kalashnikovs from other countries,'' he added.

Since the collapses of the Taliban in Afghanistan and Saddam Hussein's army in Iraq, the United States has been purchasing or arranging the transfer of thousands of knockoffs of Kalashnikovs commonly referred to as AK-47's, to outfit new military and security forces in Kabul and Baghdad.

These rifles have not been made in Russia, where the arms industry holds patents for the weapon in several nations. Instead they have originated in weapons plants controlled by Eastern European states, each of which was a partner of Moscow's in Soviet days.

So begins an argument at once curious, impassioned and bizarre, involving the legacy of cold war influence jockeying, secretive arms deals, recent efforts to defeat modern Islamic insurgencies, and international business and patent law.

The automatic Kalashnikov, made in a factory here, is in many ways Moscow's Ford. It is a quintessential national product: extraordinarily successful, widespread, a name closely connected to the identity of a state.

It was designed by Mr. Kalashnikov, a former Russian tank sergeant, in classified Soviet weapons trials shortly after World War II, and was promptly embraced by Soviet soldiers for its simplicity and reliability under almost any condition. It is regarded as a weapon that rarely, if ever, fails.

Russian arms officials say that no other nation has a valid license to make the AK-47 and its many derivatives and clones, and that to defeat insurgents and terrorists, Washington has been encouraging violations of intellectual property rights. Russia is suffering losses in income, jobs and damage to the Kalashnikov name, the officials say, and would like the United States to shop for the weapons directly from here.

"We would like to inform everybody in the world that many countries, including the United States, have unfortunately violated recognized norms," said Igor Sevastyanov, who leads a division of Rosoboronexport, Russia's state-controlled arms export company. American officials confirm that non-Russian Kalashnikov rifles have been provided with American assistance to Afghanistan and Iraq. Sometimes the weapons have been transferred via purchases on international arms markets, they say, other times via the solicitation of donations from friendly states as a gesture of cooperation with the Bush administration's war and reconstruction efforts.

The officials also say that they are aware of the Russian complaints, which raise questions of provenance that remain unresolved.

"We have taken the position that there are important issues with respect to the production, intellectual property rights and conditions of export of these weapons, and it is important that we strengthen controls in all of these areas," a State Department official said. Officials from Rosoboronexport and Izhmash, the Russian company holding patents on the rifle, say American-coordinated transfers include Kalashnikov clones made in Romanian, Bulgarian and Hungarian plants that have continued to be sold despite Russian complaints.

Another transfer, arranged by the American-led Coalition Provisional Authority in Iraq last year, involved the purchase of Kalashnikovs from Jordan. The weapons were believed to be excess stock from the Jordanian army, and to have been manufactured years ago by the former East Germany, another State Department official said.

The transfers have been diplomatically delicate; the Jordanian deal drew complaints from across the political spectrum.

American business representatives have said that American-made rifles should be bought to preserve American jobs. Others questioned the wisdom of shipping more automatic rifles to countries already awash in such guns.

Congressman have asked why American forces did not save money by reissuing to friendly forces the thousands of Kalashnikov rifles confiscated in both wars.

(Last spring, journalists from The New York Times watched United States marines collect tens of thousands of mint-condition Kalashnikovs in a cache in a hospital in Tikrit. The weapons were still in their original packing crates.)

In spite of complaints, the transfers continued, American officials say, in part because the automatic Kalashnikov is inexpensive and requires less training to master than modern American rifles. Several officials noted that many young Iraqi and Afghan men already know how to use it.

Izhmash and Rosoboronexport agree with this position; their officials are even proud that the Pentagon prefers the Kalashnikov for its new allies.

But they say Washington's deals have come at the expense of Izhmash and Izhevsk, where mass production of the rifles began in 1949, and where orders and the work force have shrunk since the Soviet Union broke up in 1991.

More than 12,000 people worked on the gun lines then; roughly 7,000 work there today, and at fewer shifts, said Andrei Vishnyakov, an Izhmash official.

The officials noted that the low price of Kalashnikov knockoffs can make it impossible to sell the genuine item, a phenomenon resembling the underselling of software and DVD's, albeit on a different scale.

For example, the Jordanian rifles sold for about $60 each - less than one-fourth of the price of a new Kalashnikov from the Izhmash plant, according to Rosoboronexport data.

"They are selling these rifles at dump prices," said Alexander G. Likhachev, a former Izhmash director who is now an official with the state arms agency.

He added that Russia wants that business. "We are prepared to manufacture the genuine weapons, in big quantities, because we know there is a demand," he said.

The legal standing of Rosoboronexport's complaint is uncertain. American officials, analysts and trade representatives said issues surrounding each transfer would require intensive legal research to resolve.

The task would be daunting. In the 1950's, in a mix of collaborative revolutionary spirit and jockeying against the West, the Soviet Union began exporting the rifles and the technology to manufacture them to states in its sphere of influence. Ultimately, Moscow entered licensing agreements with 18 states, according to Rosoboronexport.

"We transferred and gave them all the technical documentation, all the know-how about the design," Mr. Kalashnikov, now 84, said in an interview at his dacha in the Russian woods. "Representatives of these countries came here. They studied our production line."

Moreover, once the rifle's utility became well known, another 11 countries began making derivatives and clones without Moscow's approval, the state agency said.

Russia says that all former licenses have expired. But to make this case, the old licenses would have to be studied, as would Izhmash's more recently acquired patents as well as intellectual property laws in each Kalashnikov-manufacturing state.

A third American official said several former Soviet-bloc countries that formerly made Kalashnikovs with Moscow's approval contend they retain rights to the weapon today. "There is a dispute among all the parties involved," the official said.

Still, whatever the legal merits, analysts agree: the complaint's symbolic power is great.

"I'm not a big fan of guns, but that said, if the creators of this intellectual property have rights to enforce, I really do hope they can get them enforced in every country," Eric Schwartz, a vice president of the International Intellectual Property Alliance, said in a telephone interview. "And I hope that the United States government would comply and set a good example."

The alliance represents American companies with products protected by copyright laws.

The complaint also faces the unrelenting realities of the market. After decades in production in plants in Asia, Africa, the Middle East and Europe, the automatic Kalashnikov has spread far beyond Izhevsk's reach.

Analysts estimate that 70 million to 105 million of the weapons have been made.

It has been used not only by more than 55 state armies, but also by the Viet Cong, militias in Beirut, Palestinian insurgents in Gaza City, guerrillas in Iraq and child soldiers in Asian and African states. A Kalashnikov is on the seal of Hezbollah and the flag of Mozambique. It features prominently in the symbolism of jihad.

Even the United States long ago entered in the Kalashnikov business, in the 1980's, when it surreptitiously bought Chinese and Egyptian Kalashnikovs for Islamic guerrillas battling the Red Army in Afghanistan.

American purchases of Kalashnikovs have continued intermittently since then. A few years ago, according to officials at the State Department and the Pentagon, Washington purchased Kalashnikovs for a Nigerian peacekeeping force in Sierra Leone.

With so many of the weapons in circulation, one analyst said Russia's complaint could prove to be an almost impossible fight.

Rosoboronexport's position is like "the Chinese saying they have a royalty right on every firearm, because that's where it all started with the invention of gunpowder 700 years ago," said Dr. Aaron Karp, a professor at Old Dominion University in Virginia who specializes in weapon proliferation issues.

Mr. Kalashnikov, who said the Russian versions of his rifle are superior, and who expressed deep fondness to Russian workers who have long made them, recognized the difficulties in the state agency's complaint.

He remembered that years ago President Boris N. Yeltsin vowed to defend the weapon from market infringement, to no avail. "President Yeltsin said he would do everything," Mr. Kalashnikov said. "But it's not so easy."
http://www.nytimes.com/2004/07/26/in...26russ.html?hp


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Year of the Blog? Web Diarists Are Now Official Members of Convention Press Corps
Jennifer 8. Lee

Jeralyn Merritt had expected the news to come by e-mail rather than by snail mail, otherwise known as the United States Postal Service.

But she had to rip, rather than click, to open the message informing her that she had received press credentials to cover the Democratic National Convention in Boston for her Internet Web log, or blog, at TalkLeft.com, where she offers a running commentary on political and criminal justice issues.

"A big smile broke out on my face and I just went 'Yeah!' " said Ms. Merritt, 54, who works as a criminal defense lawyer in Denver. "It was someone who was judging me on the work that I was doing for free over the last two years and found me worthy."

Even as many networks are reducing their coverage of the increasingly predictable political conventions, the political blogs, which have become a fruitful alternative for individual voices, have been ablaze over the prospect of officially covering conventions for the first time. Ms. Merritt is one of about three dozen bloggers who have been given press credentials for the Democratic convention in Boston, which begins Monday. Another, Ana Marie Cox from the Washington gossip site Wonkette.com, will be working as a correspondent for MTV.

Organizers of the Republican convention have said they plan to issue credentials to 10 to 20 bloggers.

"Whomever they decide to let through the gate is now the press," said Jay Rosen, a journalism professor at New York University who will attend the convention for his blog, PressThink.com, which appraises media coverage. "What the credential means to me is that someone just expanded the idea of the press a little bit."

If the 1952 Republican convention was the first television convention, and the 1924 conventions were the first radio ones, the 2004 election will be remembered because of them, the bloggers insist.
http://www.nytimes.com/2004/07/26/po...gn/26blog.html


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New 'Bourne' Helps Keep Pace Brisk at Box Office
Sharon Waxman

The summer box office continued to steam along at a rapid pace this weekend, with "The Bourne Supremacy" taking in an unexpected $53.2 million and the Michael Moore documentary "Fahrenheit: 9/11" passing the $100 million mark in its fifth week in release.

Despite numerous big-budget disappointments, the summer box office has totaled $2.8 billion so far, running ahead of last summer's pace by $200 million. "The Bourne Supremacy," a $75 million sequel to the 2002 thriller "The Bourne Identity" starring Matt Damon, capitalized on strong word of mouth and enthusiasm for the original. Universal, which produced the film, released a new DVD version of the original in time for the sequel's release.

Universal executives said they did not expect such a strong opening, which rivaled that of far more expensive summer fare. "Unbelievable," said Nikki Rocco, the head of distribution for Universal. "I knew it would be successful, we all felt the buzz, but still."

Universal's other major summer films, the $140 million "Van Helsing" and the $100 million "Chronicles of Riddick," have both been disappointments at the box office.

Meanwhile the anti-Bush documentary "Fahrenheit: 9/11" hit a new landmark this weekend when it surpassed $100 million at the box office, reaching $103.3 million. It was already by far the highest-grossing feature documentary in history, but the new benchmark put the film, which cost $6 million to make, among the summer's top-earning movies.

"This means to me that the film has reached beyond the hard-core, politically involved people, way into the mainstream," Michael Moore, who made the film, said in an interview. "For a film to make over $100 million, you can't exist in a niche."

Bob Weinstein, who distributed the movie independently with his brother, Harvey, said Mr. Moore's documentary "has beaten 10 movies with budgets of $100 million, which goes back to the oldest ideas — good movies, movies with ideas — that's what audiences go to see."

"They do not go to see the budget of a movie," he added.

Among the weekend's disappointments was the performance of Warner Brothers' action movie "Catwoman," which opened this weekend to just $17.1 million at the box office. The movie cost $90 million to make, and a profit appears unlikely.
http://www.nytimes.com/2004/07/26/movies/26BOXO.html


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Commentary: No Matter What You Call It, the Inducing Infringement of Copyright Act Spells Trouble
Fred Wilhelms

Though it’s not aimed solely, or even primarily, at streaming media, the "Inducing Infringement of Copyright Act" should give anyone involved with moving content across the Web cause for concern.

The name has been changed from "Inducement Devolves into Unlawful Child Exploitation Act" to "Inducing Infringement of Copyright Act," but the bill is still commonly known as INDUCE, and that’s what I will call it here. The original name of the bill reflects the political ruse commonly used to fight peer-to- peer networks: that they were a hotbed of child pornography. Unfortunately for Orrin Hatch, the original sponsor, there was a severe shortage of proof of this connection, and much stronger evidence that the great majority of child pornography is traded one-to-one on the Internet via email and IM rather than by P2P.

Under either name, this piece of legislation scares the hell out of me.

What the bill boils down to is giving copyright holders a virtual veto power over any technological development that could possibly be used to distribute copyrighted material. It gives them this power by establishing contributory liability under copyright law for anyone who creates, develops, implements, or distributes technology (hardware or software) that is capable of disseminating copyrighted material without compensation to the copyright holders.

Because of the broad language regarding what constitutes inducement in the current bill, this liability would extend to anyone who even advocates the use of this technology. A couple months ago, Senator Patrick Leahy, one of the bill’s co-sponsors, entered a statement in the Congressional Record lauding Phish (Vermont residents and Leahy constituents), in which he commented favorably on their policy of encouraging fans to record and trade copies of their live performances. This could be found to violate INDUCE.

Because Rock and Rap Confidential, a newsletter of cultural and political commentary, runs a regular column entitled "Home Downloading Tips" (which are actually brief reviews of new CD releases), they could also be found liable for inducing copyright infringement under the act if it is passed with the current language. And the newsletter doesn’t have the advantage of Congressional immunity available to Leahy (though that might not apply, as Article I, Section 6 of the Constitution excludes felonies from immunity).

All the promoters of the bill (including, to no one’s surprise, the MPAA and the RIAA) say the bill will only be used to go after the "bad actors" engaged in promoting out-and-out piracy, but the reach is actually far greater. INDUCE is an overt and direct attempt to overturn the Supreme Court decision in Sony v. Universal Studios, the "Betamax case." That case established that if a device has substantial non- infringing uses, its developers, manufacturers, and distributors could not be found guilty of contributory copyright infringement if the device was also used to make unlawful copies of copyrighted works. For 20 years, the Betamax case has provided a safe harbor for hardware and software creators, protecting them from pre-emptive litigation from the "Big Content" entities intended to drive them out of business by forcing them to incur immense legal fees to defend themselves from these attacks.

Putting the Hammer Down on Innovation

If the Betamax case had been decided the other way, the VCR would never have become a consumer device. No one (at least no one in the U.S.) would have invested time or money in streaming media or dozens of other advancements—including email, CD and DVD burners, large capacity disk drives, DSL connections, the iPod—that have myriad uses unrelated to copyright infringement because their potential "unlawful" use in infringement would have given Big Content the grounds to go after them in court. Even worse, under INDUCE, Big Content can actually go back and sue all the manufacturers and distributors of all the potentially infringing devices we already have. No one seriously thinks that anyone is going to sue Microsoft over Outlook (Microsoft is a member of the Business Software Alliance, which supports the bill), but if someone comes up with next-generation email software, they can count on getting in someone's crosshairs under INDUCE.

The Betamax case provided the legal foundation for the 9th Circuit to find recently that Grokster and Morpheus were not liable for contributory copyright infringement arising from the use of their network protocols for file sharing. Big Content can’t risk having the Supreme Court affirming that decision, so they have to change the ground rules before the case gets there.

The fundamental problem I have with P2P is that the creators don’t get paid for the distribution of their work, and I don’t really buy the arguments that this "free" dissemination encourages people to buy CDs, or that it builds a fan base, or that it promotes their live appearances. The hard numbers really don’t bear these contentions out. INDUCE, however, attacks the wrong part of the problem by attempting to stop technology in its tracks. As the VCR proved, the MPAA’s position in the Betamax case was shortsighted at best, and the current bill proves they and their allies haven’t learned anything in the intervening 20 years.

Rather than figure out how to get paid from the technology, Big Content is supporting INDUCE in order to stop the technology from coming to market. This is just stupid. INDUCE isn’t going to stop hardware and software developers outside the U.S. from working on new technology and bringing it to market. It is going to stop U.S. developers from participating in this growth, just as it will stop U.S. manufacturers, distributors, and retailers from achieving any share of the profits to be made, or employing the people who perform these functions, and no one else is going to be paid, either.

INDUCE gives Big Content a hammer to smash new technology. INDUCE gives Big Content a hammer to smash First Amendment rights to even talk favorably about new technology. If you are as unsettled by this idea as I am, I suggest you at least write someone about it.

Current co-sponsors of the bill are (alphabetically):
Sen. Lamar Alexander (TN)
Sen. Barbara Boxer (CA)
Sen. Hillary Rodham Clinton (NY)
Sen. Thomas A. Daschle (SD)
Sen. Bill Frist (TEN)
Sen. Lindsey O. Graham (SC)
Sen. Patrick J. Leahy (VT)
Sen. Paul S. Sarbanes (MD)
Sen. Debbie Stabenow (MI)

Orrin Hatch, the Chair of the Judiciary Committee, could call for more hearings, or could simply schedule the current bill for a vote. The final bill likely will be reported out of the Committee no later than September, to allow some time for House consideration before the end of the term. While I don’t expect the final version of the bill to be as sweeping in its scope as the current language, I don’t think we should expect much substantive difference, either.

Fred Wilhelms is an entertainment attorney in Nashville, representing recording artists and songwriters on royalty and benefit issues. His clients include Howard Tate, Bettye LaVette, Sam Moore, Mark Farner, and Paul Revere. He has testified before the California Senate Committee on the Entertainment Industry's royalty accounting practices.
http://www.streamingmedia.com/r/prin...ly.asp?id=8739


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Punk Rock's Warped Tour Wins Tech Sponsorsp
Scott Banerjee

Last winter, Vans Warped tour founder Kevin Lyman attended the Consumer Electronics Show to learn more about setting up backstage wireless Internet connections.

The connections he made, however, were of a different type. Technology companies, eager to tap into the Warped tour's young, tech-savvy fan base, have jumped on board as tour partners or sponsors. The 10th annual roadshow kicked off June 25 in Houston with a lineup including such bands as Bad Religion, Good Charlotte, NOFX, Thursday, New Found Glory, Simple Plan, The Vandals and Taking Back Sunday.

The tour's extensive sponsor list includes Memorex, Samsung, Cingular Wireless, Apple Computer, MusicNow, Altnet, TV Desktop, Wraptor, Fuse, AOL and Sony PlayStation2.

Deborah Hernandez, marketing communications manager for Memorex, says the company sees the Warped tour as a way to reconnect with the 18-34 market by giving them an "immediate experience with the music they're passionate about."

Digital download market leader Apple has its own iLife tent on the tour. The tent features iMacs and PowerMac G5s that allow fans to experiment with music and video creation.

Lyman also embraced relationships with companies that promote legal peer-to-peer downloading of music.

Digital content distributor Altnet has provided an infrastructure to sell live performance videos from the tour. Fans can access the videos on the Warped tour Web site or through P2P network Kazaa.

"The independent artists are looking for any way to promote themselves. A lot (of them) aren't opposed to a certain amount of downloading," Lyman says. "A lot of our kids have a greater loyalty to the Warped artists, and these P2P relationships allow fans to support the artists and buy their music through legal ways."

Lee Jaffe, president of Altnet, worked out licensing parameters with more than a dozen independent labels with acts on the tour -- including Epitaph, Vagrant and Artemis. Altnet allows users three free video downloads before it starts charging.

"We're experimenting, and selling video is the new thing," Jaffe says. "Every time we reach out to independent record labels to distribute their work, they say, 'Yes, this is what we want, we want the ability to market to (our) audience.' It's important to connect them directly to their fan base."

"This is a way of leveling the playing field for indie artists trying to get into digital distribution," says Benjamin Osgood, president/CEO of Wraptor parent Free Radical Networks. "They can proactively promote themselves rather than wait for an iTunes to get behind them."
http://abcnews.go.com/wire/SciTech/r...40725_283.html


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Music Industry Taking Cues From File Sharing

Online businesses are adding features such as peer-to-peer networks to boost song lists while protecting copyrights.
Jon Healey

Having condemned file-sharing for five years, the music industry is now trying to co-opt it.

Online music businesses are adding features once found only in file-sharing networks, such as the ability to send free songs to friends and to listen to them on a variety of portable players. And a handful of companies are developing hybrid peer-to-peer networks that encourage sharing but prevent users from violating copyright law.

One example is Mercora Inc. of Santa Clara, Calif., a fast-growing start-up that lets people listen to songs from other users' computers. Mercora's software turns each user's computer into an Internet radio station that any other Mercora user can tune in, enabling them to hear — but not download — a wide array of tracks.

Meanwhile, one of the leading peer-to-peer networks has agreed to transform itself from a hotbed for piracy into a haven for legal file-sharing. IMesh.com Inc., which struck a truce with the major record companies last week, pledged to revamp its network by the end of the year.

It remains to be seen whether any of these efforts can compete effectively with popular file-sharing networks such as Kazaa and EDonkey, which are used by millions of people around the world.

"You can't displace piracy with legal services by being as good as a pirate service, because pirate services have no restrictions," analyst Josh Bernoff of Forrester Research said. Instead, Bernoff said, legitimate outlets should compete by providing more innovative, reliable and easy-to-use services.

Unlike the songs offered by legitimate outlets, which are wrapped in electronic locks to deter piracy, the music on file-sharing networks can be shared freely and played on any device without regard to copyright law.

Some legal services are hoping to win over customers by offering the same features — to the extent they can.

MusicMatch Inc. of San Diego, which operates a downloadable music store and an online radio service, is planning a $10-a-month offering that will let subscribers play as many songs as they wish from the company's online jukebox. They will also be able to make songs available to their friends for free.

There's a catch, of course — non-subscribing friends can only play each track three times. If they want to hear a song again, they'll be invited to subscribe to the monthly service.

For Mercora, sharing songs is fundamental to the business.

Like Kazaa and EDonkey, the start-up relies on users to provide the free songs that are the lifeblood of its network. As more users sign on, more songs become available, attracting more music fans.

To keep everyone on the right side of the law, Mercora doesn't let users copy songs from each other. Instead, they merely listen to tracks from other users' collections. The tracks are chosen by Mercora's software, which tailors playlists to meet restrictions that Congress imposed on Internet radio stations. That way, the service qualifies automatically for a broadcasting license.

"Our whole premise was based on the fact that the reason people went to peer-to-peer networks was the unlimited discovery of music," said founder Srivats Sampath, who previously served as chief executive of computer security software maker McAfee.com.

The 2-month-old Mercora service is free today, but the company may decide to charge its most active users a small monthly fee to cover the royalties it pays to labels, artists and music publishers. Sampath said the company also planned to generate fees by selling advertisements and running an online marketplace for Mercora members to buy and sell music-related goods.

Bridgemar Services Ltd., which owns IMesh, could bring the music industry even closer to embracing peer-to-peer technology. But it has yet to reveal how its users will find and share songs legally, and the major record companies have not said how they will support the new service.

The most likely approach for IMesh, according to music-industry executives, is to use technology that manages what users share and download to prevent them from copying songs without permission. That sort of technology is being pitched by several companies, including Audible Magic Corp. of Los Gatos, Calif., Kokopelli Networks Inc. of Ottawa and Snocap Inc. of San Francisco, which was launched by former Napster creator Shawn Fanning.

Of course, clamping down on what users can share would rob IMesh of one of the most compelling features of today's file-sharing networks: the virtually unlimited selection of songs, including bootlegged and homemade versions of songs that were never officially released.

Nevertheless, Audible Magic Chief Executive Vance Ikezoye said he was encouraged by the labels' and IMesh's stated wish to blaze a trail to new business models.

"The industry I think has gotten some criticism for not supporting digital media and new models," he said, "and I think this is a positive direction."

In the meantime, RealNetworks Inc. is trying to chip away at another advantage of the pirate networks by making it easier to play legally downloaded songs on any device the consumer chooses, provided it uses anti-piracy technology from Real, Apple Computer Inc. or Microsoft Corp.

On Tuesday, the Seattle company is expected to unveil software that can transfer songs bought from Real's store to any MP3 player or other gadget. Other stores support only one kind of anti-piracy technology; for example, Apple's iTunes Music Store works only with Apple's iPods.

Real's "Harmony" technology will give people who buy music the same flexibility as those who download it illegally, said Richard Wolpert, Real's chief strategy officer.

Harmony will initially be available only with RealPlayer software, and the company is hoping to persuade rivals to use it with their music services as well, Wolpert said.

In the short term, analyst Michael Gartenberg of Jupiter Research said, the primary beneficiary of the new technology is Real, whose store lags far behind Apple's.

"It solves a huge problem for Real, which is the fact that there simply aren't that many devices on the market that support Real's music store," he said, adding that the success of Apple store has been driven by the popularity of the iPod.

Musicmatch and at least three other online music outlets — Roxio Inc.'s Napster, MusicNet Inc. and Circuit City Stores Inc.'s MusicNow — also plan to add more flexibility to their subscription services. Starting this year, their subscribers will be able to take hundreds of songs with them wherever they go for about the price of one CD a month.

The key is new software from Microsoft that enables subscribers to move the songs they rent to portable music players. Microsoft found a way to satisfy the major record companies, which insisted that portable players be able to disable songs if the user's subscription lapsed.
http://www.latimes.com/business/la-f...-home-business


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TiVo's Fight With Content Owners

Hollywood studios and the US National Football League have protested to the Federal Communications Commission in an effort to stop digital video recorder maker TiVo extending the reach of its technology, allowing users to watch TV shows and movies outside the home.

The objectors argue that the new technology could compromise copyrights of material broadcast digitally, which offers higher sound and video quality than at present, says the Washington Post. They fear computer buffs would capture programmes and start exchanging them online, just as millions of music files are illegally distributed through file-sharing.

The TiVo battle marks an escalating war in Washington as content owners struggle to keep control of copyright works that can be digitally stored, copied, manipulated and redistributed. Public advocacy groups and some technology firms argue that content owners are seeking to revoke long-standing consumer rights to "fair use" of artistic works.

With 1.6m users, TiVo's technology lets users copy programmes for later viewing, pause live shows, skip commercials and otherwise manipulate their viewing, though they have until been unable to send copied programmes to another device apart from "burned" DVD copies.

Now TiVo plans to make its copies more portable, starting this autumn with a system for transferring programmes from the TiVo box to a computer via a small hardware module, from where they could be sent to other devices within the home and viewed on them.
http://msnbc.msn.com/id/5482232/%20


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Film division, booming DVD sales contribute to growth

Recovery at AOL Helps Time Warner Report Strong Profit
Geraldine Fabrikant

Time Warner posted solid second-quarter earnings yesterday as America Online, long its most troubled operation, showed continued signs of recovery. But the company now faces investor concerns about growth in the cable operation, its largest and most stable unit.

In addition, the troubles at AOL may not be entirely over. The company said for the first time yesterday that it was reviewing accounting at AOL Europe before 2002 and that the review could lead to financial restatements. Time Warner said earlier this year that the Securities and Exchange Commission and the Justice Department were looking at how the company handled $400 million that AOL received from Bertelsmann for advertising.

For the second quarter, Time Warner said that total revenue rose 9.7 percent, to $10.89 billion, from $9.92 billion in the period a year earlier, fueled by strong performances in its film and cable businesses. Net income fell to $777 million, or 17 cents a share, from $1.06 billion, or 23 cents a share, in the period a year earlier.

The 2003 figure, however, was buoyed by several one-time gains. Excluding those, net income in the period would have been $536 million, or 11 cents a share.

Nevertheless, shares of Time Warner fell 26 cents yesterday, or 1.5 percent, to $16.65.

Investors worried yesterday about the drop in cable subscribers as well as less-than-robust growth of high-speed data customers at Time Warner's cable unit, which is the company's largest single contributor to cash flow.

And while the film division turned in a stellar performance, hit films are difficult to forecast. That means investors cannot necessarily anticipate comparable growth in future quarters.

The company said that over all, operating income before depreciation and amortization rose 30 percent, to $2.6 billion. However, excluding one-time items, operating income would have been up about 17 percent.

Dennis Leibowitz, who heads Act II Partners, a media hedge fund, said that while the corporate performance was strong, investors were concerned because Time Warner, along with the Comcast Corporation, was showing the pressure of competition from phone companies and the satellite business.

Operating income at the cable unit rose 9 percent, to $817 million, making it the largest cash-flow producer at Time Warner. Revenue rose 10 percent, to $2.1 billion. But the number of basic cable subscribers dropped 21,000 from the previous quarter, to 10.9 million.

While the summer holidays traditionally result in slower growth in cable subscribers, analysts noted that this was the first time that Time Warner had actually lost subscribers.

Although the company added 127,000 net residential high-speed data subscribers in the quarter, analysts had been expecting a greater increase. Mr. Leibowitz added that the high-speed data business was crucial at Time Warner because cable is a maturing business and high-speed data has been an engine for growth.

The slower growth underscored the growing aggressive competition from phone companies like Verizon, which are making inroads in the fight for broadband customers and could continue to win new customers at the expense of the cable operators, analysts said.

But even investors who worried about the cable unit were encouraged by the performance of Time Warner's film division. Revenue rose 12 percent, to $3.09 billion, and operating income rose 23 percent, to $417 million, after excluding a $43 million gain from an asset sale in 2003.

Box office releases in the quarter included "Harry Potter and the Prisoner of Azkaban" and "Troy." "Harry Potter" generated $703 million at the box office worldwide and "Troy" has made $484 million. Time Warner said that through July 5, the Warner Brothers studio had generated $714 million in revenue and New Line had $197 million in box office receipts, combining for an industry-leading 19.4 percent of the box office.

Revenue gains were driven by strong theatrical and television home video sales as the studios delivered feature films and television series to the booming DVD market. Sales of New Line's "The Lord of the Rings" and Warner's "Harry Potter" helped lift total sales.

At America Online, Time Warner raised the profit forecast for the unit after advertising sales increased for the first time in three years. They rose 23 percent while revenue increased 2 percent, to $2.2 billion. The company now expects percentage growth in operating income before depreciation and amortization this year to be in the low to mid-teens, up from its earlier forecast of low double digits.

AOL's operating income before depreciation and amortization in the second quarter rose 13 percent, to $487 million. That increase came despite a decline in the number of United States subscribers, which fell 668,000 in the quarter, to 23.4 million.

As to expansion plans, investors have been waiting to see how aggressively Time Warner would pursue an acquisition of Metro-Goldwyn-Mayer. But there was little clue yesterday as to how eager the chief executive of Time Warner, Richard D. Parsons, is to buy MGM.

During a meeting in Manhattan yesterday with analysts, Mr. Parsons said the company would be "prudent and disciplined." He added that the company was looking at every option, including a share buyback. "We have our eye on that needle as well," Mr. Parsons said.

As to the possibility of buying the cable company Adelphia, a Time Warner spokesman said, that it was too early to talk about any deal because Adelphia is still in bankruptcy.

At Time Warner's cable networks unit, cash flow rose 84 percent, to $661 million, but 23 percent excluding a one-time charge in the period a year earlier. Revenue rose 5.7 percent, to $2.3 billion.

Peter J. Mirsky, who follows Time Warner for Oppenheimer & Company, noted that advertiser spending at the Turner Networks was up only 8 percent.

"We felt that the advertising revenue growth seems light compared to Viacom's MTV Group, where revenue grew about 20 percent, for example," Mr. Mirsky said.

A company spokesman noted that the Time Warner unit includes CNN, where comparisons with last year, which included the high ratings from the war in Iraq, were difficult.

The publishing unit's cash flow, excluding a one-time charge in 2003, rose 9 percent, to $357 million. Revenue increased 4 percent, to $1.47 billion. The unit owns People, Sports Illustrated, Time and Fortune, among other magazines, and a book company.
http://www.nytimes.com/2004/07/29/bu...ia/29time.html