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Old 12-02-04, 10:40 PM   #1
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Default Peer-To-Peer News - The Week In Review - February 14th, '04

Quotes Of The Week

"The cat is out of the bag, People have it in their brain that they can organize themselves." - Scott Heiferman, CEO of Meetup.com.

"No one has put any figures on the industry's revenue loss due to consumer piracy that have any credibility." - Bill Rosenblatt.

"It's not anonymous, and it can't be made anonymous because it's fundamentally antithetical to the architecture." – BitTorrent’s Bram Cohen

Rip Tide

This week’s 130-page issue harks back to the big summer WiR’s of 2003. Those giant hundred-plus page magazines put out in June and July were so packed with story after story of outrageous corporate behavior they made my hard drives wobble. Hard to tell when the big waves’ll roll in but one reason this weeks is so full is the absolutely amazing stories coming out of Australia. The ones about the secret raids at the homes of P2P company personnel. Imagine having your place invaded by force by corporate cops - because you might be working on some software! And legally no less. What a surprise that would be at six o’clock in the morning. I’ve heard reports that people were assaulted and injured, and I thought things were tough in the DMCA crazed USA! If I hadn’t already stopped supporting RIAA member companies I’d sure be stopping now, and if I lived in Australia I’d be burning up the phone lines pushing repeal of those police-state Anton Pilar laws. I’d also demand the removal of Murray Wilcox, the guy who gave the order for the raids. Shame on you judge.

The good news is this kind of over-the-top behavior doesn’t sit well with reasonable people – and reasonable people participate in democracy. We’re seeing more and more communities here in the States organizing and responding to threats against their liberties and it’s a movement on the march. They’re fighting back – we’re all fighting back, and we’re beginning to be heard.



“This Machine Kills Fascists”
Siva Vaidhyanathan

How committed are we to free speech? In the first of his new monthly columns on life in America, Siva Vaidhyanathan, passionate champion of liberty, abandons the cause when faced with airport security, his wife and the ghost of Woody Guthrie.

I am writing this on a plane to San Francisco. Until a few hours ago I had a sign taped to the cover of the laptop on which I am typing:

“This Machine Kills Fascists”

As I approached security at Newark, I took the laptop out of my bag to place it in the plastic tray. I froze when I saw the sign. What if this security person reads the sign as a threat? Would he care about my explanation? Would he be interested in the fact that it is only a quote, a reference to the words that Woody Guthrie wrote on his guitar? Would he care that I have no intention of killing anybody?

I quickly calculated the risks of proceeding with the sign taped to the computer. If I were pulled aside, would the security staff see me as a genial professor and frequent flyer?

Or would the staff see me as a man with a long, foreign name, olive skin, a goatee, and an attitude?

Would it even matter? They are trained to take threats and jokes of threats seriously. Some of them have probably been called fascists by less polite passengers. And I pride myself, with my slip-on shoes and empty pants pockets, as a deft, trouble-free traveler.

I decided to remove the sign. I started digging at the tape. “What are you doing?” asked my wife. “They don’t want to see this,” I said, nodding in the direction of the security guards. “But Woody Guthrie …” she said. “I don’t want any complications,” I said.

Maybe if I had been traveling alone, I would have been braver. Maybe I would have been willing to jeopardize my flight, but not my wife’s. Maybe I would have felt like having a conversation, even an argument, with security.

But instead I kept thinking about civil libertarian John Gilmore and his lapel button that read “suspected terrorist”. British Airways attendants demanded that he remove his button because it was making other passengers uncomfortable, when that was clearly the point. When he refused, and he questioned airline officials why a pro-Tony Blair button would be allowed, but a “suspected terrorist” button would not, the crew returned the plane to the gate and made Gilmore and his partner leave.

I respect Gilmore and his commitment to free speech and reason. But did I really want to be a martyr for the cause? Did I really want to be a troublemaker for the sake of the memory of Woody Guthrie? Could I get to San Francisco in time to deliver my lecture if security pulled me aside? Would I still get reimbursed for my ticket?

After I got through security, pangs of guilt hit me. I don’t really want to live this way. I don’t want to censor myself from making harmless statements during sensitive times. What will I do when I have to make serious statements during difficult times?

I claim to understand the ways general fears can twist us into behaving in inauthentic ways. I pretend to teach young people about the pernicious effects of a total surveillance state.

But can I trust myself to stand up for my own professed values? Are they even my values if I am not willing to act upon them?

The state of mind in the United States for the past two years is a strange mix of arrogance and paranoia. We are confident that we can defeat something as nebulous as “terrorism”, yet we panic over the smallest hint of risk. The fact is, neither of these attitudes is actually making us safer.

Airlines check identification of every passenger, as if fake identification were not easily available in every city in the world (and despite the fact that the 2001 hijackers used their Ids to no avail). Yet time and time again we find how easy it is to evade prohibitions against bringing weapons or explosives onto airplanes.

My students who come from Italy, Israel, and the United Kingdom don’t understand why the United States is filled with so many foolish security measures, and why Americans can’t seem to just deal with constant surveillance. After all, they have dealt with threats of terrorism and constant surveillance for decades.

I think that’s the point, exactly. Americans do not have decades of experiences, mistakes, and modifications on which to rely. This is all new and odd to us. We all stop and cringe when we see large men in fatigues bearing automatic weapons walking in public places. This is not the country we grew so comfortable with.

As we head toward one of the most definitive elections in American history, I wonder how this combination of arrogance and paranoia is corrupting the political culture of this country and fraying its social fabric.

Can we trust ourselves to select leaders who would install reasonable yet imperfect measures to make us safer? Or will we invite our leaders to pander to our worst attributes: xenophobia, provincialism, and impatience?

Will we continue to reward leaders who insist on intrusive measures that make the state more secure in its power over its subjects? Or will we remember the value of and reinvest in our liberal traditions?

The potentially alarming statement itself, “this machine kills fascists,” demonstrates a passion, a commitment, to speak loudly against the technologies of oppression and conformity that fascists use to maintain power, even without pointing guns at everyone. Eyes can be more effective constraints than weapons.

I am sorry. I am not worthy of Woody Guthrie’s legacy. I wonder how many of us are.

When I get back to my office next week, I will put those words back on the computer. This land is our land, and this machine must be free to do its job. We must not be cowed out of speaking our minds.


First of it’s kind ruling

Finn Ordered To Pay Alanis Morissette For Internet Bootleg Spreading

HELSINKI (AFP) - A Finnish court ordered a 24-year-old man to pay Canadian rock star Alanis Morissette 7,000 euros (8,965 dollars) for spreading unauthorized recordings of her concerts on the Internet.

The judge found that during 1999 to 2003, the man had swapped over 1,900 copies of unauthorized concert recordings, so-called bootleg tapings, with other bootleggers through his private website, news agency FNB reported. The case was the first of its kind in Finland, and legal experts said the ruling might be the first in Europe where someone who swapped illegal recordings to add to his own collection had been found guilty. Legal action in Europe has so far been limited to prosecuting people who have tried to make money off the trend. While the man offered illegal recordings of a number of artists, including Eric Clapton, The Cure, Madonna, HIM and Ozzy Osbourne, he had been swapping no less than seven tapings of Morissette's concerts with others, the court found. As a result, the Tampere district court, some 170 kilometers north (100 miles) of Helsinki, ordered him to pay a total of 17,000 euros (21,756 dollars) in damages for copyright infringement to various artists and organizations. He was only fined 408 euros (522 dollars) however, as he had not engaged in the online bootleg swapping for profit but rather as a hobby, and had not made the illegal recordings himself, FNB said. On the website, the man posted lists of which bootleg recordings he wanted and what he had to offer in return, as well as his detailed contact information.


Court Battles Don't Stop Streamcast Releasing Morpheus 4
Matt Whipp

Even as Streamcast fights to uphold a lower court ruling that it is not liable for the actions of users of its file-swapping software, it has released a new version that hooks its users into the networks of other peer-to-peer platforms such as KaZaA.

Morpheus 4 gives its users access to the networks of Kazaa, iMESH, eDonkey, Overnet, Grokster, LimeWire, Gnutella, G2 and others, in addition to files on its own network. It also offers free voice chat (VOIP). Streamcast says nearly 300,000 people have downloaded the beta already.

Meanwhile, on the courtroom floor, lawyers for MGM, seeking to overturn the lower court ruling and force peer-to- peer networks to introduce filters to curtail the trading of copyright material, didn't have the judge on their side when they argued that such activities amounted to piracy.

Judge Noonan chided them for 'abusive language': 'Let me say what I think your problem is. You can use these harsh terms, but you are dealing with something new, and the question is, does the statutory monopoly that Congress has given you reach out to that something new. And that's a very debatable question. You don't solve it by calling it 'theft.' You have to show why this court should extend a statutory monopoly to cover the new thing. That's your problem. Address that if you would. And curtail the use of abusive language.'


The Pornography Industry vs. Digital Pirates
John Schwartz

THOUSANDS of Web sites are putting Playboy magazine's pictures on the Internet - free. And Randy Nicolau, the president of Playboy.com, is loving it. "It's direct marketing at its finest," he said.

Let the music industry sue those who share files, and let Hollywood push for tough laws and regulations to curb movie copying. Playboy, like many companies that provide access to virtual flesh and naughtiness, is turning online freeloaders into subscribers by giving away pictures to other sites that, in turn, drive visitors right back to Playboy.com.

When Mr. Nicolau is asked whether he thinks that the entertainment industry is making a mistake by taking a different approach, he replies: "I haven't spent much time thinking about it. It's like asking Henry Ford, 'What were the buggy-whip guys doing wrong?' ''

The copyright rumble is playing out a little differently in the red-light districts of cyberspace. That neighborhood is increasingly difficult to confine, what with a fetishwear- clad Janet Jackson flashing a Super Bowl audience of millions, and Paris Hilton making her own version of a "Girls Gone Wild" video. Professional peddlers say they are hard pressed to compete.

Still, the business of being bad is very good, especially for the biggest players. Though the industry has felt a financial squeeze during the economic slowdown, it nonetheless has sales of as much as $2 billion each year, said Tom Hymes, the editor of AVNOnline, a business magazine for the industry.

And the pornography industry, which has always been among the first to exploit new technologies, including the VCR, the World Wide Web and online payment systems, is finding novel ways to deal with the threat of online piracy as well. The mainstream entertainment industry, some experts say, would do well to pay attention.

Music executives say their campaign of lawsuits has been successful. They say they have spread the word that downloading free music infringes on copyrights and that there could be consequences for large-scale file sharers.

But the pornography industry has been dealing with Internet copyright issues since the 1980's. By comparison, the movie and music businesses are relative newcomers. Mr. Hymes said companies in his industry had come to realize that suing consumers and promoting "draconian laws" were not the answer. "No law written can stem the tide," he said. And so, he said, companies are seeking ways to live with the technologies that threaten them and are trying to turn them to their advantage.

That is not to say that the companies have not been harmed by free copying and distribution of copyrighted material online. Mr. Hymes's magazine warned recently that such companies were "losing incalculable amounts of cash" to peer-to-peer file-sharing networks like Kazaa, LimeWire, Grokster and Bit Torrent.

"As the networks continue to grow and even more sophisticated programs are created, the P2P networks might prove a bigger threat to the revenue stream of the porn world than all the censorious right-wingers in the country put together," the article stated.

Maybe. But many companies that distribute X-rated material say they do not worry too much about consumers sharing among themselves; they often unleash their lawyers only when someone is trying to profit by copying their goods and trying to sell them.

When people in the industry talk of copyright, there is none of the grand speechifying about revering artists and rewarding creativity, and the near-tearful paeans to the yeoman key grips and stunt men, as is favored by movie and record executives. Instead, there is just this: We spent a lot of money to get this stuff out to the market. Somebody else is making money off of it. We want the money.

"We haven't gone after Joe Citizen who's sharing something he printed off something from the Hustler Web site with another guy," said Paul Cambria, a lawyer who represents Hustler, Vivid Video and other companies on copyright issues. He does send out some 20 letters a week, he said, warning for-pay Web sites to remove material owned by his clients.

Mr. Cambria suggests that the mainstream entertainment industry is much more combative when it comes to consumers partly because the songs and movies are so carefully and expensively made and distributed. Movies in his industry, by contrast, are often made in a few weeks, and on budgets that a major studio may spend on coffee and pastries, so piracy is not taken quite as seriously. "Maybe a classic is one thing," he said, "but they're not all classics."

A few merchants in the industry who have tried the kind of aggressive methods used by mainstream entertainment companies say they have not received much in return for their efforts. One company that tried to track down copyright infringers and demand that Internet service providers shut down their sites used BayTSP, an Internet monitoring service that also serves the music and movie industries. "It was costing us a lot of money and was producing absolutely zero results," said Humphry Knipe, who manages the business operations of Suze Randall, a photographer in the field who has her own Web site.

Mr. Knipe, who is married to Ms. Randall, said many Web sites were taken down as a result of more specific legal threats by subpoena to Internet service providers. But even then, "it was extremely doubtful that any of this activity had any effect at all in the real world of improving our sales by restricting piracy," he said.

MARK ISHIKAWA, the chief executive of BayTSP, disputes that. He said his company worked for Mr. Knipe almost four years ago, before the threat of lawsuits became common enough to present a real danger to downloaders. "He would have a much different effect today," he said of Mr. Knipe.

In general, Mr. Ishikawa said, pornography businesses have not been a good market for his services, which can cost from $10,000 to $50,000 a month, depending on the volume of work. "Nobody wanted to spend the money," he said. It was just as well, he said: "We don't want to be known in the porn space."

Many of the businesses, however, are trying various techniques to make paying customers out of people who take their content. Titan Media, a provider of gay pornography, says it tracks down people who violate its copyright and, as an alternative to a lawsuit, offers amnesty if the infringer becomes a subscriber. Identities are not easy to find in the virtual world, and the company must track the infringement through Internet service providers, who are often reluctant to reveal the names of their customers.

So Titan does what many copyright holders do: it sends infringement notices to the service providers, asking them either to remove the offending material or to pass along the notice to the customer. Titan initially tried to unmask infringers by using the same controversial provisions of copyright law used by the music industry to track down file sharers: a streamlined system of subpoenas that do not require a judge's approval. Titan backed away from the tactic when it prompted privacy protests; a federal court has since ruled that the music industry cannot use those subpoenas against peer-to-peer file traders.

Wendy Seltzer, an advocate for online civil liberties, says the Titan approach may point the way for other industries to enforce their copyrights. Ms. Seltzer, a staff attorney for the Electronic Frontier Foundation, a high-tech policy group that has fought the record industry over copyright issues, acknowledged that the amnesty offer "sounds a little extortionate when they say it, perhaps." But she said it was "a much more sensible approach" than the music industry's litigation strategy. "People always want this stuff," she said, referring to pornography. "Seeing some of it just whets their appetite for more. Once they get through what's available for free, they'll move into the paid services."

Gill Sperlein, general counsel for Titan, said his company must be tough in combating file-sharing networks because of the nature of the content. "When we're trying to maintain control of our product, it's not just to protect our financial interest but also our moral obligation to keep it out of the hands of minors," he said. Once an image or movie has been taken from his site, the company's elaborate precautions to ensure that minors cannot gain access to the material through the site are defeated. "We are very careful about who we sell our products to," he said.

Companies are finding that free images can be a selling point, and not just a problem. Playboy pays Webmasters $25 or more for every subscription they funnel to Playboy.com and provides sales and marketing tools to help make the free Web sites more effective. Mr. Nicolau of Playboy.com said that the subscription business grew 74 percent in 2002 and that the company's revenue growth in 2003 was expected to be as much as 60 percent.

Mr. Hymes of AVNOnline said that the salvation for the industry would come not from laws or lawsuits as much as from bits and bytes. "Technology is going to solve the problem that technology has created," he said. "The people in this space are seeing it as an opportunity to change habits and to create new opportunities."

Mr. Sperlein said Titan Media had experimented with software that would require people who download a video clip to return to the Titan site to unlock it and view it, but that this process was too intrusive. So, he said, the company is coming to realize that "the key is to make a product available that's reasonably priced and reasonably easy to obtain."

"We're kind of at the beginning stages of that," he added.

Others in the industry are using bare-knuckled legal tactics, but they are suing other companies, not individuals. An emerging industry of lawyers and self-appointed Internet monitors is feeding off provisions in copyright law that allow automatic damages when infringement is proved in court. Groups like the Association for the Protection of Internet Copyright, which works mainly for pornography-related businesses, scour the Internet for signs of copyright infringement that they can present to the original owners of the material. They then collect a bounty from a portion of the settlement or statutory penalties, which can reach as much as $150,000 an infringement.

Some people who have been approached by APIC say tactics of the organization's founder, Steve Easton, go out of bounds. According to papers filed by an Internet service provider in the United States District Court for the Northern District of California last fall, Mr. Easton sent copyright notices with links to pornographic sites to the company and business associates "to burden, harass and embarrass" the service provider.

Mr. Easton said that he was the one being victimized by the lawsuit, but conceded that his tactics had made him vulnerable. "I've said things to people that I probably should not have bothered," he said, "instead of sending notices and keeping to the straight and narrow."

A pornography merchant, Norman Zada, has sued Web sites that use pictures from his site, Perfect 10, and has also sued the companies that process payments for those sites. (Those suits are still working their way through the courts.) Last month, he took his campaign a step further and sued MasterCard and Visa, which he said contribute to online piracy by processing bills for Web sites that post pornography that rightfully belongs to his site and magazine.

Mr. Zada argues that piracy has cost him some $29 million. "If you create a product and everybody else can sell your product" without paying for it, he said, "you can't survive."

Neither credit card company would comment for attribution, but a lawyer from one of the companies scoffed at the suit, saying that it had no legal basis and that the company was too far removed from copyright infringement to have any liability.

Mr. Zada said his lawsuits were legitimate. "They're all accusing me of extortion and they're accusing me of using litigation as a profit center - I'm out $29 million!" he said. "This is not a profit center." He said he believed, however, that he could make back that sum and more if he could only have the courts give him total control over images he owns.

He has the right to make his case in court, he said: "This wonderful country gives you the opportunity to right the playing field." Companies like his, he said, must litigate aggressively because they do not get the kind of support from law enforcement that the music and movie industries receive.

TOUGH industry tactics should come as no surprise, said Charles Carreon, the lawyer suing Mr. Easton. Pornography, after all, is a business with a history. "Everybody forgets that somebody shot Larry Flynt," he said.

Pornography merchants say that they have the advantage over free file-sharing networks, at least for now. They say the networks are not well suited to the needs of their consumers, who like images and movies that push their very specific buttons for, say, blondes or cheerleaders.

"Free is very anarchistic and hard to deal with, and you don't know what you're getting," said a pornography entrepreneur who goes by the online pseudonym T. Lassiter Jones. "Cheap is more convenient."

That notion could be the great hope of the mainstream entertainment industry, where fledgling services like the iTunes store and Rhapsody that offer inexpensive, easy access to legal music are beginning to catch on.

So, yes, sex sells, but so can music.
http://www.nytimes.com/2004/02/08/bu...rtne r=GOOGLE


Real Announces Flaw in Music Software
Bloomberg News

RealNetworks Inc. said a flaw in its RealPlayer software for playing music over the Internet may let hackers take control of a personal computer.

The problem with RealPlayer, which competes with similar software from Microsoft Corp., allows someone to create a fake song file that when loaded into the program could make the PC run whatever malicious instructions the creator set up, the company said.


EU Debate To Take Up P-to-P Filesharing

Draft law addresses mass pirating, counterfeiting of digital products
Paul Meller

BRUSSELS - Sharing music over the Internet could become a criminal offense if some members of the European Parliament get their way in a debate next week. The Parliament is set to debate a draft law designed to stamp out mass pirating and counterfeiting of digital products such as music and movies.

But instead of focusing on law breakers as the European Commission intended, the Parliament's legal affairs committee wants to stretch the proposal to include peer-to-peer (P-to- P) exchanges of digitized music. The proposed changes to the intellectual property rights enforcement directive collide head-on with citizens' rights to privacy, and have angered consumer groups and legal academics.

ISPs (Internet service providers) are also opposed to the changes to the bill because they say they would be required to snoop on their subscribers or face fast-track injunctions in the courts to reveal private information. A provision of the enforcement bill would subject ISPs to criminal sanctions if they fail to provide information to copyright holders about subscribers who may be infringing copyrights.

''The balance between privacy of subscribers and the duty to cooperate with right holders seeking to protect their intellectual property that was reached in the e-commerce directive could be changed by this directive,'' said Tilmann Kupfer, British Telecommunication PLC's (BT's) European regulatory manager.

No one on either side of the debate doubts that counterfeiting, the main target of the new law, is a major problem. According to the European Commission counterfeiting and piracy cost the union €8 billion (US$10 billion) annually in lost economic output between 1998 and 2001.

According to the International Federation of Phonographic Industries, one-third of all music CD's sold around the world last year were counterfeit.

The music industry joined forces with the film industry last year to complain that the European Commission's proposal, which limited enforcement measures to breaches of copyright "for commercial purposes," was too soft.

Even though the proposal granted rights holders criminal legal tools to pursue pirates across the European Union (EU), this wasn't enough for them. The proposal ''failed to introduce urgently needed measures to hold back the epidemic of counterfeiting,'' music and film companies said after the Commission's proposal was unveiled a year ago.

"The Commission's proposal fell short of international requirements agreed at the World Trade Organization," said Ted Shapiro, director of the European Motion Picture Association.

International intellectual property protection rules called TRIPs (Trade-Related Aspects of Intellectual Property Rights) of the World Trade Organization (WTO) urges WTO members to impose criminal sanctions, such as imprisonment, for people who counterfeit goods for commercial gain.

Shapiro admits that by stretching the proposed EU law to catch file shares, the European Parliament is going beyond the TRIPs agreement. "You could say the amended version is TRIPs-plus," he said. Nevertheless he supports the Parliament's changes, calling them "a useful tool."

The European NetAlliance, which includes BT, Deutsche Telekom AG, Vodafone Group PLC, MCI (WorldCom Inc.), Verizon Communications Inc. and Yahoo Inc., have warned of the risks that a widening of the directive would pose. "It must be ensured that consumers are not placed on the same level as parties that violate copyright for commercial gain or as members of organized crime," the trade group wrote.

Similar words of warning were voiced by legal experts, who expressed concern that EU lawmakers have gone to far in their efforts to protect copyright holders by pushing for a law that goes beyond piracy and counterfeiting. William Cornish, a professor at the University of Cambridge in England, and Josef Drexl, Reto Hilty and Annette Kur from the Max Planck Institute in Germany wrote in an article published in the European Intellectual Property Review: "Haste and political pressure from interest groups do not make for good counsel when it comes to regulating complex and sensitive fields like that of sanctions and procedural measures for IP (intellectual property) protection.''

Consumer groups have also weighed in. "We are worried that the current European Parliament text would allow consumers to be prosecuted, judged and condemned as harshly as a person making and selling millions of copies of CDs, BEUC (Bureau Européen des Unions de Consommateurs) said. "We do not see why a consumer downloading music from the Internet to make a private copy for personal and noncommercial use should be prosecuted at all."

National governments are also unhappy about criminalizing file sharers. One EU diplomat said the Council of National Government Ministers may agree to stretch the directive to cover file sharers, but only if criminal sanctions against P-to-P exchanges of content such as music and movies are dropped.

The Council, Parliament and the Commission have held four meetings this year to try to reach a swift conclusion to the debate. All three institutions want the directive agreed to at first reading in the Parliament before March when the parliamentarians leave Brussels to campaign for re-election.

The EU diplomat admitted that efforts to push the directive through before the recess could be "overly hasty." He criticized the Commission for not doing its homework before proposing the directive a year ago. "A little more consultation would have been useful," he said.

The Parliament hopes to put the proposed directive to a vote toward the end of February. However, the topic has already been added and removed from the plenary agenda several times. Many critics of the bill say it would be sensible to delay it again.


University Of Rochester Opens Online Music Store
Ashlee Vance

The relationship between the music industry and universities just gets cozier and cozier.

The University of Rochester is the second school to sign up as a Napster customer, following the ground-breaking move earlier this year by Penn State University. All 3,700 students living in Rochester dorm rooms will have free access to the Napster service and its rich listing of tethered downloads. At present, the school will subsidize the monthly Napster service fee, but it warned that students may well end up shelling out for the program at some point in the future.

“Digital distribution of entertainment media is definitely the wave of the future,” said University Provost Charles E. Phelps. “I am very proud that the University of Rochester will be at the forefront of this emerging trend by offering students easy access to a high quality, legitimate music service.”

It's not at all surprising to see Phelps pop up as a champion of the Napster service. Phelps chairs a Task Force on Technology for the national Joint Committee on Peer-to-Peer File Sharing and is a member of the Joint Committee of the Higher Education and Entertainment Communities Technology Task Force.

For those of you following the online music business closely, these committees should be familiar. You'll recall that Barry Robinson, a Penn State trustee and RIAA lawyer, Grand Spaniel, Penn State's President and Cary Sherman, the RIAA President all serve on the Joint Committee of the Higher Education and Entertainment Communities Technology Task Force. These four men are doing everything in their power to turn universities into online music stores.

Like Penn State, the University of Rochester is receiving the Napster service at a heavy discount. Neither school will say exactly how much it is paying, but you can bet the price is lower than a 12- year-old's allowance.

"The only thing we can say is that the regular rate for the premium service is $9.95 per month, and we are paying a discount amount from that," said Robert Kraus, a spokesman for the University of Rochester, in an interview with The Register.

This discount is a sticky point from where we sit for a couple of reasons. First off, both Penn State and University of Rochester are billing themselves as pioneers in the legal online music scene - models to follow. This is all well and good when you are such close friends with the RIAA (Recording Industry Association of America). But should less fortunate schools expect the same price breaks? We think not.

This puts the business model being shoveled forth by Napster into question. A couple of privileged schools are leading the rest of the higher education community toward programs they may not be able to afford. But the pressure will surely be on these schools to fork over the full price for Napster or look like laggards in the copyright protection game.

Secondly, the University of Rochester may be tricking its students with a similar shell game.

"The university is paying but whether or not that is the model in the long term needs to be discussed," Kraus said.

Look out kiddies. Your university fees may soon be funding the music industry whether you like or not and by 2005, no less. Apple customers will feel the most pain in this plan, as they can't even use the Napster service.

"That is absolutely true," Kraus said. "(Napster) does not work for Mac users, and we are aware of it. We could not find one service that would fit all the students in this regard."

That's a pretty interesting position given Kraus' argument for why University of Rochester needs to be in the music business. Selling music is not "too dissimilar" from the school providing Internet access, athletic facilities and cable TV, Kraus said.

Well, it really is dissimilar. Internet access and athletic facilities make up pretty basic parts of a students' educational resources and all students have access to them. Most schools now rely on the Internet for the delivery of assignments and other course material. In addition, many universities require at least a couple of athletic credits. We've yet to see the music downloading requirement come into effect, but don't imagine it is far off.

With regard to cable TV, Kraus could not say whether or not the school subsidizes that service.

"In the face of the emerging digital nature of our society, (the Napster service) is in a way a logical step forward," Kraus said.

Logical or lucrative?

The emerging digital nature of our society has put peer-to-peer technology at the forefront of personal computing - like it or not. And yet not one member of a P2P company or even scientific user of the technology is on the Task Force on Technology for the national Joint Committee on Peer-to-Peer File Sharing.

As of today, P2P services have been deemed legal by US courts. In addition, companies such as Sun Microsystems, Intel and Microsoft are all looking into ways to tap the technology as an efficient and cost-effective means of file distribution. Wouldn't input from these companies be logical?

Beyond that, some very bright people have proposed sound business models for allowing everyone - not just Windows users or college students - to enjoy music and taste our culture.

It will come as no shock to see all of the universities with representation on the above committees roll out Napster-branded services over the next year. The only shock is that outsider universities are not questioning this before it's too late for them, their budgets and their students.


E-Mail at The Washington Post Disrupted by a Missed Payment
Jacques Steinberg

Sometimes it doesn't take a hacker to bring down a computer network.

The Washington Post said yesterday that it had inadvertently allowed the registration for one of its Internet domain names - washpost.com - to expire. That lapse had the immediate effect of shutting down the e-mail system that reporters and other Post employees use to exchange messages with the world, something they were unable to do for much of the day.

In a message sent to newsroom employees over another computer server yesterday morning, Steve Coll, the managing editor of The Post, wrote that "Network Solutions, which manages Internet addresses, apparently notified The Post of the pending expiration via a drop-box that was not being monitored.'' Mr. Coll wrote that "all external e-mail has been disrupted and external senders are receiving delivery failure notices.'' In general, the cost of renewing an Internet domain name is under $100.

The Post said that it had been able to renew its registration for washpost.com by midmorning, before any outsider had a chance to lay claim to it. But the disruption to the newspaper's newsgathering efforts was significant enough that Post editors were advising reporters to set up temporary e-mail accounts using Yahoo and Hotmail.

In interviews, several reporters said the loss of e-mail made them realize how dependent they had become on technology to do their jobs.

"I know I'm missing things,'' one reporter said.

Another said that many people in the newsroom, especially those who believed they should be paid more, expressed regret that they had not "snapped up the domain name and parlayed it into the reward that they know they so well deserve.''

By 5 p.m. yesterday, the newspaper had restored some e-mail functions, a spokesman for The Post, Eric Grant, said, but did not yet have "100 percent e-mail capability.''

Mr. Grant declined to say if any of The Post's production operations or other Web services - including its main news Web site, washingtonpost.com, whose domain name did not expire - had been affected by the lapse.

The Post is not the first company to allow its registration to expire inadvertently. Last May, for example, Alameda Power and Telecom, a California utility, allowed its domain name to lapse through an oversight, The Contra Costa Times reported at the time, drawing complaints from nearly 100 customers whose messages to the company bounced back.


Let's All Gather Round the Screen
Katie Hafner

BUD AND LYNDA SLOTKY live a quiet life in a hillside development of 65 houses not far from Hollywood. Each day, Mr. Slotky, a mutual fund administrator, looks forward to his leisure hours. He and Ms. Slotky love nothing more than dinner and a movie with friends.

But such evenings do not involve restaurant reservations or theater lines. Instead, chez Slotky, hosts and guests journey all of 20 feet from the dining table to the living room couch.

Wielding his remote control, Mr. Slotky orders an 82-inch reflective screen to drop from the ceiling, activates a digital projector overhead, adjusts the volume on five surround-sound speakers and commands a DVD to play.

Within seconds, the screen is awash in action, the room is rumbling with sound effects and the audience is completely immersed. "Ice Age" is a favorite. So is "Chicago," which the Slotkys have seen half a dozen times.

The VCR and the DVD player have changed where and how Americans watch movies, and now home theaters are further transforming the experience. As setups like the Slotkys' become commonplace, TV watching is becoming more of a communal ritual, shared with family and friends.

"People really congregate around it. It's what people do now," said Mike Orio, who designs and installs home theater systems in the New York area and is the host of frequent movie gatherings at his Brooklyn home. "It's an American temple and the screen is the altar."

Some home-theater owners find that their living room has become a gathering place for neighbors to watch big games and other special events. Others prefer more intimate movie viewings with a few friends.

"Everybody's doing it, said David Bruce Mann, an architect in Manhattan. "Every apartment I'm doing right now, whether it's high end or just regular people with regular budgets, involves surround sound."

According to the Consumer Electronics Association, some 3.1 million prepackaged systems - five speakers, a subwoofer and an audio-video receiver - were sold last year, nearly triple the number sold in 2000.

The rise of the home theater appears to be having an effect on the movie industry: the number of tickets sold last year dropped to 1.5 billion, from 1.6 billion in 2002. Anthony Kusich, an analyst with ReelSource, a box-office tracking firm in Los Angeles, attributed the decline in part to home theaters. "Particularly older people who don't want to deal with a theater don't mind waiting for the DVD," he said.

The home theater numbers from the electronics association do not take into account more expensive customized systems, to say nothing of rooms made to resemble a movie theater, complete with curtains and reclining seats.

The range in systems is indeed enormous. "If you ask consumers what a home theater is, you'll get so many different answers you won't know what to do," said Nick Donatiello, president of Odyssey, a market research firm in San Francisco.

Home theaters generally have a television with a screen of at least 30 inches combined with surround-sound speakers, but there are plenty of other permutations. Fifty- inch flat-screen plasma TV's, digital projectors, six-foot speakers, special lighting and inclined walls to maximize acoustics are but a sampling of the possibilities. And some custom-built homes are being designed with a home theater in mind.

Not only have the Slotkys, who are both 56, all but eliminated their trips to movie theaters, but since they installed the home theater last summer it has turned into the center of their social life. Last weekend they held a Super Bowl party for about 40 neighbors and friends. "Everybody brought an appetizer or a dessert, and the seating was great," Ms. Slotky said. A few people watched the game from the backyard, through a large picture window.

The home theater has encouraged some people to reconsider the moviegoing experience. Pam Stuchin, 51, a psychiatrist who lives in Manhattan with her husband and two teenage daughters, is increasingly put off when she goes to the movies. She offered a litany of peeves: "The floor is all sticky, and you can't put your bag on the floor, and someone is always coughing or singing along. And there's always someone taller than you with a big head."

Dr. Stuchin's 15-year-old daughter, Margot, is not fond of theaters either. Unlike many teenagers - a group that studios bank on for ticket sales - Margot prefers to invite friends over for a movie rather than go out. "You have to be polite in the theater," she said. "And it's more fun at home because if you miss something you can say, 'Wait, I want to see that again.' "

Of course, the comfort of the Stuchins' Park Avenue apartment might be an influence. A cozy den, redesigned 18 months ago by Mr. Mann with the benefit of Mr. Orio's audiovisual expertise, is now a library and media room. It has a 42-inch Fujitsu plasma TV, Bowers & Wilkins speakers and a Sunfire subwoofer, the bass speaker that creates the sounds of explosions, falling buildings, and asteroid strikes. ("The things the guys like and women always turn the volume down on," Mr. Orio said.)

The whole setup, which would have cost $30,000 four years ago, cost less than $15,000. "You don't have to spend huge amounts of money to get a high-quality home theater system any more," Mr. Orio said. "And you don't have to tear the whole house apart to do it."

Lynn Spigel, a professor of communications at Northwestern University and the author of "Make Room for TV: Television and the Family Ideal in Postwar America (University of Chicago Press, 1992), said that when television sets first started appearing in upper-crust homes in the early 1940's, they were viewed much as today's home theaters are. "A TV was very much of a status symbol," Professor Spigel said. Box-office ticket sales fell in areas where television was being introduced. Now, Professor Spigel said, "the home theater is a sign of luxury because you can be back in your private home again."

Mr. Slotky said that persuading his wife to agree to spend $12,000 on a home theater was not easy. In fact, two years went by before Ms. Slotky, who is a speech therapist, agreed. "It was a really, really, really long sell," he said. Ms. Slotky said she worried that her husband would become an incurable couch potato. But now she loves the theater as much as her husband does.

The couple is careful not to have friends simply come over, watch a movie and leave. "I still like conversation," Mr. Slotky said. "That's what friendship is all about."

As he spoke in his living room, blinds drawn, Mr. Slotky demonstrated his system with a swashbuckling scene from "Pirates of the Caribbean." As the sound thundered throughout the room, Ms. Slotky took over the task of answering a reporter's questions - at raised volume - while her husband sat staring straight ahead, too transfixed to talk.

Brian Cincera, 35, a computer security consultant in Allentown, Pa., spent 52 weekends working to convert his basement into a theater at a cost of more than $50,000, a sum he managed to conceal from his wife, Tina. Each new component he brought home was scrutinized by Ms. Cincera, and when she inquired about the price, he offered a standard reply. "Apparently everything costs around $200," she said.

Yet like Ms. Slotky, Ms. Cincera is a convert. "Family members come over and Brian shows them the beginning of 'Toy Story 2' and they think it's amazing," she said.

With his home theater finally in place, Mr. Cincera said, he is reluctant to go to theaters, where the picture is "grainy," and he is less enthusiastic about attending sports events, particularly Philadelphia Eagles games, which he receives in high-definition format on his 64-inch rear-projection TV. "For the headaches of driving to the stadium, and paying for the tickets and the food, you have it much better in your own home," he said.

Larry Hertzog, a television writer and producer who lives in Los Angeles, has not bought a movie ticket in nearly a decade. A serious film buff, Mr. Hertzog finally decided that going to movies was too upsetting. "You'd go to revival houses to see old classics and they'd be out of focus and there would be babies crying. It ruined the experience for me," he said. "I like to be swept away by a Lana Turner and Clark Gable on the high seas, and that's hard when the person behind you is being an idiot."

He put together a home theater in the late 1980's, then built a far more elaborate one after his house was destroyed in the Northridge earthquake in 1994.

Mr. Hertzog, 52, said his home theater is less of a social focus than some tend to be. Still, over the years he has noticed that when he goes out to dinner with friends and a particular film is mentioned, "I'll say: 'Oh, you haven't seen that? Let's go watch it.' "

When the group arrives at Mr. Hertzog's house, he plucks the film from his collection of 1,800 movies, turns down the lights and invites his guests to sink into a plush sofa and enjoy a movie on his 10-foot screen.

Mr. Hertzog pointed out that in his room, "the visual experience is as good, if not better, than what many people would experience in today's chopped-up multiplex theaters."

Almost as much as the film itself, Mr. Hertzog said, he enjoys "the afterglow," the time spent sitting with friends, discussing what they have just watched. "It's the only time I really just hang out in that room," he said.

Collecting films has become a crucial component of the home theater hobby. Dr. Stuchin said her Manhattan home theater made her want to buy more movies. Indeed, DVD sales have soared. "Seabiscuit" sold five million copies in the first six days after its release, and sales quickly surpassed the $120 million the film made at the box office.

Mr. Orio, who lives in Brooklyn in a Park Slope brownstone, has a home theater with a 92-inch screen and projector, which he uses just for movie viewing. Television programs are watched on any of several large-screen TV's.

When "Seabiscuit" came out on DVD in December, he held a private screening for four friends. "We had dinner afterwards, then we went upstairs and watched 'The Sopranos' on one of the TV's," he said. "Then people had coffee and left. It was great."

Mr. Orio now plans to show movies to his friends every two weeks. Across the continent, Ms. Slotky is thinking along the same lines. She wants to start a movie club, taking a book-club approach. And while she's at it, she is seriously considering buying a theater-style, free-standing popcorn maker.



For Better HDTV Displays, It's All About the Chip
Eric A. Taub

BACK in the dark ages of high-definition television - about four years ago - HDTV pictures suffered in quality.

The problem was not with the technical standard, but with some of the digital television sets that were sold. "The weakest link in the HDTV chain was the display," recalled Joe Flaherty, a CBS senior vice president for technology who was one of the people responsible for instituting digital high-definition TV. "It was like Mark Twain's comment that Wagner's music is better than it sounds."

The biggest sets at the time, supersize rear-projection monstrosities priced around $10,000, used conventional cathode-ray-tube technology to create images. As a result, the high-definition pictures were not very sharp and had some problems common to big-screen TV's in general: inaccurate color registration and pronounced "hot spots" that limited where viewers could sit and see the picture.

Today, consumers have a much wider and better choice of display technologies in HDTV models, some of which are priced considerably lower than those available a few years ago.

Flat-panel TV's using plasma and liquid-crystal-display technology have captured the public's imagination. But plasma is pricey and has its own problems, like image burn-in, decreasing brightness over time and high energy consumption. L.C.D. panels do not have those problems, but the largest sizes cost even more than plasma.

To offer consumers advanced displays at lower cost, manufacturers have focused on improving rear-projection technology. By using smaller image-generating micro- display devices like single-L.C.D. chips, rear-projection sets can be made lighter and thinner than those that use cathode ray tubes.

Because it is a transmissive technology, L.C.D. can be used in both direct view and projection sets. In a direct-view screen, light passes through the liquid crystals and color filters and appears on the front of the display. In a rear-projection L.C.D. television, a light source and a series of lenses magnify the image. By using mirrors to direct the image to the screen, the back of the set can be kept relatively shallow.

Another rear-projection technique uses D.L.P., or digital light processing, technology to create the image. The D.L.P. chip, made by Texas Instruments, measures less than one inch across diagonally and contains hundreds of thousands of tiny mirrors that pivot to allow more or less light and color to be reflected to the screen. Today D.L.P. sets can be created that rival the depth of flat-panel displays. At the Consumer Electronics Show last month in Las Vegas, RCA showed its new Profiles rear- projection D.L.P. models, 61- and 50-inch sets that are just 6.85 inches deep.

Another rear-projection technology, liquid crystal on silicon, or LCoS, shows promise, too. Like an L.C.D. chip, an LCoS chip uses liquid crystals to determine how much light reaches the viewer. But that light is reflected off the LCoS chip rather than passing through it. Built into the chip are aluminum plates that function as both electrodes and fixed mirrors.

LCoS chips, their proponents say, create a high-resolution, good-contrast, long-lasting image without the problems associated with some other techniques.

Philips is first on the market with a single-chip LCoS set, and several other companies, including Intel and the MicroDisplay Corporation, have entered into agreements with electronics manufacturers to deliver components that will make sets available later this year. In addition, JVC will make a series of three-chip LCoS displays marketed under the D-ILA name.

LCoS has been tried before. RCA marketed an LCoS rear-projection TV in 2001, a 50-inch set that sold for $8,000 and was withdrawn after one year. And last month Toshiba announced that it would abandon its promise to sell LCoS sets and concentrate on making D.L.P. TV's instead.

LCoS sets have inherent advantages over D.L.P. and L.C.D., proponents of the technology say. Because light shines through an L.C.D. chip, the circuitry that controls the liquid crystals blocks some of the light. With an LCoS chip, all the circuitry is in a silicon layer behind the reflective layer.

Unlike D.L.P., LCoS has no moving parts, making it relatively easy to shrink the size of each pixel within a given space, thereby increasing resolution. And because D.L.P. chips use tiny mirrors secured to individual posts, "each post shows up as a dimple on the screen," degrading the image, said Sandeep Gupta, president of MicroDisplay.

D.L.P. proponents dispute these claims.

"Both D.L.P. and LCoS make a great picture," Dale Zimmerman, general manager for D.L.P. television at Texas Instruments, said. "Our new HD2+ chips, shipping this year, have the same performance as LCoS. We've created a dimple fix."

LCoS sets will be price-competitive with D.L.P. TV's of the same size. Philips' first LCoS model, a 55-inch set, is currently priced at $4,499.

Whichever technology eventually captures the pocketbook and the imagination of the American consumer, it is clear that the first HDTV's were the worst HDTV's the world will ever see.



Recording the VCR's Swan Song
David Pogue

PREDICTING the future of technology is a fool's game. Still, every now and then, you recognize that a product is so obviously superior to what came before it, the writing is on the wall in block letters big enough for Mr. Magoo to read. The graphic elegance of the first Macintosh spelled the demise of DOS, the crisp sound and compact size of the CD unmistakably suggested the vinyl record's decline, and the convenience of the digital camera set off a tailspin in film sales that continues today.

Don't look now, but another machine you probably own is on its way out: the VCR. Its disruptive successor is the cheap set-top DVD recorder.

Now, the phrase "cheap set-top DVD recorder" may strike you as two oxymorons in one. First of all, in this era of flat screens that are only two inches thick, the last place you'd set a set-top box is on the top of the set. (Nominations are welcome for a better term that distinguishes these TV-room DVD recorders from the ones that you attach to a computer.)

Second, there's that bit about "cheap." Everybody knows that set-top DVD recorders are expensive. The best ones include a hard drive for TiVo-like flexibility but cost $600 and up. DVD-only models start at $400 or so. Logic and pundits have long maintained that the VCR's funeral rites won't begin in earnest until DVD-recorder prices fall below $300 - and now they have, led by Gateway's AR-230 and a few rivals from lesser-known companies.

The brilliance of these stripped-down machines is that they're so easy to explain to people. "It's exactly like a VCR, except you use blank DVD's instead of tapes." You hook the thing up to your TV the same way, operate the remote control the same way and choose a recording speed the same way.

Yet discs offer a list of advantages as long as your arm. DVD's offer far better picture quality than VHS tape. They never require rewinding or fast-forwarding. You can never record over something by accident. DVD's are cheaper to mail, and a lot more of them fit into the same shelf space. DVD's may well last a lot longer than tapes, too, which begin deteriorating in as little as 15 years (the DVD format is too new to know for sure).

Furthermore, a DVD recorder like Gateway's also plays DVD's - and very well, too. It's a so-called progressive-scan player, which means that if your set has Y, Pb and Pr jacks on the back, you get an even more stable, brilliant picture.

For many people, though, storing movies and shows "taped" from the TV is only a secondary perk of owning a DVD recorder. The primary mission is more time- critical: rescuing VHS and camcorder tapes before they turn to dust.

Here, the Gateway does a great job. It offers input jacks in enough formats and locations to accommodate just about anything you want to hook up. On the back panel are S-video, coaxial and composite connectors (the standard red-white-yellow set of three connectors); on the front is another set of composite jacks so you can hook up your camcorder without crawling behind your TV table.

The front panel also offers, surprisingly, a FireWire input for today's digital camcorders - something that's missing from most DVD recorders under $600.

Better yet, the Gateway features extremely simple on-screen menus. Even the remote control is thoughtfully designed, featuring buttons of different sizes and shapes to help your thumb find its way in the dark.

All of this looks good on paper, but remember that this machine costs $300. The lightweight box has so few components inside, it feels practically hollow. You're entitled to wonder, then, how well it works, if indeed it works at all.

As long as you keep adding "compared with a VCR" to your critical assessments, the Gateway performs very well indeed.

The machine offers four quality settings that fit one, two, four or six hours onto a DVD. You can't see any difference whatsoever between the one- and two-hour modes, even with repeated A-B tests and a magnifying glass; both look indistinguishable from the original TV or videotape. The four-hour mode is fine for sitcoms, news and reality shows and still beats the quality of a VCR by a country mile. Only the six-hour mode looks blurry and blocky.

One strange quality glitch arises when you burn a DVD from the front-panel FireWire jack, though. Even at the best recording setting, the faces of moving subjects are just the tiniest bit blurry - a surprise, considering the pristine perfection of the original digital camcorder source. It turns out that despite having a reputation for excellent picture quality, a DVD nonetheless stores video, behind the scenes, as compressed files. When you turn a digital camcorder's footage into a DVD, you're actually stepping down slightly in quality.

What do you give up by buying a $300 player instead of, say, a $450 model? You can't edit your recordings. You can't watch the beginning of a show while you're still recording the end, as you can on some Panasonic models.

The Gateway lacks the on-screen TV guide that its more expensive competitors have, and there is not even VCR Plus+ to save you some programming hassle. It can't change the channel on your cable or satellite box, either, so you have to set the box to the proper channel before you leave the house.

You do get a nice menu screen of the recordings on a disc, featuring a thumbnail picture representing the first frame of each recording. But although the machine can divide longer recordings into chapters or scenes, just like those on a Hollywood DVD, they appear automatically at regular intervals (every five minutes, say); you can't insert them at dramatically significant moments. And although you can rename your recordings - tediously, using an on-screen alphabet - you get only eight characters per show, so "Home Improvement" becomes "Home Imp."

Finally, a note on compatibility. This machine requires blank DVD's in the DVD+R format (about $20 for 10), which aren't easy to find in stores and don't play in as many DVD-player models as the confusingly similar DVD-R format.

Note, too, that as long as you keep a disc in the machine, you can delete recordings and add new ones. But to play one of your homemade discs in somebody else's player, you must first subject it to a digital shrink-wrapping process called finalizing, which takes about a minute (and isn't even mentioned in the mediocre manual). Once you have finalized a DVD+R disc, it's frozen; you can never erase or edit it. The Gateway also accepts the more expensive DVD+RW discs, which you can completely erase even after finalizing.

Gateway isn't the only maker of low-priced DVD recorders, by the way. Best Buy, Wal-Mart and other chains each carry a sub-$300 model or two, which offer roughly the same features as the Gateway. Some carry recognizable names (Magnavox, Polaroid), and some don't (Coby, Cyberhome), but all are made in Asia using the same supercheap standards as $50 DVD players and $40 VCR's. In short, they may not offer, ahem, Toyota-like reliability.

But never mind all that. If your point of reference is the VCR (rather than, say, Pioneer's $700 DVR-810H, a drool-worthy combination TiVo-DVD recorder), you lose very little by investing in a recorder like the Gateway AR-230. The simplicity, picture quality and price of these machines makes one aspect of next year's home entertainment center crystal clear: the VCR isn't in it.


Step on the Gas With a Speedier DVD Recorder
J.D. Biersdorfer

Just as CD burners got faster at recording discs as the technology improved, DVD recorders are beginning to pick up speed. The Memorex True 8X Dual Format DVD Recorder can record DVD+R and DVD-R discs at a sizzling (for DVD) 8x pace. With the ability to store 4.7 gigabytes of data on a disc, DVD has become a common option for data backup as well as recording homemade video.

The True 8X drive also records other disc formats at various high speeds: DVD+RW and DVD-RW discs at a speed of 4x, CD-RW discs at 24x and CD-R discs at 40x. The drive reads DVD-ROM at a speed of 12x and CD-ROM discs at 40x and comes with a kit for either vertical or horizontal installation inside the PC. To prevent recording errors and wasted discs, the True 8X uses a two-megabyte buffer to keep the data flowing onto the DVD during the burning process.

The package includes the Nero Express software suite for all types of DVD and CD recording, from data backup to DVD movie creation. The True 8X drive works with Windows 98 SE and later on a computer with at least a Pentium III 800 megahertz processor. Detailed specifications are at www.memorex.com. Although the drive usually sells for $200, a $30 mail-in rebate is now available, enabling you to save a chunk of change while burning a hunk of data.


Music-Sharing Group Proposes Pay-to-Play Plan
Andy Sullivan

Internet users could collect paychecks rather than lawsuits when they share music through "peer-to-peer" networks like Kazaa, under a proposal outlined by an industry trade group Thursday.

Rather than losing millions of dollars in potential sales to online song swappers, the recording industry should give them a cut of the revenues when they distribute songs in a protected format, the Distributed Computing Industry Association said.

The scenario follows two others put forth by the trade group in an effort to forge peace between peer-to-peer networks and the major record labels that have hounded them and their users in court.

DCIA chief executive Marty Lafferty said record labels could see sales grow by 10 percent over the next four years if they embraced the new technology, much as movie studios increased their market when they embraced the videocassette recorder in the 1980s.

"Each time there's a technology breakthrough in entertainment distribution, once it's harnessed and embraced and an industry finds a way to capitalize on it, the industry does enjoy accelerated growth," he said.

Under the plan, record labels would encode their songs with copy-protection technology so users would have to pay a small fee, between 80 cents and 40 cents, to listen to them.

Prolific song-swappers would be encouraged to convert their collections of unprotected material into the protected format, and then paid a portion of the fees collected each time somebody purchases a song after copying it from them.

Eventually, user-friendly software would allow amateur musicians without recording contracts to make their music available as well, DCIA said.

But implementing the plan could be difficult as it would require the cooperation of Internet providers, record labels and peer-to-peer networks.

Most peer-to-peer networks back a model in which musicians and record labels could be reimbursed through surcharges on blank CDs, CD burners, and fees from Internet providers and peer-to-peer networks themselves.

Though any proposal to pay artists for peer-to-peer activity is welcome, DCIA's suggestions "need to be taken with a large portion of the salt shaker," said Adam Eisgrau, executive director of P2P United, a competing trade group.

An earlier DCIA proposal would have positioned member company Brilliant Digital Entertainment Inc.'s copy-protection technology as a standard, Eisgrau noted.

A spokesman for the Recording Industry Association of America said he had not had time to look over the proposal and declined comment.

Major record labels include Vivendi Universal , Bertelsmann AG's BMG, EMI Group Plc, Sony Corp.'s Sony Music and Time Warner Inc.'s Warner Music.


File Sharing's New Face
Seth Schiesel

Anna Mia Davidson for The New York

AFTER working for a parade of doomed dot-com startups, a young programmer named Bram Cohen finally got tired of failure.

"I decided I finally wanted to work on a project that people would actually use, would actually work and would actually be fun," he recalled.

Three years later, Mr. Cohen, 28, has emerged as the face of the next wave of Internet file sharing. If Napster started the first generation of file-sharing, and services like Kazaa represented the second, then the system developed by Mr. Cohen, known as BitTorrent, may well be leading the third. Firm numbers are difficult to come by, but it appears that the BitTorrent software has been downloaded more than 10 million times.

And just as earlier forms of file-sharing seem to be waning in popularity under legal pressure from the music industry, new technologies like BitTorrent are making it easier than ever to share and distribute the huge files used for video. One site alone,

suprnova.org, routinely offers hundreds of television programs, recent movies and copyrighted software programs. The movie industry, among others, has taken notice.

What Mr. Cohen has created, however, seems beyond his control. And when he was developing the system, he said, widespread copyright infringement was not what he had in mind.

Rather, he was intrigued by a problem familiar to many Internet users and felt acutely by friends who were trading music online legally: the excruciating wait while files were being downloaded.

"Obviously their problem was not enough bandwidth to meet demand," Mr. Cohen said in an interview at a Mexican restaurant near his home in Seattle. "It seemed pretty clear to me that there is a lot of bandwidth out there, but it's not being used properly. There's all of this upload capacity that people aren't using."

That was the essential insight behind BitTorrent. Under older file-sharing systems like Napster and Kazaa, only a small subset of users actually share files with the world. Most users simply download, or leech, in cyberspace parlance.

BitTorrent, however, uses what could be called a Golden Rule principle: the faster you upload, the faster you are allowed to download. BitTorrent cuts up files into many little pieces, and as soon as a user has a piece, they immediately start uploading that piece to other users. So almost all of the people who are sharing a given file are simultaneously uploading and downloading pieces of the same file (unless their downloading is complete).

The practical implication is that the BitTorrent system makes it easy to distribute very large files to large numbers of people while placing minimal bandwidth requirements on the original "seeder." That is because everyone who wants the file is sharing with one another, rather than downloading from a central source. A separate file-sharing network known as eDonkey uses a similar system.

For Mr. Cohen, BitTorrent was always about exercising his brain rather than trying to fatten his wallet. Unlike many other file-sharing programs, BitTorrent is both free and open-source, which means that those with enough technical know-how can incorporate Mr. Cohen's code into their own programs.

While writing the software, "I lived on savings for a while and then I lived off credit cards, you know, using those zero percent introductory rates to use one credit card to pay off the previous card," Mr. Cohen said.

The first usable version of BitTorrent appeared in October 2002, but the system needed a lot of fine-tuning. Luckily for Mr. Cohen, he was living in the Bay Area at the time and his project had attracted the attention of John Gilmore, the free-software entrepreneur, who had also been one of the first employees at Sun Microsystems. Mr. Gilmore ended up helping Mr. Cohen with some of his living expenses while he finished the system.

"Part of what matters to me about this is that it makes it possible for people with limited bandwidth to supply very popular files," Mr. Gilmore said in a telephone interview. "It means that if you are a small software developer you can put up a package, and if it turns out that millions of people want it, they can get it from each other in an automated way."

BitTorrent really started to take off in early 2003 when it was used to distribute a new version of Linux and fans of Japanese anime started relying on it to share cartoons.

It is difficult to measure BitTorrent's overall use. But Steven C. Corbato, director of backbone network infrastructure for Internet2, the high-speed network consortium, said he took notice in May. "We started seeing BitTorrent traffic increase right around May 15, 2003, and by October it was above 10 percent of the traffic," he said.

Data for the week of Jan. 26, which Mr. Corbato said was the latest reliable information, showed that BitTorrent generated 9.3 percent of the total data traffic on Internet2's so-called Abilene backbone, which connects more than 200 of the nation's biggest research universities, in addition to laboratories and state education networks. By contrast, no other file sharing system registered more than 1 percent of the traffic, though Mr. Corbato said his network might be underreporting the use of those other services.

Just a few months ago, however, that success still had not translated into dollars for Mr. Cohen.

"This past September I had, like, no money," he recalled. "I was just scraping along and doing the credit card thing again."

But unknown to Mr. Cohen, BitTorrent was serving as a job application. Out of the blue, he heard from Gabe Newell, the managing director of Valve Software, based in nearby Bellevue, Wash. Valve is developing what gaming experts anticipate will be a blockbuster video game, Half-Life 2, but it is also creating an online distribution network that it calls Steam. Because of Mr. Cohen's expertise in just that area, Valve offered him a job. He moved to Seattle and started work in October.

"When we looked around to see who was doing the most interesting work in this space, Bram's progress on BitTorrent really stood out," Mr. Newell said. "The distributed publishing model embedded in BitTorrent is exactly the kind of thing media companies need to build on for their own systems."

All along, Mr. Cohen had accepted donations from BitTorrent users at his Web site, bitconjurer.org, but the sum had been minimal. In October, however, Mr. Cohen's father prevailed on him to ask a bit more directly. Now, Mr. Cohen said, he is receiving a few hundred dollars a day.

"It's been a pretty dramatic turnaround in lifestyle in just a few months, with the job and the donations coming in," Mr. Cohen said. "It's nice."

According to survey data from the Pew Internet and American Life Project, file sharing is on the wane, apparently as a result of the music industry's legal offensive. Last May, 29 percent of adult Internet users in the United States reported that they had engaged in file sharing; that figure dropped to 14 percent in a survey conducted in November and December. Nonetheless, the ranks of the BitTorrent faithful - whether anime fanatics, Linux users, Deadheads or movie pirates - appear to be growing. And some are quite thankful to Mr. Cohen.

"I think Bram is going to be like Shawn Fanning in terms of the impact this is going to have," said Steve Hormell, a co-founder of etree.org, a music-trading site that predates the file-sharing phenomenon, referring to the inventor of the original Napster service. "It is a bit of paradigm shift and I can't stress the community aspect of it enough. You have to give back in order to get. Going back 15 years, that's what the Internet was all about until the suits came along."

Not surprisingly, the movie industry is not amused. "BitTorrent is definitely on our radar screen," Tom Temple, the director for Internet enforcement for the Motion Picture Association of America, said in a telephone interview. While the association first became aware of the technology about a year ago, BitTorrent's surging popularity prompted the group to start sending infringement notices to BitTorrent site operators in November.

"We do have investigations open into various BitTorrent link sites that could lead to either civil or criminal prosecution in the near future," Mr. Temple said.

For his part, Mr. Cohen pointed out that BitTorrent users are not anonymous and that their numeric Internet addresses are easily viewable by anyone who cares. "It amazes me that sites like Suprnova continue to stay up, because it would be so easy to sue them," he said. Using BitTorrent for illegal trading, he added, is "patently stupid because it's not anonymous, and it can't be made anonymous because it's fundamentally antithetical to the architecture."

That said, Mr. Cohen is not in the nanny business.

"I'm not going to get up on my high horse and tell others not to do it because it's not my place to berate people," he said. "I just sort of watch it with some amusement."


Justice Department Asks FCC To Address VoIP Wiretapping

The Justice Department has asked federal regulators to delay setting rules for carrying phone calls over Internet connections until they address how those conversations can be monitored.

FBI Deputy General Counsel Patrick W. Kelley made the request in a letter to the Federal Communications Commission.

``We look forward to working with the FCC on this matter of paramount importance to the law enforcement and national security interests of the United States,'' Kelley wrote on behalf of the FBI, Drug Enforcement Administration and Justice Department.

FCC spokesman Richard Diamond declined to comment on the letter.

The FCC is looking at how to regulate ``Voice over Internet Protocol,'' or VoIP. The technology allows users to transmit calls through high-speed Internet connections, known as broadband.

In some cases, a conventional phone, plugged into a special jack, is used to dial in. Other VoIP systems allow users to bypass the conventional telephone network entirely.

Law enforcement officials are concerned the new technology won't allow them to listen to calls the way they can now wiretap conventional phones. A 1994 law requires phone companies building digital networks to include surveillance capabilities, but there are no similar standards for VOIP technology.

Before they can place a tap on a phone, law enforcement agents must first obtain a court order. Some privacy advocates say they are concerned that VoIP wiretaps may also pick up e-mail and other data sent over the same Internet connection.

The FBI letter was sent to the FCC last week. The five-member commission is scheduled to discuss VoIP at its meeting next Thursday.

A small Long Island VoIP company and industry giant AT&T have pressed the FCC to issue the rules. As their businesses grow, they want to know whether they will be subject to the same regulations and fees as conventional phone service.

Jeff Pulver, chief executive officer of Melville, N.Y.-based Free World Dialup, said he already has met with the FBI and offered to work with law enforcement.

``The FBI is trying to get a handle on this new form of communications,'' Pulver said. ``There's a lot of opportunity to learn and to work together, which is going to happen.''

Among the issues before the FCC are whether customers who make phone calls over the Internet should have to pay the same fees as conventional callers for 911 emergency services and delivery of telephone service to poor and rural areas, schools and libraries.

In a speech last month, Chairman Michael Powell said law enforcement's views must be taken into account in any commission rules, even as he warned against over-regulating the nascent technology.

``Regulation can smother the risk-taking oxygen young entrepreneurs need to survive,'' he said. ``It can weigh down innovation with forms and filings and drain capital by adding significantly to the cost of service. And the cost of government compliance is higher and you get less competitive prices for consumers.

``Yes, there will be issues as Internet voice becomes more widely adopted. You will need to assure the legitimate concerns of public safety and law enforcement are addressed.''


Playing Games With VoIP
David Becker and Ben Charny

While the giants of the telecom industry scramble to stake a claim on the nascent market for making phone calls over the Internet, Microsoft and Sony have already discovered the first breakthrough application: talking smack to other virtual commandos.

Online services for Microsoft's Xbox game console and Sony's PlayStation 2 have created the first major consumer application for voice over Internet Protocol (VoIP) service, enabling thousands of hours of daily chat for online combatants. While a far cry from the business and home installations seen as the major market for VoIP services, online gaming is providing valuable early clues about how to deliver such services cheaply and effectively enough to entice consumers.

But VoIP isn't just for playing games. There are now about 2.5 million U.S. residents making phone calls via the Internet, whether with VoIP or a less elegant method of broadband telephony that relies on traditional circuit-switched telephone network equipment.

Getting voice to work was another matter, however. In VoIP, each second of a phone conversation is broken up into about 50 packets of data that have to travel over the Internet, arrive at the same Internet Protocol address, and then be reassembled successfully. Crowded networks and lost packets are common. "Voice had been tried in a number of PC games, and it was very cumbersome and difficult to configure," he said. "There was some healthy skepticism about whether we could get this to work."

The solution adopted by both Microsoft and Sony was to use a peer-to-peer version of VoIP, in which consoles connect directly to each other to exchange voice data instead of transmitting it over a network. Similar approaches have been promoted by a few VoIP carriers, including start-up Skype. But the peer-to-peer approach is considered generally inappropriate for business environments, where client software varies and multiple voice streams have to be accommodated.

Such concerns don't apply with game consoles, however, because the client software is identical on every system, and traffic is limited by the capacity of the game. For all the concerns about bad voice quality, Skype has resonated with consumers. It has been downloaded 6 million times.

"We had a big debate about whether voice should go all through the service or whether it should be peer to peer," Henson said. "Our ambition was to be serving many millions of users, and the topology of that design made it pretty clear peer to peer was the right choice."

Sony's SOCOM series uses a similar peer-to-peer system to enable voice chat. Seth Luisi, senior producer at SOCOM, said one of the keys to making a peer-to-peer approach work was to develop efficient software codecs to compress and decompress voice traffic.

"When I was looking for a voice solution, there wasn't really anything that fit," he said. "There weren't a lot of good voice codecs out there, so we did our own...Once the service was running, I immediately got a lot of phone calls from people wanting to know how we did it."

Henson describes similar software tweaking to make Xbox Live voice-friendly. "We put some special sauce into our front-end servers--that let us do some magic," he said.


FCC To Weigh In On VoIP Regulation
Ben Charny

Federal regulators this week are expected to issue their first major decision on Internet phone services, in a closely watched decision that could reshape the telecommunications industry.

At a meeting scheduled for Thursday, the Federal Communications Commission is widely expected to contend that companies that sell phone services based on voice over Internet Protocol (VoIP) technology aren't subject to traditional telephone rules.

The FCC is then expected to open a 12-month to 18-month public-comment period to help decide what to do next, sources familiar with
agency's plans said.

The FCC has yet to disclose its position. Still, commission watchers said they believe that the outcome is not in doubt, given the outspoken antiregulation views several commissioners aired prior to the ruling. Chairman Michael Powell and at least two FCC commissioners on the five-member board have said publicly that they believe that modern telephone laws don't apply to VoIP services.

"When it comes to nascent services such as VoIP, we should employ the regulatory equivalent of strict scrutiny.

We should make sure that our rules are narrowly tailored to the governmental interests at stake," FCC Commissioner Kathleen Abernathy said recently.

The FCC's decision is expected to derail state-by-state efforts to regulate VoIP providers, cementing a federal court decision issued last year that found that VoIP provider Vonage was not a telephone service and was thus not subject to phone rules the Minnesota Public Utilities Commission set.

Although the FCC won't likely slap traditional phone rules on VoIP services, the agency may still regulate Internet calls. For example, some industry groups are already lobbying for consideration of new rules that would require VoIP providers to offer access for the disabled, support 911 emergency services and allow law enforcement to intercept calls, among other things.

At the same time, VoIP providers are hopeful that the agency will, for the foreseeable future, steer clear of ordering price regulations and other "economic sanctions" that traditional phone companies must obey.

The FCC's expected decision Thursday comes in response to a petition filed last year by Free World Dialup founder Jeff Pulver, who asked the FCC to declare that his free Internet phone service isn't subject to traditional phone regulations.

"I just wanted to ask a simple question a year ago: 'Do phone rules apply?'" Pulver said. "In my wildest dreams, I didn't think it would become something as big as this."

Internet phone services have existed for years, but they have recently gained prominence, thanks to improvements in quality and ease of use. While traditional phone services create an end-to-end connection between callers, VoIP breaks up conversations in packets that are routed independently across a network and reassembled on the other end. VoIP calls are cheaper than circuit-switched calls, because they make more efficient use of network resources. But the biggest cost savings from VoIP come simply because the calls are usually not subject to taxes that apply to the old telephone system.

Regulators are already worried about revenue shortfalls, as more calls shift to IP-based systems. Consumer VoIP services from companies such as Vonage, 8x8 and VoicePulse have begun to sign up tens of thousands of residential customers. VoIP subscriptions could soar, as cable companies begin to market broadband phone services to their customers, threatening local taxes, if large numbers of people switch over and cancel traditional phone service.

As IP-based voice traffic surges, other sticky policy issues are waiting in the wings. Already, more than 11 percent of long-distance calls travel at least part of the way over IP networks, a number that's expected to jump to more than 50 percent by 2007. That trend raises significant policy issues related to connection fees paid between carriers for completing each other's calls.

Signaling the importance of the issue, AT&T last year filed a petition with the FCC, seeking to exempt its IP-based traffic from some interconnection charges. The FCC is still weighing its response in that case, and observers said they do not expect the agency to issue an answer by Thursday.

Cathy Martine, in charge of the company's VoIP rollout, says it could save AT&T about $10 billion a year. "We'll reinvest it and make our network better," she said.

The regulatory makeover is another example of how technology has outpaced FCC regulation. The FCC faces a number of glaring examples of just how Internet dialing has made its rules obsolete and, at the same time, how it threatens the way it funds public services like 911. Perhaps the best example: universal service fees, which telephone operators pay as a percentage of service revenues to subsidize rural telephone expansion.

On traditional phone networks, calls travel the same series of circuit switches, so it's easy to determine whether a call is local or over a long distance. But that's not the case on the Internet. Each of the approximately 50 packets of data that represent a single second of an Internet phone call could take a different pathway, sometimes halfway around the world, to avoid Internet traffic jams. The FCC's rules, rooted in geography, can't cope.

One of the most important regulatory problems that face the FCC is creating a definition of a VoIP provider.

The National Cable & Telecommunications Association (NCTA), which represents cable interests, has developed a test that it is lobbying the FCC to use, and that's gaining some favor inside the beltway, sources said.

Lobbyists said there should be at least three criteria met before labeling something a VoIP provider: It gives its customers a 10-digit telephone number; it allows customers to make calls to and from the regular phone network; and its service is IP-based.

That test casts quite a wide net. It would include most U.S. telephone service providers, which now routinely use the Internet to complete long-distance phone calls, as well as cable companies that use VoIP to enter the local phone market, plus Vonage, 8x8, VoicePulse or other subscription services that connect broadband subscribers to each other and the regular phone system.

It wouldn't include the few hundred thousand VoIP devotees who use what's called Internet-to-Internet methods such as Skype, Free World Dialup and instant-messaging clients, which completely avoid the traditional phone networks.

"Only a regulatory framework that is minimally burdensome can create the right incentives and a favorable climate in which service providers can invest, innovate and deploy VoIP services," the NCTA wrote in a recent white paper, making the rounds among the telecommunications sector's elite.

Whether VoIP is to be regulated by states or the federal government is another longer-term policy issue. On this front, VoIP providers both large and small, in addition to FCC commissioners, agree that VoIP is subject to federal controls.

Under a federal umbrella, VoIP providers would face only one policy. Currently, about a dozen states have expressed interest in crafting their own rules for VoIP, the beginnings of a possible patchwork of slightly different regulations that could slow down the pace of VoIP's spread.

With just 300,000 people in North America now paying for VoIP service, Abernathy and others feel that it would be wise to keep VoIP under the jurisdiction of the federal government, where it can be coddled with light regulations and give it enough room to expand from coast to coast.

"As VoIP providers gear up to roll out services regionally or nationally, they should not be burdened with a patchwork of disparate state regulations," Abernathy recently said.

The FCC also has shorter-term problems they have indicated they will address more immediately.

One is what to do about universal service. Both FCC Commissioner Kevin Martin and AT&T, which will use VoIP to launch a local phone service, want to base universal service not on revenue but on the number of telephone numbers that a service provider has.

VoIP luminaries want to use the FCC overhaul to redirect universal service to fund broadband expansion, an old idea that's gaining new support.


F.C.C. Begins Rewriting Rules on Delivery of the Internet
Stephen Labaton

The Federal Communications Commission began writing new rules today that officials and industry experts said would profoundly alter both the way the Internet is delivered and used in homes and businesses.

In one set of proceedings, the commission began writing regulations to enable computer users to gain access to the Internet through electric power lines. Consumers will be able to plug their modems directly into the wall sockets just as they do with any garden variety appliance. Officials said the new rules, which are to be completed in the coming months, would enable utilities to offer an alternative to the cable and phone companies and provide an enormous possible benefit to rural communities that are served by the power grid but not by broadband providers.

In a second set of proceedings, commissioners began considering what rules ought to apply to companies offering Internet space and software to enable computer users to send and receive telephone calls.

A majority of the commissioners suggested that the new phone services should have significantly fewer regulatory burdens than traditional phone carriers. The agency also voted 4-to-1 to approve the application of a small Internet company, Pulver.com, asking that its service of providing computer-to-computer phone service not make it subject to the same regulations and access charges as the phone carriers.

Industry experts say that neither the phone service nor the broadband delivery systems offered by electric companies will take any sizable market share for at least the next two years. But in moving forward with the new regulations, they said the agency was reducing regulatory uncertainty and encouraging major companies and investors to make investments in the new technologies to enable them to move to market more quickly.

The F.C.C. chairman, Michael K. Powell, and his two Republican colleagues on the commission said the agency's decisions on the two sets of rules and the Pulver application would ultimately transform the telecommunications industry and the Internet.

"This represents a commitment of the commission of bringing tomorrow's technology today," Mr. Powell said. He added that the rules governing the new phone services were intended to make them as ubiquitous as e-mail, and at possibly a significantly lower cost than traditional phones, since the services would have lower regulatory costs.

A Republican commissioner, Kathleen Q. Abernathy, said that the agency and industry "stands at the threshold of a profound transformation of the telecommunications marketplace" as more companies — including such giants as AT&T and Verizon — move from circuit-switching phone technology to Internet-based technology.

But one Democratic commissioner, Michael J. Copps, raised objections to the Pulver petition and questioned the underlying themes of deregulation in the two rulemaking proceedings. He said that they had set the agency on a course that could effectively rewrite the Telecommunications Act of 1996 and make it easier for the incumbent phone companies to escape necessary regulation.

Mr. Copps also criticized the majority of the commission for rejecting a request by law enforcement agencies that the F.C.C. first work out the legal and technical problems in monitoring phone calls over the Internet before granting Pulver's application or considering new rules for the Internet-based phone services.

"I believe it is reckless to proceed, and I cannot support this decision at this time," he said of the Pulver application. "The majority apparently prefers to act now and fix law enforcement issues later — along with universal service, public safety, disability access and a host of other policies we are only beginning to address."

Mr. Powell replied pointedly to Mr. Copps's criticism that the agency was rewriting the Telecommunications Act by offering a new deregulatory climate that the old phone companies might seek to take advantage of.

"We can talk about rewriting the Telecommunications Act," he said. "But the Telecommunications Act is nine years old and it is being rewritten by technology."


Spam May Be Driving Shoppers Away From Internet

BRUSSELS — The exponential growth of unsolicited junk e-mail — better known as spam — is shaking consumer confidence in the Internet and may hamper growth of the online economy, according to officials gathered Monday at a global anti-spam meeting.

A survey published by the Trans-Atlantic Consumer Dialogue, a consumer group, showed that 52% of respondents were shopping less on the Internet or not at all because of concerns about receiving unsolicited junk e-mail.

"It is very clear that the majority of citizens are very troubled by unsolicited commercial e-mails," said the survey, which was released at a global anti-spam meeting led by the Organization for Economic Cooperation and Development.

"It is also very clear that bona fide businesses are losing money because the disreputable image of spam is making consumers uneasy about engaging in e- commerce," the survey said.

Data from anti-spam software company Brightmail Inc. of San Francisco showed that spam accounts for half of all e-mail traffic. Filtering and clearing up e-mail inboxes is a rising cost for business and consumers.

Only 17% of the 20,000 respondents to the consumer group's survey said they thought their spam filters worked well. Another 21% did not even know whether their e-mail program had a filter.

An overwhelming majority of those surveyed said they either hated or were annoyed by unsolicited junk e-mails and wanted them to be banned.

"If you continue at this pace, in five years from now I do not think the Internet will be very popular," said Marc Rotenberg, executive director of the Electronic Privacy Information Center in Washington.

The OECD is calling for governments to pool resources to tackle the scourge of nuisance offers of sex aids and cheap loans. The e-mails also can be used to spread malicious viruses.

The problem costs European Union and U.S. companies more than $11.5 billion a year in lost time and productivity, according to the American Chamber of Commerce to the EU. The United Nations Conference on Trade and Development estimates that the global economic cost could reach $20 billion.

Governments are trying to tackle the problem through a mixture of regulations, codes of conduct for business and advanced technical solutions.

"Most governments do view the Internet as a key to the global economy," said Peter Ferguson, chairman of the OECD working party on information security and privacy. "Spam has certainly the capacity to interfere with that."


Online Song Sales, Though Rising Fast, Are at Most a Hopeful Blip
Jeff Leeds

John Mayer is basking in a new kind of stardom: The Grammy-winning troubadour is one of the most popular acts on Apple Computer Inc.'s iTunes music service.

In December, the 26-year-old singer captured all top three spots on the service's chart with live songs he released exclusively to Apple. And in the last nine months, the online versions of Mayer's singles have sold 161,000 copies.

But even with such popularity, Mayer's download sales equate to only about 16,000 albums — or a fraction of the 1.3 million copies that his latest CD, "Heavier Things," has sold for Sony Corp.'s Columbia Records, according to Nielsen SoundScan data.

It all goes to show that record companies looking for paid downloads to fill the void left by dwindling CD sales may be in for a long wait.

Global record sales dropped to an estimated $28 billion last year from a 1999 peak of roughly $40 billion. Paid downloads are rising on services such as iTunes, Roxio's Napster and Real Networks' Rhapsody but have barely begun to cover the shortfall. Industry analysts estimate that total U.S. sales from online music stores and subscription services were only about $60 million last year.

So label executives are trying to turn online sales into an everyday practice among consumers. The unofficial kick-off of the effort comes today, when PepsiCo Inc. is expected to air a 45-second ad during the Super Bowl inviting an expected 90 million viewers to redeem soda caps for free songs at the Apple service.

As many as 100 million songs will be given away in the promotion, and executives are expecting a redemption rate of 10% to 20%.

Upbeat executives are projecting that the U.S. online music business could generate $400 million or more this year. That would mean, of course, luring fans away from file-sharing networks, where piracy flourishes.Industry officials are hoping a massive legal assault against digital pirates and more Pepsi-style promotions will help turn the tide.

"When it came to downloading illegally, that was a slow process. It took a while to hit big, and I think it's the same thing with the turnaround" and a shift to legal online buying, said Mayer, who counsels patience for artists and executives alike.

"It might take another five years to get back in the other direction," he said. "The best we can do is put music out there, point people to where it is and hope they find it."

Industry leader Universal Music Group recorded CD sales last year of more than $5 billion with hits from such acts as 50 Cent and 3 Doors Down. The Vivendi Univeral unit's U.S. online sales were $8 million to $10 million, sources said.

British music giant EMI Group, home to Norah Jones and Coldplay, said it generated about $3.8 million in worldwide digital sales for the six months through Sept. 30, up from about $1.3 million for the prior six months.

No Bonanza Yet

Such modest figures are a reality check for executives who first ignored the power of the Internet, and then suddenly envisioned a digital bonanza reaped from fans who would buy music on their cellphones and zap them to a computer or TV set-top box. In 1999, Forrester Research was predicting U.S. sales of song downloads alone would reach $1.1 billion by 2003.

Today, online for-pay services continue to face stiff competition from unauthorized file-sharing networks, where the bulk of the history of recorded music is floating around free for the taking. And a thicket of legal and logistical troubles continue to hamper expansion.

Some artists have slowed the process by insisting that their albums not be broken up into singles available for individual sale. (Indeed, such concerns prevented Mayer's "Heavier Things" from becoming available on iTunes until Dec. 17, more than three months after it was released in stores.)

Record labels, music publishers and artists are still bickering about how much money each of them should receive from the sale of a digital track. As a result, the catalogs of the industry services are lacking the works of such acts as the Beatles and Led Zeppelin.

Complaining that too many people "are at the table and they're all competitors," Marc Geiger, veteran music talent agent and co-founder of online music firm Artistdirect Inc. said: "They'd rather kill each other half the time than win."

Indeed, even the early commerce rests on a series of temporary truces between warring factions. A two-year settlement designed to put off a fight over how fees from online subscription services would be divvied up, for example, expired in October, with music publishers' pay rates still undetermined.

Meanwhile, some of the hottest artists have limited the amount of time their record companies can sell digital downloads, waiting to see how the royalties will flow from online sales.

Punk band the Offspring, for example, agreed to sell their music on iTunes for only six months, sources said.

Such core issues may not be resolved for years.

"We all want to encourage online services, because we think it's a major part of the future. But we're going to have to sort out the rights," said music attorney Jay Cooper, who represents such acts as Sheryl Crow. "There's going to have to be a complete reformation of the contracts, if you want to know the truth. The battle may continue while records are being sold."

The conflicts are likely to be amplified as the labels seek to expand online services beyond the U.S. to foreign markets, where the industry earns two-thirds of its revenue.

Outside the U.S., the services will confront a web of different licensing procedures and copyright rules.

In Europe, for example, the services may have to secure rights from music publishers and set up payment systems in each nation individually. And while the major labels are happily licensing U.S. online services, iTunes and other services will have to start from scratch in Japan, where artist management firms — not the labels — control many artists' master recordings.

Global expansion probably will be hampered by more disputes with artists, some of whom are likely to challenge the customarily lower royalties they receive for foreign CD sales. Executives also say the payoff may be smaller abroad, because most international territories have far fewer Internet-wired homes.

"All of a sudden I have to look at the different copyright laws, I have to put everything in a different language and the market opportunity is smaller," said Sean Ryan, vice president of RealNetworks music services.

Still, the initial burst of sales has prompted many in the industry to raise their estimates of how big the market will be.

Alain Levy, chairman of EMI Group's recorded-music division, said that six months ago, he believed online sales would account for as little as 5% of his company's sales in five years. Now, he says, it will be at least 10% — and as much as 25%.

"We've learned that the consumer wants their music in a different form and they're ready to pay for it," Levy said. "The perception has gone from doom and gloom, to, 'Now, it's a new world and everybody's going to pay for music and use music all the time.' The truth is somewhere in the middle."


Pirated Movies Flourish Despite Security Measures

The more studios try to stifle bootlegging, the more technology works to undermine them.
Lorenza Muñoz and Jon Healey, Greg Krikorian and Patrick Day

Hollywood's all-out war against movie piracy is turning into a big-budget bomb, with illegal copies of virtually every new release — and even some films that have yet to debut in theaters — turning up on the Internet.

Sophisticated computer users currently can download pirated versions of titles ranging from "Bad Santa" to "Master and Commander: The Far Side of the World." While some of the versions are crude copies made by camcorders aimed at theater screens, a surprising number are nearly pristine transfers.

The abundance of bootlegs arrives just as the movie studios have launched their most aggressive campaign yet to protect their business from the rampant downloading that has plagued the record industry. As part of this antipiracy initiative, the studios have done everything from banning the distribution of free DVDs to awards voters to stationing security guards equipped with night-vision goggles inside Hollywood premieres to spot camcorder users.

The steps may have made some thievery more difficult, but overall, piracy appears to be up from previous years, when an avalanche of year-end awards DVDs and videos, or "screeners" as they are called, flooded the entertainment and media communities. In fact, the new security measures seem only to have emboldened some pirates.

The Motion Picture Assn. of America says that last year it found at least 163,000 Web sites offering pirated movies. The number is likely to go up to 200,000 sites by the end of the year, said Tom Temple, the association's director of worldwide Internet enforcement.

A major source of movies online is an underground network of groups that specialize in bootlegging films, piracy experts say. These "ripping crews" — which recruit members around the world to obtain, edit, transfer and store films — compete with each other to be the first to obtain a movie, the experts say. They frequently are assisted by people connected to the movie industry, whose numbers include cinema employees, workers at post-production houses and friends of Academy members.

Pirates usually copy a movie first by sneaking a digital camcorder into a movie theater, sometimes the very auditorium in which antipiracy public service announcements have just played before the feature attraction. These copies yield something less than DVD-quality results. After this version appears online, crews will continue to compete to deliver a true DVD-quality version before it is officially released to video stores.

Piracy-monitoring firms say the advancing technology of digital camcorders is yielding dramatic improvements in the earliest versions of pirated movies. Although these efforts vary, the best ones come close to the picture and sound quality of DVDs.

Mark Ishikawa, the chief executive of BayTSP, a Los Gatos firm that helps studios combat online piracy, said, "We have seen some copies of 'Finding Nemo' that look like they were DVDs, yet after forensics we determined they were camcorders." Said another antipiracy expert who asked not to be identified: "The quality of non- DVD screeners has increased so much in the past year, the DVD screener ban is too little, too late."

The crews store films on powerful computers connected to the Internet but not accessible to the public. But their movies quickly trickle down to places open to the Internet savvy, such as Internet chat rooms and news groups. They take pains to hide their identities and locations, and so far have remained outside the reach of federal enforcers and studio lawyers. The Justice Department has struck only a glancing blow against this type of piracy, prosecuting members of several so-called "warez" groups, loose confederations of online partners who concentrate on copying computer software and games.

Nevertheless, government agencies are paying attention. The FBI began investigating the unauthorized release to the New York Post of Mel Gibson's "The Passion of Christ" two weeks ago; by the time that probe began, federal authorities already had launched a broader investigation into the unauthorized copying of numerous other first-run films, according to sources.

Adding to the magnitude of the problem is the fact that some of these bootleg copies are pirated from inside the entertainment industry itself.

Piracy from such an array of sources means that there now are more Internet movie offerings than at the world's largest megaplex. Quentin Tarantino's "Kill Bill Vol. 1" is available in two versions, an American/European edition (with portions in black and white) and one in Japanese (all in color). Other titles available include "The Rundown," "Timeline," "21 Grams," "The Missing," "The Cat in the Hat," "Thirteen" and "Pieces of April."

The box-office hit "Elf" was available four days before its Nov. 7 release in theaters, taken from a digital camcorder recording made in a theater, with the sound most likely recorded from a cinema seat audio jack used by hearing-impaired moviegoers. Films not yet in theaters, including "Girl With a Pearl Earring" and "Monsieur Ibrahim," were taken from DVD screeners sent out in advance of the films' release.

As part of the campaign against movie piracy, the MPAA on Sept. 30 banned the seven major studios and their specialty film divisions from sending out free movies to anyone but the 5,800 Academy Awards voters. Oscar voters, furthermore, can only receive specially marked videocassettes and not DVDs, which provide better masters for bootlegs. The move infuriated the makers of lower-budget movies and less conventional fare, who feared the true motive for the ban was to bring Oscar attention back to big studio releases.

Movies from independent companies that are not part of the MPAA are turning up in a number of Internet sites. DVD copies of all of the movies being pushed for awards consideration by Lions Gate Films, for example, are available illegally online. Lions Gate began sending out screeners to an array of awards voters two weeks ago. The studio declined comment Wednesday.

The motion picture association's Temple said the main point of the ban was to delay the arrival of high-quality copies of movies online as long as possible. It's too early to tell the impact of the new rules, he said, because the studios have just started sending out screeners. But a few copies of DVD and VHS screeners have started to pop up online; for example, a VHS copy of United Artists' "Pieces of April" hit the Net on Thanksgiving.

The piracy expert who asked not to be named said the MPAA's action "has of course caused a shortage of real, true DVD screeners of movies" online. "But it doesn't matter because there are copies out there that are good enough…. Some of them even exceed the quality of VHS screeners."

Several other experts agreed that the new rules have had absolutely no effect on the availability of movies online.

"There's no difference," said Kevin Moylan, senior vice president of the antipiracy firm Vidius Inc. of Beverly Hills. "The thing to remember is that all it takes is one copy. So even an authorized screener, one of them is going to perpetrate a leak."

The MPAA ban is now at the center of a lawsuit in New York, where on Wednesday a federal judge heard a full day of testimony on a challenge by a group of independent filmmakers to the screener edict. MPAA President Jack Valenti testified that the prohibitions were necessary to combat the illegal copying and sale of videotapes and DVDs.

But two independent film producers who are among the plaintiffs in the case testified that the distribution of screeners is essential to their strategy of marketing independent films based on good reviews, word of mouth, mentions on critics' Top 10 lists and, eventually, awards nominations.

"The hardest thing with my movies is getting people to see them…. [It's] not that people would want to steal them," said producer Ted Hope, who has prize aspirations for two films this year, "American Splendor" and "21 Grams."

He and fellow indie producer Jeff Levy-Hinte, who has similar hopes for his film "Thirteen," told the judge that the major studios would have a big advantage if lower- budget films like theirs cannot send thousands of copies to opinion-makers and voters who may never see the works in theaters.

The organization's vice president supervising its anti- piracy efforts, former FBI agent Kenneth Jacobson, later told the judge that the film studios were trying to avoid what happened in the music industry, in which illegal Internet downloading is widely seen as cutting sharply into sales.

Authorities around the world already have seized "35 million [illegally copied movies] so far this year," Jacobson testified, adding that film piracy has become so rampant in countries such as China, Russia and Pakistan that the legal markets there have all but evaporated.

Miramax's Harvey Weinstein, who has used promotion campaigns to gain multiple Oscars for films such as "Shakespeare in Love," submitted a declaration stating that "a successful awards season can make the difference between a movie grossing $5 million at the box office and a movie grossing $20 million."

U.S. District Judge Michael B. Mukasey said he will rule Friday whether to grant a temporary restraining order barring the MPAA from carrying out the ban.

The MPAA and California law enforcement officials plan to announce today how they will enforce a new state law barring the illegal recording of motion pictures in movie theaters. Similar federal legislation has been proposed.
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Big Brother In Britain: Does More Surveillance Work?
Mark Rice-Oxley

KINGSTON, ENGLAND - It was all over in 54 seconds. One moment the four friends were strolling home after a night out, the next they were nursing injuries inflicted by a knife-wielding assailant.

Another sad tale of crime and impunity in modern Britain? Not quite, for the incident last April in this town in southeast England was filmed from start to finish on surveillance cameras. Police were rapidly alerted; a suspect was quickly identified, apprehended, convicted, and sentenced. Case closed.

It's successes like these that are giving CCTV, or closed-circuit television, a good name in Britain. The technology has become popular and widespread, with the result that Britons are by far the most watched people on earth, with one camera for every 14 people, according to recent estimates.

More than 4 million cameras observe all aspects of life, from town centers to transport systems, office towers to banks, commercial zones to residential areas, restaurants, bars, and even churches.

In 1990, just three towns had systems. Now some 500 do, after a decade in which more than £250 million ($460 million) of public money was funneled into CCTV systems.

"The British public seem to like it," says Martin Gill, professor of criminology at Leicester University. "One of the great problems of our lives is crime and disorder, and people feel it can be tackled by having cameras on the wall."

But serious question marks hang over the technology and its dark Orwellian implications. Many cameras are hidden or not signposted, in breach of regulations. Several cases of abuse have been documented, raising fears of snooping or worse.

Civil liberty groups complain that the intrusive lens scanning for suspicious characters contravenes that pillar of civil society - the presumption of innocence.

Research meanwhile suggests that the camera systems may not actually deter criminals.

"One of the concerns about CCTV is that it can give a false sense of security," says Barry Hugill of Liberty, a civil liberties and human rights group based in London. "I suspect that the reason why people are happy with CCTV is that they say it makes us safer and stops crime. But we don't think there's evidence that that is the case."

Indeed, research has yet to support the case for CCTV.

A government review 18 months ago found that security cameras were effective in tackling vehicle crime but had limited effect on other crimes. Improved streetlighting recorded better results.

A new report being drawn up by Professor Gill for the government promises to be no more favorable in its assessment of CCTV as a crime-fighting tool.

"I have talked to offenders about this," says Gill. "They say they are not concerned by security cameras, unless they were actually caught by one."

Britain is a case apart from Europe, where most countries embraced the technology only in the late 1990s - and then with caution. According to researchers now preparing a report on comparative systems, France tends to limit coverage to high-risk locations and public buildings, while in Spain, surveillance is tightly controlled. In Austria, it is used primarily for traffic and transport systems. In Germany, it was severely restricted in public spaces until recently.

But in Britain, the public has had a soft spot for CCTV ever since it was used to dramatic effect to solve a wretched crime more than 11 years ago.

Most people can still picture the grainy footage of two juveniles leading 2-year-old Jamie Bulger by the hand out of a shopping mall in Liverpool. He was found dead days later. Without those images, experts say, police would have been looking for a culprit with an entirely different profile from the 11-year-old offenders.

"Since Jamie Bulger's case over here, the public see CCTV not as Big Brother but as a benevolent father," says Peter Fry, director of the CCTV user group, a 600-member association of organizations who use the technology.

"If you ask the public what they would like to do about crime, No. 1 is more police on the street and No. 2 is more CCTV," he adds.

The trend coincides with a growing culture of snooping in Britain, where speed cameras rule the highway, residents post their own cameras to spy on trespassers, and the favorite TV shows revolve around hidden cameras observing bland people lounging around.

But not everyone is reassured by the idea of lenses capable of reading a car license plate from half a mile away. Anecdotal evidence suggests the technology can be used for voyeurism, and concerns remain about who gets access to the tapes, which are typically held for a month before being erased.

In one case, a man's attempted suicide was caught on camera and passed on to television. Mr Lazell says he sometimes gets individuals calling on him to use the technology to spy on partners.

Prof. Clive Norris, deputy director of the center for criminological research at Sheffield University, told a recent conference that the technology "enables people to be tracked and monitored and harassed and socially excluded on the basis that they do not fit into the category of people that a council or shopping center wants to see in a public space."

Legislation requires authorities to clearly signal where cameras are in operation, yet as many as 80 percent are thought to break this rule.

Some cameras are being developed with face-recognition technology that raises further alarms.

"There are privacy concerns," says Mr Hugill of Liberty. "There are people who believe that we have fundamental human right to go about our business without being spied on. CCTV is spying. It's monitoring your every move."

Naturally, surveillance enthusiasts scoff at such logic, saying that operators will not be focusing on the average member of the public, but on anyone acting out of the ordinary.

For Mr. Lazell, it's a trade-off: a little liberty for greater security.

"All progress offers compromise," he comments. "Would you be prepared to take down all cameras in the Underground and let terrorists move about without being seen?"


Bombs away.

Zip Files Hide Viruses

New techniques help to spread chaos
Paul Roberts

Malicious hackers are finding other ways to maximise increased ZIP file use with viruses.

A recent security advisory from AERAsec Network Services and Security GmbH in Hohenbrunn, Germany, found that many anti-virus engines are vulnerable to denial of service attacks from so-called "decompression bombs," in which gigabytes of data are zipped into very small files.

Anti-virus engines that try to unzip these bombs often crash when trying to handle the huge amount of data stored in them, AERAsec researchers warned.


Microsoft Takes Drastic Step To Keep Explorer Viable

Cuts out Internet standard for passwords.
Kieren McCarthy

Microsoft has taken a drastic step to prevent Explorer from being undermined by security holes and announced plans to cut an Internet standard out of its browser.

The software giant has not disclosed when its “patch” - but more accurately described as a “limiter” - will be made available, but it has said that it will prevent people from automatically logging into a website using just the browser’s address line.

The announcement of an upcoming fix, rather than the release of the fix itself, points rather conclusively to the fact that another hole discovered this week (which compounded the problem) has forced the company’s hand.

The original problem has been used by con-artists to make Web users think they are visiting one site when they are in fact at another. This is done by twisting the Internet standard that allows you to sign into a website with a password and username using just a single address line of the form: http(s):// username: password@website.com.

If you replace the “username: password” part with a website name like “www.techworld.com” and put it as a link in an email of on a website, it looks to the Net user as if the link leads to Techworld whereas in fact it leads to Website.com.

This simple ploy has been used to con people all over the world by making them think they are visiting trusted sites including PayPal and eBay, among others.

However, the problem was made even worse in December when it was found that the introduction of a simple set of characters made the con even more convincing because one the link was clicked, even the browser itself displayed the false Web address. This meant that someone would have nothing but their own suspicions over whether a site was real - Explorer displayed exactly what the con-artist wanted it to.

To make matters even worse, this week another hole was revealed (although it appears to be identical to one first discovered and pointed out to Microsoft nearly three years ago) in which a user could be conned into thinking he/she was downloading a certain file when they were downloading something completely different.

When a Web browser can’t be trusted to tell you what site you are visiting and even what you might be downloading, you really have to question whether it is viable as a Web browser at all.

Microsoft swiftly recognised the huge issue involved and has jumped in saying it is producing a fix before the idea of Explorer as a liability gathers momentum. This “fix” is clearly painful for Microsoft to introduce as it pulls functionality out of its browser. It is only pulling it out of Web pages (i.e. http(s)) at the moment, but it may also have to do the same for FTP sites - effectively killing any plans to make its browser practical as a website updater.

Microsoft was criticised for not introducing a fix for this problem in January, leading many to believe it was not fixable. Its decision to cut the whole thing out is a good demonstration that it wasn’t.

To be fair though, Explorer is not alone in this problem - all the other browsers have the same issue with spoofed addresses. Mozilla has also yet to find a solution. Opera throws up a warning box if it believes it may be a spoofed address.

We’re not Web developers but it seems to us that rather than destroy the standard it would make far more sense to make it more exacting. For example, specifying what format the username and password have to be given in order for it to work. In this way it would be possible to cut out any misleading links.

Who for example would feel comfortable following a link to the site “http://microsoft8756.com”?


Requiem for the Record Store

Downloaders and Discounters Are Driving Out Music Retailers
David Segal

With a total stock of more than 85,000 albums, Manifest Discs & Tapes was a music lover's mecca in the North and South Carolina towns where it operated. And despite an industry-wide downturn in CD sales in recent years, all five Manifest stores were turning a decent profit right up until the end of 2003.

So there was shock all around when chain owner Carl Singmaster announced in late December that Manifest would close all locations and lay off all 100 of its employees. There were still plenty of consumers eager to browse the bins, Singmaster explained, but his company's prospects looked bleak and were getting bleaker.

"I felt like I needed to take this opportunity to exit," Singmaster said in a telephone interview. "Indies in the smaller markets face a very risky environment."

It's not just the indies, and it's not just the smaller markets. On Thursday the parent company of Tower Records, which has four stores in the Washington area and a few dozen more in major cities nationwide, was on the verge of filing for Chapter 11 bankruptcy, according to news reports, having failed to find a suitable buyer. In September, the bankrupt Wherehouse Entertainment chain was acquired by a company that promptly said it would close 35 under-performing stores. Mall chains such as Sam Goody are hurting, too.

As pop's superstars strut down the red carpet in Los Angeles tomorrow night for the Grammy Awards, there's something close to panic in the retail trenches of the music business. The record store is in serious trouble. Sales have been hammered by Internet piracy as well as competition from big-box retailers, such as Best Buy and Wal-Mart, which are two of the nation's leading music vendors. Online CD stores, such as Amazon.com, are gaining momentum, too -- 3 percent of the market in the most recent survey by the Recording Industry Association of America, up from zero eight years ago.

Now a new threat looms. The market for legally downloadable music is tiny today, but the success of Apple's iTunes online music store and the rush of rival services to the marketplace is expected to gobble up an ever-larger share of the pop music pie. A recent study by Forrester Research, which examines technology trends, predicts that in five years fully one-third of all music will be delivered through modems, and the CD itself will be passe, if not obsolete, in the years after. This isn't necessarily bad news for the record labels, but it could be lethal for brick-and-mortar stores.

"I tell retailers they need to get out of the plastic business," said Josh Bernoff, the Forrester analyst who wrote the report, titled "From Discs to Downloads." "Two-thirds of the people who currently download say that when it comes to music, it isn't important to them to hold a physical object. They're done with the CD. They just care about the songs."

If that's true, the album is doomed and the industry is headed back to its roots in the '40s and '50s, when the single was the most popular format. It's already moving that way. Last week, the punk trio Green Day released a cover of the rock classic "I Fought the Law" through a promotion advertised on the Super Bowl and available exclusively on iTunes. That's a peek at the future: Hear the song one minute, own it the next.

That's a transaction that doesn't require a record store, of course. As a precedent, consider the airline ticket. Thanks to online travel sites and the advent of ticketless travel, millions of flyers no longer think of tickets as physical objects that must be printed and brought to the airport. And that's been brutal for travel agencies: in the past three years, 30 percent of them have closed, according to Airlines Reporting Corp., which keeps tabs on the industry.

Plenty of stores like Manifest have surrendered, while others believe the end is inevitable, if not yet near.

"The fat lady is warming up, but she's not exactly singing," says Mike Dreese, who runs Newbury Comics, a music chain in Massachusetts. "We're five to seven years from a complete meltdown. The only question is whether our death is in seven years or eight. Everybody's lights are out in 10."

This isn't the first time the death knell has been sounded for a segment of the real-world retail market. Bookstores were supposedly doomed by Amazon a few years ago, and by e-books after that, and yet there are still plenty of Borders stores and Barnes & Nobles -- in part because they started selling CDs -- and even independent bookshops around. People like getting out of their homes, touching the merchandise and mingling more than a lot of tech-enamored Web experts predicted.

Furthermore, most record retailers, Dreese included, aren't going quietly. Many are going loudly, by inviting bands for in-store performances that draw customers. Others are diversifying into other product categories, stocking comic books, posters and clothing lines. Others are getting into DVDs of every kind, including music, television shows and movies.

"The music store of the future will have to be an arcade," says Roy Trakin, editor of Hits magazine, a music industry tip sheet. "A place where you can try out things, grab legal downloads, see performances."

Retailers are also scrambling for a seat at the digital download table. A consortium of the biggest players -- including Virgin, Tower and FYE -- will launch their own downloadable music stores through a technology company they jointly invested in, called Echo. The idea is that Echo will allow the stores to split the cost of building a downloadable sales infrastructure, then handle transactions and downloads on separately branded Web sites.

"Our members do $5 billion worth of business now," says Echo's president, Dan Hart. "The question is, how do you leverage those assets?"

Virgin is now taking its first tentative steps into the downloadable market. Over the Christmas holiday, the company revamped its San Francisco store by adding something it calls Mega Play, a system that allows customers to listen to any album in the store. By June, says company CEO Glen Ward, the system will offer song-at- a-time downloads for portable MP3 players, and eventually there will be frequent-buyer cards that allow repeat customers to build up credits for free downloads.

"There will remain a place for the physical product," Ward predicts. "A good retailer can help people figure out what is new and what is recommended. But we'll offer the chance to buy anywhere people want to buy -- from the home, the office or in a store."

The trouble is that record stores are up against companies that can consistently beat them on price. Best Buy and Wal-Mart often sell new CDs a dollar or two below wholesale prices, using the lure of the new Sheryl Crow album, for instance, to bring customers to the stores and sell them something else, like a high-margin computer or a washing machine. Likewise, at 99 cents per song, Apple is actually losing money on each track it sells. It earns the money back, and then some, by selling iPods, which start at $249.

It's hard to beat rivals who consider music a loss leader, especially given recent trends. CD sales were down more than 8 percent, year over year, in 2002 and dropped another 2 percent in 2003. The most encouraging sign of relief arrived last month, when Nielsen SoundScan reported that sales figures for January were up 10 percent over the same month last year. The uptick might reflect a rebound in the economy, store owners say, or it could be the fruits of the Recording Industry Association of America's high-profile lawsuits against online pirates, which might have scared many people straight. Or it might be an aberration.

Regardless, many in the business blame not just the fans of file-swapping services such as Kazaa for their current woes -- they blame the labels, too.

The rise and fall of Manifest tells the story. Singmaster opened his first store 19 years ago, and since then has often been confounded by the labels' addiction to the album format. It requires fans to pay around $15.99 for, say, a 12-song disc that might have only a couple of tunes they'd like to hear. The single, once the mainstay of the record business, was getting scant attention from the labels. Eventually, as the public demand for a la carte, downloadable music became clearer, owners like Singmaster had a hard time getting in on the action.

"We said, 'Just give us access to anything that is available online,' " Singmaster says. "We'll give you 69 cents a song, just like Apple does. Just let us burn a physical CD, and we'll sell it."

Manifest finally signed a deal for a $3,000 computer system called a Starbox, which allowed customers to burn songs onto a CD, but, under the terms of a licensing agreement, prohibited staff from burning discs or creating compilations on their own. It was as though Manifest employees were teaching every customer how to make a doughnut but couldn't bake any themselves.

"Can you imagine if there was tremendous consumer demand for an 18-ounce Pepsi and we told Pepsi about this demand?" Singmaster says. "How long do you think it'd be before Pepsi started selling an 18-ounce Pepsi to anyone, anywhere? The record industry has created all these barriers, and those barriers have alienated consumers."

The downloadable music system is erecting new barriers, he says. He couldn't offer all the tracks his customers were requesting: four songs that John Mayer released exclusively through iTunes, four Johnny Cash tunes released through the same service. Then there are the deals that labels are cutting with big-box retailers, such as a Rolling Stones DVD released last year that was sold only through Best Buy. That so infuriated some store owners that they pulled all Stones albums from their inventory.

Manifest's sales sank 30 percent in the past three years, causing Singmaster to close two of the seven stores he then owned. Business at one of those, in Clemson, S.C., dried up almost overnight when the university there installed broadband Internet connections in dorms, Singmaster says.

"You can tell me all that online business went to Amazon, but I'd like to see the receipts," he says.

The five stores remaining were getting weaker but still turning a profit when, in December, Singmaster's leases were up for renewal. He decided to jump before he was pushed. He eventually found buyers for all but one of the stores, thanks in part to local newspaper coverage of the closing. Once he closes those deals, he'll be looking for a new line of work.

"I have no idea what I'll do next," he says. "I really don't have another plan."


St. Paul Passes Resolution Condemning PATRIOT Act
Mark Connor

The St. Paul City Council recently joined Minneapolis and more than 200 cities that have passed resolutions condemning the 2001 USA PATRIOT Act. The resolution was passed with a 6 to 1 vote, the only dissenter being Ward 6 member Dan Bostrom. The wording of the three and one-half page resolution reveals the specific concerns the Council has with how the legislation affects St. Paul residents, as well as how it encroaches on the city’s ability to run its own affairs without undue interference from the federal government. Councilmembers Kathy Lantry, Ward 7, and Dave Thune, Ward 2, spoke with Pulse about the resolution late last week.

“I think if people really took a look at some of the aspects of the PATRIOT Act and what rights they’re giving up, they would be appalled,” Lantry said, explaining her motivations for signing the resolution. A grassroots organization called The Bill of Rights Defense Committee first presented the resolution to the City Council more than a year ago. Some Councilmembers found the language in parts of the original document problematic, but Patrick Harris, Ward 3 Councilmember, worked on a revision of it, eventually coming up with the version that passed, which is more similar to a resolution written by the National League of Cities. “That’s how democracy works,” Lantry said. “The general public decides what they want to have made an issue. I never think we should underestimate the force that a bunch of small entities getting together can have.”

While emphasizing their recognition of the need for effective measures against terrorism, Lantry and Thune both gave specific examples of the aspects of the PATRIOT ACT that trouble them the most.

A provision of the act requires librarians to turn over records of what reading material a library patron checks out when a federal agency demands it, but the librarian will be guilty of a felony for even revealing that the government has made such a demand.

“At our St. Paul Public Library Board meeting,” Lantry explained, “one of the Councilmembers asked the director of libraries if she had been asked to provide any of that. She said she couldn’t answer that. She can’t even report to the board she’s supposed to report to, because that would be illegal.”

“The PATRIOT Act may have been well intentioned,” Thune argues, “but unfortunately I think it was sort of grounded in some kind of anti-citizenry thing that the right wing has been wanting to pass for a long time, and this was their excuse.”

Thune agrees that the Library Board meeting alluded to by Lantry had a major effect on the City Council’s collective opinion regarding the resolution. “It’s interesting how things align themselves,” he said. “Off the top of my head I asked our chief librarian if the federal government had requested any records from our library ... That’s really wrong when a good civil servant, a marvelous library director, is put in that kind of a position by the federal government, because they can’t even answer ‘yes,’ ‘no,’ or deny to their own board of directors.”

Other areas of the PATRIOT Act specifically referred to in the resolution are “Section 206, which effectively eliminates judicial supervision of telephone and internet surveillance,” and “Section 213, which permits law enforcement to perform searches with no one present and to delay notification of the search of a citizen’s home.” The resolution further condemns the expansion of the PATRIOT Act with the Domestic Security Enhancement Act (DSEA), which would further restrict Constitutional rights. The resolution also reaffirms St. Paul’s commitment to prevent racial profiling by the city police force.

Bostrom, the sole dissenting vote, is a retired St. Paul police officer with many family members who have also worked in law enforcement. Debbie Montgomery, Ward 1, is also a retired St. Paul police officer and has sons who work in law enforcement. She is the first African American woman to hold the position of Commander in the department, and she is also the first African American woman elected to the St. Paul City Council.

In a related development, U.S. District Judge Audrey Collins ruled unconstitutional a PATRIOT Act provision banning certain types of support for terrorist groups. In a case filed by The Humanitarian Law Project, which provided what it describes as human rights training to the Kurdistan Workers Party, which is designated a terrorist group by the U.S. for its support of the Kurdish fight for independence from Turkey, Collins said the law is so vague it risks violation of the First Amendment. This ruling could effect the eventual trial of Mohammed Warsame, the Somali-born Canadian citizen arrested in Minneapolis in December and charged last month with “providing material support to a designated terrorist organization.” Although they are different cases and the secretive nature of Warsame’s detention and indictment make an evidentiary prediction of his fate less feasible, the judicial interpretation of at least parts of the USA PATRIOT Act as unconstitutional is, along with the rising numbers of cities condemning it, indicative of just how problematic the legislation is for a country still claiming to be free.


New York City Passes Resolution Against Patriot II

New York City has become the latest U.S. city to pass a resolution against the Patriot Act. The City Council called upon Congress to take action to prohibit passage of the Domestic Security Enhancement Act, known as Patriot II.


Piracy shock troops.

Executive Homes of Sharman/BDE Raided
James Pearce

Music Industry Piracy Investigations this morning raided the offices of P2P companies Sharman Networks and Brilliant Digital Entertainment, along with the homes of key executives and several ISPs.

MIPI obtained an Anton Pilar order - which allows a copyright holder to enter a premises to search for and seize material that breaches copyright without alerting the target through court proceedings - yesterday from Justice Murray Wilcox, and began raiding premises in Queensland, New South Wales and Victoria this morning searching for documents and electronic evidence to support its case against the peer-to-peer companies.

In addition to the offices of Sharman Networks and Brilliant Digital Entertainment (BDE), MIPI raided the residences of Sharman Networks' chief executive Nikki Hemming, Brilliant Digital Entertainment chief executive officer and president Kevin Burmeister and Phil Morle, Director of Technology at Sharman Networks. Monash University, the University of Queensland and the University of New South Wales were also raided, as well as four ISPs including Telstra.

"Telstra lawyers are presently working with lawyers from the record labels in order to determine exactly what information is being sought under the terms of the order," Telstra spokesman Warwick Ponder told ZDNet Australia . "We have not been asked for and will not provide any BigPond subscriber information."

"Telstra has made it very clear for a long time now that it does not support copyright infringement or any other illegal activity," said Ponder. "At the same time Telstra clearly respects its obligation to protect customers' information and privacy under the Telecommunication Act and Privacy Act under Federal law."

MIPI general manager Michael Speck told ZDNet Australia the order was specifically targeted at the operators of the Kazaa network. "This is not about individuals, this is about the big fish," said Speck. "This is a signal that Internet music piracy is finished in Australia." The ISPs and universities were raided to gain evidence about the operators of the Kazaa network.

The investigation into the Kazaa network has been ongoing for six months, and was precipitated by a significant change in the physical and technical structure of Sharman Networks, according to Speck. "The Kazaa operation infringes copyright within the terms of the Australian Copyright Act," he said.

"This action appears to be an extraordinary waste of time, money and resources going over legal ground that has been well and truly covered in the US and Dutch Courts over the past 18 months," said Sharman Networks in a statement. "This is a knee-jerk reaction by the recording industry to discredit Sharman Networks and the Kazaa software, following a number of recent court decisions around the world that have ruled against the entertainment industry’s agenda to stamp out peer-to-peer technology."

Sharman Networks became a target for the music industry when it purchased the Kazaa peer-to-peer file-sharing technology from its Dutch creators Kazaa BV in 2002. It has had a long relationship with BDE, and in 2002 had to defend against a backlash when it was revealed spyware had been included with the Kazaa software. BDE subsidiary Altnet was later formed and offered to pay people for hosting content on the Kazaa network.

"Kazaa operators know the difference and make the decision as to whether they facilitate legitimate or illegitimate downloads," said Speck. "It's very clear they are facilitating and authorising global copyright infringement."

Sharman disagreed, claiming it bought the Kazaa software "with the express purpose of building it into a legitimate channel for the distribution of licensed, copyright protected content which in turn financially benefits artists".

"There is no doubt this is a cynical attempt by the industry to disrupt our business, regain lost momentum, and garner publicity," said Sharman. "The assertions by plaintiffs are hackneyed and worn out. It is a gross misrepresentation of Sharman’s business to suggest that the company in any way facilitates or encourages copyright infringement."

Monash University and the University of Queensland have challenged the order, and the arguments will be heard before Justice Wilcox on Friday.

Sharman Networks, Australian subsidiary LEF Interactive and BDE will face the record company lawyers before Justice Wilcox on Tuesday.

According to MIPI, there are around 3 million users simultaneously online and connected to the Kazaa network at any one time sharing around 573 million files. More than 850,000 tracks are made available by over 2,500 Australian users. If each downloaded track was purchased for $0.99 the total would be more than $2bn (£1.09bn) per month globally.


Aussie Record Industry Raids Kazaa Offices
Jay Lyman

"This is a knee-jerk reaction by the recording industry to discredit Sharman Networks and the Kazaa software, following a number of recent court decisions around the world that have ruled against the entertainment industry's agenda to stamp out peer-to-peer technology," Sharman Networks said in a statement.

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In a move reminiscent of government tactics used against drug dealers and organized crime, an Australian group working on behalf of the recording industry there raided offices and homes belonging to executives of the Kazaa peer-to-peer (P2P) network operator, Sharman Networks.

Using a search order secured from an Australian federal court, the Australian record industry's Music Industry Piracy Investigations (MIPI) unit served the order at Sharman's Sydney offices and executive homes, indicating its intentions to take legal action against the company.

The move, among the most aggressive of the recording industry's efforts to quash the trading of copyrighted music online, is likely to earn the industry even more anger from consumers who already have witnessed the industry bring lawsuits against individual computer users accused of illegally sharing music through services such as Sharman's Kazaa network.

"It's a pretty aggressive tactic to start searching individuals' homes," Yankee Group senior
analyst Mike Goodman told TechNewsWorld. "They have a really good chance of shooting themselves in the foot again."


Aust Music Investigators Head To Vanuatu To Tackle Kazaa
James Pearce

An investigator for Music Industry Piracy Investigations (MIPI) this morning formally served papers on Sharman Networks at its headquarters in Vanuatu in relation to the just-launched Australian copyright infringement case.

On Friday, MIPI obtained court orders to search 12 sites across Australia to hunt down evidence of copyright infringement. One of the targets of the searches was Sharman Networks, owner of popular peer-to-peer software Kazaa. Sharman Networks is registered in Vanuatu.

"As a formality you always serve the papers on the registered company as well," MIPI manager Michael Speck told ZDNet Australia . Sharman Networks incorporated itself in Vanuatu to capitalise on tax efficiencies.

MIPI also targeted Brilliant Digital Entertainment (BDE) – the owner of peer-to-peer technology company Altnet, which partners with Sharman Networks to offer authorised content over the Kazaa Network – a move which BDE described as "ironic".

"It is ironic that the music industry would target Brilliant Digital Entertainment in its attacks against online piracy when the business and technology of BDE subsidiary Altnet are expressly designed for authorised distribution of online content," said Altnet in a statement.

"Altnet works on behalf of major independent labels, video game companies, and prominent software firms and film studios to securely sell digital media to the largest Internet audience with a near zero cost of distribution," said Altnet. "Altnet is far and away the largest distributor of licensed digital media in the world."

Despite the attack, Altnet is still keen to partner with the major record labels to distribute their music content via peer-to-peer technology. "Altnet remains committed to the commercialisation of P2P and our door is still open to the major record labels and film studios," said the company. MIPI represents several major record labels in Australia.

In a series of raids last week, MIPI targeted the offices of Sharman Networks, BDE, the homes of key executives of the two companies, three Universities (University of Queensland, Monash University and the University of NSW) and four Internet Service Providers, hunting for evidence of copyright infringing activity involving peer-to-peer companies.

MIPI declined to comment why certain ISPs and universities were singled out for the searches. "The targeting was based on matters that had arisen during the course of the investigation," said Speck.

It is likely MIPI was searching for content hosted on servers at the ISPs and universities that supported their case. For instance, Kazaa uses the services of Akamai, which claims to be "the world's largest on demand distributed computing platform for conducting profitable e-business". ZDNet Australia understands the raid on Telstra may be related to the fact some Kazaa site content is hosted on Web servers on the Telstra network that are used by Akamai.

MIPI and the defendants will appear in the Federal Court before Justice Murray Wilcox tomorrow.


Telstra Attacks Music Industry Raids
James Pearce

The music industry's piracy investigations unit is in danger of losing one of the legal tools it relies on to gather evidence of copyright infringement, as Telstra joined Sharman Networks in attempting to have the Anton Pillar orders used in raids on company premises and individuals on Friday overturned.

Telstra joined an application by Sharman Networks yesterday to have the Anton Pillar orders thrown out, arguing that Music Industry Piracy Investigations (MIPI) could achieve the same outcome with a subpoena or pre-trial discovery.

"We argued against a particular legal tool used by the music industry to get the information they wanted," Andrew Maiden, group manager of Public Policy and International Regulatory at Telstra told ZDNet Australia . He said Anton Pillar orders don't give Telstra time to prepare, increases the cost of compliance and dilutes the legal rights of the telecommunications heavyweight's Internet service provision arm.

MIPI also used an Anton Pillar orders in a raid against Comcen, the directors of which have been included in litigation. Telstra are claiming that because they are not a party to the litigation they had no reason to destroy evidence, and an Anton Pillar order was therefore unnecessary.

If Telstra and Sharman are successful in convincing the courts that Anton Pillar orders should not be issued in these circumstances, MIPI stands to lose a tool it relies on to gather evidence. "We'll abide by the decision of any court," Michael Speck, managing director of MIPI told ZDNet Australia . However, he reiterated that the order was "court-sanctioned and court-monitored", and that MIPI was comfortable with the action it took on Friday and confident of the outcome.

"We're resisting this on a matter of principle," said Maiden. "Because in the future as more information is stored electronically Telstra is going to be asked more often to provide electronic forms of evidence. We don't want a precedent that allows evidence to be collected using an Anton Pillar order with the costs and obligations that come with that, rather than by subpoena or pre-trial discovery."

"It's really hard to cooperate when you get a knock on the door and people rush past you to seize evidence," said Maiden.

Speck insisted that an Anton Pillar order was necessary in order to gain all the information MIPI thought was available and relevant to the case.

"Telstra appear to be saying that the law in Australia as it stands is inappropriate to it and should be changed," said Speck. "This looks more like an attempt to protect its Internet business over the need to protect its music business."

"I think it will be a concern to artists throughout the world that when it comes to the pinch this telco will throw its weight behind its online business rather than music," said Speck.

Telstra has been concerned about being perceived this way, especially after recently launching an online music store. "We've conducted diplomacy with the music industry over the last few days so they understand we didn't object to the principle, just tactics," said Maiden, adding that if the Anton Pillar order is overturned and MIPI returns to gather the evidence using another method Telstra would cooperate fully.


Please Don't Squeeze the Sharman
Patrick Gray

SYDNEY, Australia -- The makers of Kazaa, the peer-to-peer file sharing software, challenged the validity of a court order used by the Australian recording industry to raid its offices last week.

The company, Sharman Networks, threw down the legal challenge Tuesday in Australia's Federal Court in Sydney. Sharman was raided by Music Industry Piracy Investigations, a private investigations unit established by the Australian Recording Industry Association to crack down on copyright infringement, including illegal Internet file sharing.

MIPI successfully applied to the federal court for a number of private search warrants, known as Anton Piller orders, which were executed at 12 locations, including Sharman's offices in Sydney. The order allowed MIPI to seize data and documents from all 12 sites, including the private residence of Sharman chief executive Nikki Hemming. The raids are a prelude to a copyright infringement suit, which will argue that Sharman has the ability to block the transfer of copyrighted works through its software but refuses to do so. Sharman vehemently denies the claim.

On Tuesday, Sharman launched a legal counter-attack, accusing MIPI of not disclosing all "material facts" to the court when it applied for the order. If that charge is proven, the order could be rendered invalid. The company claims MIPI did not tell the court there had been similar proceedings against Sharman in other countries, which it claims is an omission serious enough in nature to have the order struck down.

"The music industry had already been unsuccessful in comparable proceedings in the Netherlands and U.S. concerning allegations of copyright infringement against other providers of P2P technology," a statement issued by Sharman read, adding that the company had "already cooperated fully in current U.S. proceedings by producing documents and giving statements, and that the documentation now sought by Australian recording industry companies need not be applied for or produced a second time".

Sharman's U.S.-based trial counsel, David Casselman, who has flown to Sydney to assist in proceedings, believes the recording industry is targeting the company in Australia because legal attacks in other countries have failed. He further claims MIPI made misrepresentations to the court in seeking the order. "(MIPI) failed to acknowledge that the only two courts to address that issue have found that the P2P software company does not have control," he said.

"They have now determined from the outcome in the Netherlands and the very bold writing on the wall in the U.S. that things are not faring well for them in their chosen jurisdiction," Casselman said. "The law here requires essentially the same things in the U.S. when it comes to proving vicarious or indirect infringement."

MIPI general manager Michael Speck, who has spearheaded the investigation, denies Casselman's assertion that the initiative is a part of a global strategy on behalf of the recording industry.

"This is an Australian case brought by the Australian copyright owners," he said. "Six months ago we identified technical and physical changes to the infrastructure of the Kazaa operation that make it clear that they had become an Australian operation infringing copyright in Australia."

In another development, the country's largest telecommunications company and ISP, Telstra, moved to support Sharman in its application to have the order "set aside." The telco, which is 50 percent government owned and one of only a handful of Australian companies to sell digital music over the Internet, was itself raided by MIPI. Speck said while the company is not itself a legal target, it held information pertinent to the case. Despite supporting the broader action being launched by MIPI, a spokesman for the telco said the company is worried the issuance of the order will set a dangerous precedent.

"We think the Anton Piller order is a heavy handed order that is expensive to comply with, and gives the subject too few legal rights," said Telstra spokesman Andrew Maiden. "We think that there are alternative legal instruments that could have the same effect without the drawbacks.

"It's a sledgehammer for a walnut. This is a federal court decision ... that will be relied on as a precedent."

The decision by Telstra to rush to the aid of Sharman has surprised MIPI. "I'm surprised a company with a legitimate music business and not a party to the actual proceedings would want to get involved with the pirates," he said.

Properties raided by MIPI included companies and universities in three states, among them Telstra, Monash University, Akamai Technologies and Brilliant Digital Entertainment.


After Aussie Assault, Sharman Squeezes Back
John P. Mello Jr.

Sharman Networks' legal action surprised no one at the Australian Recording Industry Association. "It's not an unexpected strategy," general manager Michael Speck told TechNewsWorld. "We're confident we'll be pursuing our copyright infringement case against the Sharman-Kazaa operation after February 20th."

Sharman Networks has moved to nullify a court order that allowed agents of Australia's music industry to raid the company's offices in Sydney last week in search of evidence for a copyright infringement case against the owner and distributor of Kazaa, a popular Internet file-sharing program.

The action by the Australian Recording Industry Association (ARIA)-- which also blitzed three major Australian universities and four ISPs, including the country's largest telecommunications company, in the raids -- was sanctioned by a legal instrument called an Anton Piller order, a measure usually issued when evidence is in imminent peril of destruction.

"There is a duty to give full and frank disclosure to the court of all material facts in order to obtain an Anton Piller order," Sharman said in a statement issued Wednesday. "It is Sharman's position that the recording industry failed in this duty. Because of this, the orders should be set aside."

Significant Omissions

A hearing on Sharman's motion has been scheduled for February 20th. According to the company's statement, some of the most significant omissions in the presentation made to obtain the order included:

The music industry already has been unsuccessful in comparable copyright infringement proceedings against other Internet file-sharing providers in The Netherlands and the United States.
Sharman already has produced documents and testimony in litigation in which it is involved in the United States, and it should not be forced to produce that evidence a second time.

"Threat of destruction of potential evidence is a key preconditon of an Anton Piller order," the statement said. "Clearly, there was no risk of destruction of documentation, as Sharman has already provided the information the recording industry seeks.

"Anton Piller orders are commonly considered a particularly intrusive and draconian mechanism," the statement continued. The recording industry has "used the equivalent of a nuclear bomb to obtain documentation that is already being produced by Sharman through the U.S. court system."

Sharman's legal action surprised no one at the ARIA. "It's not an unexpected strategy," general manager Michael Speck told TechNewsWorld. "But we're comfortable with the action that we took, and we're confident we'll be pursuing our copyright infringement case against the Sharman-Kazaa operation after February 20th."

Speck argued that the court was justified in issuing the order to seize evidence from Sharman. "This is an operation whose real aim is to conceal themselves," he said. "The way the operation is structured, the only way to properly obtain evidence in relation to Australian copyright infringements on any realistic basis was to obtain these orders."

Asked if the crackdown on Sharman was a prelude to a campaign to target Australians sharing music files on the Internet, as has been done in the United States by the Recording Industry Association of America (RIAA), Speck replied, "We're only after the big fish -- the people who are establishing major infrastructures dedicated to providing infringing material worldwide."

Sharman's latest jam has not been greeted with total shock and awe in the peer-to-peer (P2P) file-sharing community. "[Sharman is] no friend to the industry, but this is a pretty desperate measure by the recording industry," Wayne Rosso, CEO of Madrid, Spain-based Optisoft, which distributes a P2P program called Blubster, told TechNewsWorld. "This is an act of intimidation."

Recording Industry 'Stormtroopers'

"Sharman is friends of no one, and they do more to hurt our industry in a lot of ways than help us, but that still doesn't excuse the behavior of the recording industry," Rosso added. "These guys are truly stormtroopers, and they're showing their hand every single day."

Although raids like those in Australia are making headlines today, what impact they will have on resolving the larger problem remains to be seen.

"I don't think raids unto themselves will have any impact on the long-term resolution of the problem," Jonathan Zittrain, director of the Harvard Law School's Berkman Center for Internet and Society in Cambridge, Massachusetts, told TechNewsWorld.


voiceglo To Showcase First Browser-Enabled VoIP Product Line At Internet Telephony Conference & Expo In Miami
Press Release

The sound to listen for in Internet Telephony in 2004 involves things hitting the floor. Jaws, prices, and big, old clunky telephones.

The festival of gravity is scheduled to begin on Thursday, February 12, 2004 when voiceglo’s Ed Cespedes will be introducing the product line at a press conference scheduled for 9:15 a.m. in the Brickell room (near the registration desk) at the Internet Telephony Conference & Expo at the Hyatt Regency Miami, 400 South East Second Avenue. There, voiceglo will officially launch the GloPhone, a key product in its new line of hardware-free, browser-enabled VoIP solutions. Using nothing but speakers and a microphone, voiceglo customers will be able to enjoy a variety of calling options and plans – from a free plan to others with a variety of features. And with the GloPhone Express service, GloPhone users will be able to take their VoIP capabilities with them wherever they go and use at any computer terminal with Internet access. If you’re on the Internet, you’re on the phone.

For consumers, the GloPhone is free software that enables them to make and receive calls right from their web browsers to anywhere in the world. The simple- to-install GloPhone uses our Peer-to-Peer technology and has consumers talking in just minutes. All that is needed is an Internet connection (dial-up or high speed). voiceglo will assign customers a unique U.S.-based 14 digit phone number (traditional 10-digit number plus a 4-digit extension), in the area code of the customer’s choosing, to make and receive your calls. Other features include voicemail, voice2email, caller ID, call waiting, call forwarding and 3-way calling. Features NOT included are outrageous fees or confusing and costly long distance plans. Initial GloPhone plans are free to consumers, with the most expensive GloPhone plan costing $24.99 per month for unlimited usage.

For ISPs and Internet portals, the GloPhone presents a unique opportunity to offer existing users the value-added package of GloPhone via a co-branding arrangement offered by voiceglo. This partnership will cost ISP and portal partners nothing, and can actually help generate revenue for partners through a commission program that is activated when their users upgrade for voiceglo’s fee-based plans.


Thorny Issues Await F.C.C. on Internet Phones
Stephen Labaton

The effort to write the rules for Internet telephone service begins this week, and whether it succeeds may ultimately come down to a matter of money.

On Thursday, the Federal Communications Commission is set to consider approving a notice of proposed rulemaking, the first step in a lengthy process of writing regulations for Internet-based phone services. The commission is also set to issue a final decision on a petition by one of the new Internet phone companies, Pulver.com, which has asked the commission to rule that it does not need to pay interconnection access fees to phone companies for any calls made and received between computers through Internet connections.

Experts say that a ruling in Pulver's favor will not have a major effect immediately on the nascent industry because there are so few Internet phone users. But one analyst, Blair Levin of Legg Mason, said that a favorable ruling for Pulver could have a significant effect if a company with a huge consumer base, like Microsoft, were to begin offering computer-to-computer voice services.

The interconnection and access charges in the telephone industry have long been the cause of bitter fighting between local and long-distance carriers, and the new technology raises a host of complex and arcane issues that will ultimately play a huge role in the profitability of the new services.

The access fee question is not the only important issue before the commission. The commission will have to decide how to apply a host of other regulations to Internet phone services, like fees to support 911 emergency services and rules ensuring that phone service is universally available.

The proceedings were nearly stalled by objections from federal law enforcement agencies which have complained to the commission that any attempt to deregulate the service could pose legal and technical obstacles to their ability to monitor phone conversations in criminal investigations.

Under heavy political and industry pressure, the Justice Department, which had complained earlier that it was having problems monitoring Internet-based voice calls, abruptly reversed course last week. It rejected the position of the Federal Bureau of Investigation, which had insisted that law enforcement issues had to take priority over other regulatory questions involving broadband access to the Internet.

In a series of letters and discussions over the last few months, the law enforcement agencies insisted that the commission first resolve the issues surrounding the wiretapping of Internet phone calls.

Last month, John G. Malcolm, a deputy assistant attorney general who has played a lead role for the Justice Department on the new technology, said that as a result of legal uncertainties created by the commission, prosecutors had encountered obstacles in executing surveillance orders.

And on Jan. 28, Patrick W. Kelley, a deputy general counsel at the F.B.I., asked the commission to resolve the law enforcement issues before considering other new rules and petitions from some Internet phone companies seeking regulatory relief.

But on Feb. 4, Mr. Malcolm sent a letter to the commission that both contradicted Mr. Kelley and reversed the direction of the Justice Department.

"I consider it regrettable that articles appeared last week that were prompted by Pat Kelley's letter," Mr. Malcolm wrote, referring to newspaper articles on the controversy. "While it would obviously be our preference that the F.C.C. decide these issues prior to considering other broadband proceedings, we recognize that this is not practical, and have no desire to prevent the F.C.C. from doing its work."


EU To Criminalize P2P Sharing?
posted by Ketola

The European Parliament is set to debate a draft law that would weed out mass piracy of digital products, such as music and movies. There is a chance, however, that the proposed law might be stretched to include peer-to-peer file sharing as well.

The changes would create a situation similar to the one in USA, where ISPs and RIAA have been arguing whether or not the Digital Millennium Copyright Act grants copyright holders to obtain personal details of individual customers if they are suspected of P2P piracy.

"The balance between privacy of subscribers and the duty to cooperate with right holders seeking to protect their intellectual property that was reached in the e-commerce directive could be changed by this directive," said Tilmann Kupfer, British Telecommunication PLC's (BT's) European regulatory manager.

World Trade Organization (WTO) rules urge WTO members to impose criminal sanctions for people who counterfeit goods for commercial gain. That was exactly what the original draft of the law sought. European Motion Picture Association (EMPA), however, didn't feel that the proposal was enough.

"The Commission's proposal fell short of international requirements agreed at the World Trade Organization," said Ted Shapiro, director of the EMPA.

European ISPs fear that individual consumers might be placed on the same level with criminals seeking commercial gain by counterfeiting products. Legal experts have expressed similar concerns, and many feel that a law that would criminalize private P2P use would go too far.


Trade Group Suggests Paying File-Sharers

Internet users could collect paychecks rather than lawsuits when they share music through "peer-to-peer" networks like Kazaa, under a proposal outlined by an industry trade group Thursday.

Rather than losing millions of dollars in potential sales to online song swappers, the recording industry should give them a cut of the revenues when they distribute songs in a protected format, the Distributed Computing Industry Association said.

The scenario follows two others put forth by the trade group in an effort to forge peace between peer-to- peer networks and the major record labels that have hounded them and their users in court.

Association Chief Executive Marty Lafferty said record labels could see sales grow by 10 percent over the next four years if they embraced the new technology, much as movie studios increased their market when they embraced the videocassette recorder in the 1980s.

Under the plan, record labels would encode their songs with copy-protection technology so users would have to pay a small fee, between 80 cents and 40 cents, to listen to them.

Prolific song-swappers would be encouraged to convert their collections of unprotected material into the protected format, and then paid a portion of the fees collected each time somebody purchases a song after copying it from them.

Eventually, user-friendly software would let amateur musicians without recording contracts make their music available too, the association said.

But implementing the plan could be difficult because it would require the cooperation of Internet providers, record labels and peer-to-peer networks.

Most peer-to-peer networks back a model in which musicians and record labels could be reimbursed through surcharges on blank CDs and CD burners, and fees from Internet providers and peer-to-peer networks themselves.

Although any proposal to pay artists for peer-to-peer activity is welcome, the association's suggestions "need to be taken with a large portion of the salt shaker," said Adam Eisgrau, executive director of P2P United, a rival trade group.


All Played Out

Legal downloads are revolutionising the way we listen to music but, asks Claire Neesham,will the companies at the forefront of this technology ever turn a profit?
Claire Neesham

The legal download business is no longer the preserve of a few industry specific start-ups.

Companies as diverse as Virgin Megastore, Microsoft, MTV, Sony and Wal-Mart have either launched online music stores or have expressed interest in doing so.

Yet late last year Steve Jobs, Apple's chief executive officer, revealed that Apple's iTunes Music Store was barely breaking even, despite selling tens of millions of songs since its launch last April - the ten millionth song downloaded was Avril Lavigne's 'Complicated'.

Jobs says most of the income is eaten up by record companies, licensing authorities, credit-card companies and the cost of hosting the site.

Michael Robertson, the founder of the free-music site MP3.com, commented: "Apple is leading a race of lemmings into the zero-profit business of closed music downloads."

Peter Jamieson, the executive chairman of the British Phonographic Industry (BPI), disagrees.

"This is the greatest opportunity for the music industry since the arrival of the CD," he said.

The International Federation of the Phonographic Industry (IFPI) is also positive about the download business. It believes more legal downloads are better than more illegal ones.

Fran Nevrkla, the chairman of Phonographic Performance, which collects licence fees from broadcast and public performance on behalf of the record companies, thinks electronic distribution poses "a fantastic opportunity".

He says it not only allows a huge range of new music to be heard, but also enables archive material that it would not be financially viable to sell on CD to remain available.

But how can companies provide this service if music-download services cannot turn in a profit?

Peter Kastner, an analyst with Boston-based research company The Aberdeen Group, sees 2004 as the year when many companies in the sector will go bust.

"This market would be a terrible venture capital investment," he said. "I think the survivors will be household brand names. The question is which will survive?"

Ed Averdieck, the marketing director of On Demand Distribution (OD2), a European provider of music-download technology, remains confident.

OD2, which supplies the technology behind digital music-store services such as those offered by HMV, Freeserve and MSN, broke even in three out of ten months in 2003.

"If just one per cent of people who download illegal files in the UK switched to OD2's services the business would become highly profitable," he said.

But industry insiders insist around 98% of music acquired on the internet is still via a peer-to-peer network and is not being bought for download.

Figures from Forrester Research show 6% of the UK's online population admits to using peer-to-peer file sharing.

Typical is Jasper, a 15-year-old Londoner. He downloads ten to 20 tracks a week from the internet, which he transfers to his MP3 player. "Everybody does it," he says. "It doesn't feel right paying for music any more."

Elizabeth Brooks, who is the senior vice-president of business development for BuyMusic.com, part of the US-based Buy.com e-commerce business, is well aware of this attitude.

"For legal digital services to compete they need to provide a wide range of music in a format with which the younger generation feels some connection. Initiatives that try to stop them downloading music can only fail ... and the cost per tune must come down."

But estimates from the industry suggest that in the US the legal digital music suppliers are lucky to keep 10 cents (6p) of the 99 cents (55p) charged per tune (in the UK the price per tune is nearer £1 due to VAT).

Peter Kastner warns that this kind of pricing "leaves little to cover the cost of the network bandwidth and infrastructure such as computers, operators and search engines needed to run a site".

He says Microsoft and Wal-Mart have threatened to undercut the current suppliers if they launch their services this year.

But how can a supplier that can't sell digital music as a loss leader (as Kastner believes Wal-Mart will) or that doesn't have an established infrastructure (like Microsoft's MSN) expect to flourish?

Mike Bebel, the chief operating officer and president of Napster, says: "We believe that we make sufficient margin across the offering to make a profit."

The Napster 2.0 service offers both an à la carte download music service at 99 cents (55p) per tune and a subscription service that offers subscribers unlimited listening and tethered downloading of tunes to up to three computers for $$9.95 (£5.50) per month.

Both BuyMusic.Com's Brooks and OD2's Averdieck see legal online music as a volume market.

"The margins are tight, but when the volumes come through the profits will be made," confirms Averdieck.

Brooks notes: "To give the digital services the right numbers for 'all you can eat' subscription downloads, the labels would need to make the bet on volume versus pricing. That is a bet they have not yet taken."

But Jay Berman, the chief executive officer and the chairman of IFPI, believes that, even with current licensing agreements for digital music, the record companies are demonstrating that they are prepared to experiment with different business models.

John Hutchinson, the chief executive of the UK's MCPS-PRS Alliance, which represents composers and music publishers, stresses: "We are very keen to see regulat

ed online business develop."

His organisation is currently offering a discounted licence fee equivalent to 8% of a legal service's gross revenues compared to the 12% of revenues that will eventually be charged - and this agreement can be arranged with just a single e-mail or telephone call.

Are such initiatives enough? Kastner is dubious.

He believes that if the record companies bet on selling around 100 million songs a week, and charge fees that let the online stores sell tunes at 25p or 50p each, then more people might be tempted to pay for music online.

And Rebecca Jennings, a senior analyst at Forrester Research's UK Research Centre, thinks that there is room in the market for a number of players ... "but current offerings aren't flexible enough for a significant mass of online consumers to pay for them".


Is The Mood Changing Towards The Legitimate Use Of P2P Networks?
By Faultline

The mood of the media and the entertainment industry used to be very clear that file sharing equals bad and that copy protection equals good. During the past two weeks we have been told that piracy is about to be beaten and that CD sales will soon be on the rise again.

Faultline chose not to tow that party line and perhaps we have sensed in the last week that this could anyway be about to change?

Just as the file sharers are in court once more duking it out in a life or death legal battle that could see them as a permanent fixture, or eliminated from the scene forever, evidence has arisen from various parts of the industry to suggest a new lease on life for file sharing networks. The Distributed Computing Industry Association (DCIA), the association of the P2P file sharers, has proposed that a series of new business models for the legal distribution of music and film over the
networks of its members.

At the same time we have heard some praise for a new DRM lite system that does not lock out file sharing, but just makes it easy to trace back to who did any illegal file sharing. Also a UK peer to peer file sharing system has finally managed to license some major record label content and Reprise records has come up with another way around the file sharing networks, by releasing an online digital version of one of its band’s albums three months before it is in the shops. That way Reprise customers can’t copy a CD, and their only way of getting hold of the new song, during its early, most popular days, is via paid online service.

And finally this week a UK company was acquired that has technology that plugs what it calls the analog hole, stopping the swapping of music over file sharing networks without reducing playability on other devices. When a track is legally copied on a DRM controlled digital system, it allows normal copying, but when it is copied to analog devices or goes through an analog-to-digital converter or undergoes conversion to MP3, a hidden watermark suddenly becomes audible ruining the track. It strikes us that finally technology and the music labels are learning to live with P2P networks, instead of trying to crush them.

Filing suit

Just as well really, because if the appeal that began being heard this week, does not go the way of the RIAA and the MPAA, then file sharing is most certainly here to stay. This appeal was filed back in August when the Recording Industry Association of America representing the music industry and the Motion Picture Association of America, representing the film industry, jointly filed an appeal with the US Court of Appeals in San Francisco, aiming to overturn the April decision that file sharing networks such as Grokster and Morpheus do not infringe copyrights themselves and should not be shut down.

The judge at that time pointed out that it is the customers of these networks that are committing the crime, not the network or networks owners themselves.
It is this ruling that has led to the RIAA going after individual file sharers, those who actually make copyrighted material available, rather than the services that offer the file sharing infrastructure that makes it possible. At the time of the original finding, the judge compared file sharing networks with photocopiers, saying it is not their existence which is illegal, but the purposes they are put to.

The appeal has also had the weight of the National Music Publishers Association added to the original two protagonists. Grokster has always said that there is little or no new evidence for the appeal to consider, and this really looks like these organizations just want a different verdict, regardless of the law.

A statement referring to the file sharing services as “businesses that were built for the exclusive reason of illegally exchanging copyrighted works, and they make money hand over fist from it. The Court of Appeals should hold them accountable," came from RIAA president Cary Sherman as the appeals were filed. Now the courtroom argument is little different and the three-judge panel for the US 9th Circuit Court of Appeals in Pasadena are being asked for a second time to close down all file sharing networks and make them effectively illegal.

The logic is that they ONLY exist for trading copyrighted works, and that if they are allowed to stay in existence, then they should at least be made to filter out copyrighted works. The riposte from the file sharers has been that it is not possible to filter out all copyrighted works, and to refer back to what is known as the Betamax finding and be treated as it they are VHS or DVD devices. In a case heard way back in 1984 the US Supreme Court upheld Sony’s view that it was not liable for copyright infringement by selling VCRs which could be used to tape the TV. The case hinged on whether or not the devices had other, legitimate uses, which
they were found to have.

Changing the filter

If this court is satisfied that file sharing networks have other uses, then it would be powerless to overturn a Supreme Court verdict, and the RIAA and MPAA would either have to accept it or try to get leave to take it up with the Supreme Court. The ideas of putting in blocks and filters appears to be a non-starter, given that the Appeal Court would have to make an effective change in the law by precedent, and has been urged to leave that to the legislature. A new bill could be brought making it the responsibility of a file sharing network to filter the content that is shared using its software, but it is unlikely that the Appeals Court will take that on itself.

When asked why this suit was different from Sony’s case, the counsel representing the RIAA and the MPAA said that Sony had no way to prevent unauthorized copying on VCRs, but that Morpheus and Grokster, the two file sharing networks named in the suit, could apply the filters.

This is not technically true. Sony could have placed a file listing every piece of copyrighted work in existence on every VHS device and made it impossible to copy them. However this would have made the product economically impossible. But that’s what the RIAA is now asking the file sharers to do now. And we don’t think a court will impose a sanction on file sharing networks that makes it economically infeasible to carry out their business.

We don’t want to tempt fate, or pre-judge the Courts, but our guess is that the File sharing networks, in one way or another, will remain in business for some many years yet to come, so it is the other direction, that of co-existence that has become more interesting this week.

Previously media reporting almost solely focused on the unimaginative approach to file sharing that the RIAA has offered – extinguish it, don’t negotiate with it – but these other events seem to see the networks themselves growing up and beginning to realize that if they are to have a place in the universe, then they need to do some of the thinking to create a use for them and at the same time put an eventual end to illegal copying.

The DCIA is backed by Kazaa parent Sharman Networks, and its close ally Altnet and its new business model projection may have some legs. Take a look at the P2P Music models presentation at http://www.dcia.info.

It begins its pitch acknowledging that sales of CDs are going down at 2.1 per cent per year and yet it should be going up in line at least with US Gross Domestic Product, at around 2.7 per cent - a discrepancy of 4.8 per cent. It asks why the music industry is resisting overtures from P2P networks and yet encouraging online music services and asks why the RIAA hasn’t courted a marketplace that has 80 million active music lovers. Embracing it would lead to sales going up by 10 per cent per annum for the next four years, the presentation says.

What the DCIA wants to see happen is that Digital Rights Managed files are made available over the file sharing networks for purchase, that they could have pride of place in a file sharing environment a little like paid advertisements on Google are the first that anyone sees.

Initially, customers would buy these by credit card billing which is already in place at the file sharing networks, then later through their phone bills or better still their monthly ISP charges for convenience. In this environment, presumably with a cut going to the delivering network, the file sharers would promote the benefits of legitimacy and quality of content to users and the result would be 600 million legitimate paid downloads a month rising to 1.7 billion representing $900 million a month.
If those figure are right, then they would dwarf the online music sales of Apple and Rhapsody and would just about mean that P2P sales were bigger than retail sales.

By using the ISPs to bill for the service, a cut could be extracted for allowing their networks to be used for delivery, the DCIA argues, perhaps an additional monthly ISP fee for anybody having downloaded a P2P, making everybody happy. But the DCIA warns that without a micropayments billing system in place, this won’t take off. And places the responsibility for that with Telcos and ISPs.

To backfill over the existing collections that individuals have built up over the years, the DCIA asks for the labels to offer some kind of conversion of the legacy file shared music to authorized copies, carried out automatically via software so that it doesn’t involve anyone being identified or prosecuted.

Of course in order to do all of this, a Digital Rights Management regime has to be brought into play that doesn’t rely on locking down music. The one that has been suggested by the DCIA is a watermarking system.

You're all lightweights

It just so happens that such a system was described this week by the Fraunhofer-Institute, in Germany. The Light Weight DRM (LWDRM) relies on locking tracks to a PC at the stage that it is downloaded, but then using LWDRM compatible software to convert tracks into any codec of their choice including MP3. But at the same time an inaudible signature is placed on the track, in effect what we call a watermark. This watermark can be traced back to a particular PC or copy of the LWDRM software easily and if it is found on the internet, prosecution would become a formality.

The nice thing about this simple system is that personal copies can easily be made, and as long as they are not distributed over the internet, then they are ok. Even the most ardent rip and burn fan is going to think twice about even cutting a CD for his best friend, if he knows that the tracks can be identified immediately with him.

Content holders would have to have a permanent ear on file sharing content, but that could be managed by a central administration system out of a central fund, and this type of system would only be effective in countries where the local authorities could be relied upon to act when a pirated watermark is identified. But it would certainly decimate file sharing without locking down music. Locked CD protected music is not something that has not yet appealed to US purchasers of CDs, who so far have point blank refused to buy copyright protected music.

Another form of copy protection also emerged this week, with SunnComm’s distributor arm Quiet Tiger, buying UK based DarkNoise Technologies. This is a similar system to the one described above, which places watermarks on CDs. But in this system, when the tracks are illegally copied it makes the watermark audible, ruining the track.

We don’t think this approach will be quite so popular with users as the one from the Fraunhofer-Institute, because it will lock down the music so that there are no personal use copies, but it shows that the copy protection companies are at least thinking about the problem. SunnComm plans to use the technology inside its own CD copy- protection system, going to beta in just 60 days.
Whippit up

Along the same lines, EMI made headlines this week when it licensed Whippit, a UK based P2P file-sharing service to carry most of its portfolio, to start in February. EMI is the first major label to sign up, but Whippit has over 200 independent labels signed already. It hopes to license its service for just $50 per year and allow customers to download any of Wippit's tunes and save them in as many places they like. Whippit also reckons it has the ear of a further four major labels and expects to sign at least two of them. But that word, file sharing, may still scare them off.

And finally, just to throw a note of caution into anyone that thinks that perhaps Grokster and Morpheus will lose their court case and never be heard from again. Streamcast networks, distributors of Morpheus, has released a new version of the program that connects to other file sharing networks. In effect this is middeware for P2P. So requests to share files can now be picked up on other networks and the results of their search transferred back, effectively melding the entire global P2P community into a single community.

So if the law closes one down, then its customers can still link to another, and another, and so on. So far the networks included are just Kazaa, Grokster, eDonkey, Gnutella, LimeWire iMesh and Overnet, but that should do for now.

The new version of Morpheus also includes Voice over Internet Protocol software like Skype, that lets its users place phone calls over the Internet for free, so pretty soon too, VoIP traffic will move freely between all the networks.

A chilling thought if you are thinking of using a courtroom to suppress either file sharing or VoIP piggybacking.


Big Music Doesn't Deserve Your Money
David Wiernicki

There's been a lot of media buzz lately about the effect file sharing has had on the recording industry. Reporters local and national seem to look only to the RIAA's web site when writing about the most recent store closing or falling sales figure.

The RIAA talking points are that file sharing is responsible for recent sales losses, and that a file shared is a sale lost. This logic has resulted in lawsuits ranging upwards of $300 million against individual users. With yearly CD sales in the $14 billion range, this somewhat outlandishly suggests that one user was responsible for a 2.1% drop in industry revenue! What's more, the RIAA's own suggestion that some 60% of files shared on peer-to-peer networks are illegal music seems to be somewhat at odds with the MPAA (Motion Picture Association of America) claim that over 50% of file sharing is of copyrighted movies.

From the starting gate, it's clear that the RIAA plays fast and loose with the numbers. They obviously don't particularly care how close to the truth they come in justifying their attacks on file sharing -- and on file sharers. Those attacks culminated this weekend in a bizarre collaboration between the RIAA, Pepsi, and Apple, the Pepsi and iTunes commercial that aired during Super Bowl XXXVIII. In the spot, a series of fresh-faced, contrite teenagers targeted by the RIAA (not actors; despite Pepsi's involvement, the RIAA wanted the Real Thing) are labeled incriminated, busted, accused, and charged -- oddly enough, not convicted or guilty.

A particularly presentable girl then puts on her best "I'm getting back at the man" face and tells the audience that she and her pals are going to keep downloading music for free, and suggestively wiggles her Pepsi in evidence.

So we've got Apple, whose co-founder, Steve Jobs, incidentally, lets his kids neither drink Pepsi nor watch TV commercials, and Pepsi teaming up to not only strike fear into the hearts of evil-doers, but also convince kids that they're somehow fighting the good fight by pouring more money and energy into the organization that's threatening them. This, it would seem, is more than enough to justify a boycott of RIAA-backed products.

In the end, though, the RIAA's lawsuits and PR machinations are just the subtext of a much larger issue.

The RIAA is the voice of the major players in the record industry. Its policies and legislative agenda reflect the goals of the companies that receive money whenever anyone buys RIAA- label CDs from the likes of Sam Goody, Fye, and Wal-Mart.

When you buy RIAA-label CDs, your money goes to support their lobbyists and their lawyers. Those legislative efforts are aimed at destroying independent music and eliminating consumer choice.

As an independent artist, I buy a lot of CD-Rs (blank CD media) to record my music. But of the cost of every CD-R I buy, 2% goes to the RIAA, a deal going back to blank cassette tape days designed to help cover the lost sales from illegal music copying. Have I ever received any of this money? No. But I bet you the Big Music labels have. I pay Blink 182, Madonna, Britney Spears, and U2 for the privilege of making a copy of my own music.

You should boycott CDs because RIAA is ripping off independent musicians.

You should boycott CDs because RIAA labels' contracts do more to destroy music than promote it: as Steve Albini, producer of Nirvana's "In Utero" describes it, a band that signs a standard industry contract and sells a quarter of a million albums will end up $14,000 in debt to the label, which will have profited $710,000.

You should boycott CDs because the RIAA shut down Internet radio for six months, until a groundswell of public outrage forced them to back down -- for now.

You should boycott CDs when the industry launches their pay-per-download music service (named, ironically, after the breakout file-sharing company Napster), and signs a deal with Penn State to force every student to buy music they don't want, and won't even be able to keep after they graduate. You should boycott CDs because Penn State's president is co-chair of the Committee on Higher Education and the Entertainment Industry, along with RIAA president Cary Sherman.

You should boycott CDs if you don't want to hand money to an organization that's tried to pass laws that would allow it to legally hack into your computer and destroy all MP3s you have -- legal or not, yours or not -- without any due process or potential recourse, and laws that would make it illegal to have a consumer electronics device that plays any kind of media without checking with the RIAA first to make sure it's OK -- essentially outlawing non-RIAA music.

That's why you should boycott not only RIAA-label CDs, but RIAA-backed music on Internet services like iTunes, Napster 2.0, and whatever soft-drink flavor of the moment e-music store has just opened up -- and you Mac aficionados don't even have to feel bad about costing Apple revenue. The RIAA takes so much of the cut from iTunes sales that Apple can barely pay the cost of uploading the file. Buy an iPod instead, before the US slams through legislation like that just passed in Canada slapping a $22 tax on all digital music players to "pay artists" -- no matter that no artists have ever seen a penny from such taxes (which are as high as 70 cents on CD-Rs, and which, if the Canadian Recording Industry Association had had its way, would have been $21 per gigabyte of hard drive space, jacking the minimum cost of a 200gb hard drive to more than four thousand dollars!) and that you might well have already paid for the music you put on your player.

It's hard to avoid every purchase whose proceeds might end up in the hands of RIAA lobbyists. If you own a Disney DVD, a Sony TV, visit CNN.com (owned by Time Warner), or buy a computer game from Papyrus, who are distributed through Sierra, who are owned by Vivendi, a RIAA label is getting your money. But the least we can do is hit the RIAA labels where the cut is the deepest and the statement the most obvious.

Until the music industry plays fair, it's time to stop supporting it.

When the next attack on fair use or free musical expression hits Congress, call your representatives and let them know that it's time for an alternative to the RIAA -- a system which can respect the right of artists to sell music on their terms and of consumers to listen to music on theirs.


'Arresting' Kids for Downloading Music
Timothy W. Maier

Since Napster exploded on the music scene with the new millennium, allowing consumers to download copyrighted music for free, the Recording Industry Association of America (RIAA) has been attacking the file-sharing networks and knocking them down like bowling pins. Other copycat Napster- type sites have folded or given up because the cost of litigation is too expensive to keep operating. Still others, such as Grokster, the parent company of Kazaa and Streamcast, continue legally to provide equipment for the new breed of buccaneers patrolling the Internet for recorded booty.

Indeed, while these pirates don't sail under the skull and crossbones, and few of them are even old enough to drive, they have captured from the Internet a treasure chest of stolen music. They in turn bootleg millions of tunes to their fellow pirates - the downloader who with the click of a mouse can obtain a recording of anything from the Beatles to the latest rap hit by Eminem.

And Peter Pan is having great fun pretending to be Capt. Hook even as the recording industry morphs into Ming the Merciless. Engaged in a war against children, RIAA has gone so far as to bust a 12-year-old pirate who "illegally" downloaded 1,000 songs, and forced a struggling mother to pay $2,000 for alleged illegal downloading by one of her children - an act of the sort the recording industry claims has led to the loss of billions of dollars in lost revenues. RIAA justifies its hard line by claiming CD sales are faltering because 2.6 billion files are being copied "illegally" and shared each month.

The Motion Picture Association of America (MPAA), which has supported RIAA's litigation tactics, claims its industry also is being hurt by Hook's pirates. More than 600,000 movies allegedly are being copied illegally worldwide each day, leading only to a handful of criminal prosecutions, says MPAA attorney Fritz Attaway. In a recent federal case, Kerry Gonzalez, 25, was convicted in New Jersey for stealing a preview copy of The Hulk and posting it online before the film's release. He faces up to three years in prison and a $250,000 fine. "We don't want to scare everybody, but there are consequences for illegal behavior," Attaway warns potential mischief-makers.

But these Draconian tactics could backfire into a public-relations nightmare, say entertainment specialists. After being sued and fined last year, one angry mother lashed out. "We are hardly in a position to pay the price to the recording industry as their sacrificial lamb," she said. "We feel victimized and angry, but mostly we feel hurt. We are good, honest, hardworking people. My husband works two jobs and I work one. We have never stolen anything, and to be touted as thieves is the ultimate insult."

Under the law, ignorance is not a defense. Chicago entertainment lawyer Peter Strand says parents need to educate themselves. "Kids are committing a crime when they burn copies of their purchased CDs for their friends, burn CDs from [those belonging to] their friends, or download music from Kazaa or other peer-to-peer file-sharing systems," he says. "It's the Internet equivalent of shoplifting."

A Maryland mother who admits her teen-ager downloads music responds, "Oh, come on! That's an unfair comparison." She notes that as kids many parents committed the same alleged crime by making a copy of an LP record with a cassette recorder and sharing it with friends. RIAA certainly didn't make a federal case of it then, so why are kids today being sued for downloading digital music to an MP3 player? Perhaps because in this digital age, with the click of a mouse anyone can download millions of songs at once, whereas the intrusive labor to record a song on a cassette tended to keep the bootlegger from making millions of cassette copies.

"Such pirating now is so pervasive that record sales have been in decline. It has had an immediate impact, and it's devastating to the industry," says New York entertainment and copyright attorney Michael Friedman. True, CD sales are in decline, but the situation is hardly so bad as the industry wants the public to believe, critics respond. The Nielsen Soundscan figures show that 687 million CDs were sold in 2003 compared with 693 million in 2002 - a decline of less than 1 percent.

So are bullying and scare tactics the way to win back that 1 percent? Chuck D of rap group Public Enemy thinks not. "Lawsuits on 12-year-old kids for downloading music, duping a mother into paying a $2,000 settlement for her kid? Those tactics are pure gestapo," he says. Chuck D's comments might even convince kids that such downloading is legal. In fact, a recent Gallup poll found that 83 percent of teen-agers think it is acceptable to download copyrighted material illegally.

"Everyone is doing it," says a 13-year-old in Maryland whose mother approved his decision to download about a dozen songs on his MP3 player. The 13-year-old rationalizes that there is no injustice in this because "those musicians are making so much money."

Friedman counters, "But for every Elton John making millions, there are hundreds of artists who claim they have been deprived of work and creativity. It's the rest of the field, which is the vast majority of artists, that need to be protected."

It is at this point that the 13-year-old points out Kazaa is perfectly legal. He's right, because Kazaa does not provide music to download but instead allows others to use their software to share music. The tools they provide are legal because some music is in the public domain and can be legally downloaded. Music goes into the public domain either when the artist gives consent or 70 years after the artist's death.

While the heavy exchange mostly is of copyrighted performances, and therefore illegal, the prosecutors often turn a blind eye when it comes to enforcing the claims of the recording industry. "The Justice Department has bigger fish to fry," explains Boston copyright attorney Deborah Peckham. "They aren't interested in going after children." That puts enforcement clearly on the shoulders of RIAA, which has enlisted an army of recording artists, including Britney Spears, Elton John, Eminem, the Dixie Chicks, Madonna, Sheryl Crow and about 90 other artists of every genre, to participate in an aggressive educational campaign organized by the Music United for Strong Internet Copyright Coalition. The MPAA says it joined the fight out of fear that its industry could be the next to be attacked by the kiddie pirates as soon as technology develops to where movies can be copied at lightning speed.

Even so, not all musicians support RIAA's harassment lawsuits. For example, after RIAA filed nearly 400 lawsuits against consumers found to have had more than 1,000 music files each on their computers, the Grateful Dead's Bob Weir told the press in September 2003, "They're protecting an archaic industry. They should turn their attention to new models." David Draiman of Disturbed, a hard-rock band with a platinum debut album on the charts, also blasted RIAA shortly after the lawsuits were filed. "For the artists, my ass," Draiman told the music press at the time. "I didn't ask them to protect me, and I don't want their protection." Instead, he added, RIAA should spend the money it is using to litigate against kids on finding ways "to effectively use the Internet" to promote music.

In fact many musicians use their own Websites to promote their songs. And most feature free downloads, such as Country Joe McDonald, who posts dozens of tracks for free at country-joe.com., much to the dismay of RIAA, which is seeking as much as $150,000 per alleged violation. While that figure is steep it is meant to intimidate, and copyright attorneys say RIAA is hoping to settle the bulk of these cases for about $3,000.

The media ran wild with RIAA's scare campaign. Consumer Reports even recommended that parents remove file-sharing software from their teen-agers' computers. Downloading appeared to decline. A Pew survey revealed that 14 percent of Americans admitted to downloading in December 2003 compared with 29 percent in May of that year. RIAA managed to get its message out to parents loud and strong: Your child could be next.

Scared? Don't be. If you are downloading illegally you may be committing a crime, but experts tell Insight your chances of being caught fall between slim and none - more likely, none. Consider this: What's the chance of getting nabbed for sharing a song with a friend when millions of people are illegally downloading music daily and only a few hundred have been caught in the web? "Do the math," Friedman says. "Everyone has to reach their own conclusions."

After the wave of panic settled, a more recent nationwide survey by NPD Group, a marketing-analysis company, suggested downloading is on the upswing again. According to NPD Group, the number of U.S. households downloading tracks from Websites increased from 6 percent in October 2003 to 7 percent in November, and it claims to have identified some 11 million downloaders during that period, an increase of 1 million from September.

Those numbers could continue to increase in light of a favorable federal appeals court ruling concerning Internet sites such as Morpheus, Streamcast and Grokster. A ruling handed down recently from a three-judge panel of the U.S. Court of Appeals for the District of Columbia overturned a trial judge's decision in a Verizon lawsuit to enforce a special copyright subpoena from a law that predates the music-downloading trend. The appeals court said the Digital Millennium Copyright Act of 1998 doesn't cover file-sharing networks. File sharers viewed it as a major setback for RIAA, because now networks such as Kazaa do not automatically have to surrender on demand names of customers who use their sites.

A frustrated Cary Sherman, president of RIAA, released this statement upon hearing the court's decision: "This is a disappointing procedural decision, but it only changes the process by which we will file lawsuits against online infringers. This decision in no way changes our right to sue, or the fact that those who upload or download copyrighted music without authorization are engaging in illegal activity. We can and will continue to file copyright- infringement lawsuits against illegal file sharers."

San Francisco intellectual-property and entertainment attorney Cydney Tune, whose firm has represented Verizon in the past, calls it a "good decision for Internet-service providers [ISPs] who particularly are acting as a conduit for its users. It gets the ISP out of the middle. The Verizon case was a victory in the name of the anonymous user." She adds there now will be more expenses and legal work for RIAA because it will need to get a judge to sign a subpoena to obtain names from an ISP. Even then, she says, the user could seek a protective order or challenge the subpoena, which would create further delay.

"Of course, this means the ruling may have taken away RIAA and the potential defendant's ability to settle the case," Tune adds. "If you are a potential defendant you will need to decide which matters more to you - money or your rights?" But it also raises a series of privacy questions concerning those who successfully have been sued by RIAA. For example, how was RIAA able to learn the identity of the anonymous downloader? Did it hack into people's computers or did the file-sharing network freely provide the names? No one is providing any answers.

However, RIAA vows to fight on in court and hopes to appeal the ruling. In the meantime, RIAA and MPAA continue to push educational campaigns, but with even scarier warnings to the downloading generation. For example, they warn that some downloaded songs and movies contain viruses that have knocked off instant-messenger services and disrupted files and documents on computers.

Proponents of downloading believe that those tied to record labels also may disguise some popular songs for downloading with what has been called a "circular song," in which a phrase is played over and over again and followed by dead silence, or maybe something spoofing the songs and movies. "I remember we wanted to download the first Harry Potter movie and what I got was a pornographic film," says MPAA attorney Attaway. "This was not tame stuff. It was really bad stuff." MPAA spokesman Rich Taylor adds that authorities may have shut down the red-light district on Times Square, but parents should know that with downloading, "Your child's bedroom could become a red-light district."

Even so these scare tactics are unlikely to stop music and film sharing by friends, nor does it appear technology that makes it more difficult to copy music will be the answer. Whatever is done, someone always develops technology to defeat it, says music promoter Jeff Newman of V.P. Entertainment & Promotions. Newman says the music industry also has to take responsibility for some of what is happening and start producing CDs with more than one or two songs that are hits. "We need to produce albums at a fair price with more integrity," he insists, adding that the iTunes Music Store and other sites where singles can be purchased for 99 cents is long overdue and a "win-win situation for everyone."

And former Allman Brothers manager Dave Lory says the music industry should be blaming a combination of factors for its troubles, not just piracy. The record labels no longer own the distribution centers, and record stores in the malls are disappearing while mergers and layoffs in the industry are the trend, he says. According to Lory there has been too much concentration on producing "one-hit wonders and not developing artists." He says the industry made a critical mistake when it dumped singles (formerly 45s) and forced fans to purchase $18 CDs for the one or two songs they really like. In comparison, Europe continues to kick out singles with tremendous success among the teen-age population. "The kids are telling the industry something and they should listen," Lory advises.

While the 99-cent single is a start, according to Lory, the industry has to move away from oversexed stars and give the public music that it wants. Never was that more evident than with the success of Clay Aiken and Ruben Studdard of the hit TV show American Idol. Neither of these singers is exactly a sex symbol, Lory observes. "A nerd and a fat guy are big hits," he says. "The public is saying, 'We like Clay and Ruben because some of us are nerds and some of us are heavy. We can identify with these guys.'"

Lory laughs. "It's so funny. Piracy? We have had piracy going on in Asia for years, but when it hits our home turf the recording industry has to have some easy way to tell its stockholders and the public and Congress why it suddenly is in bad shape. They aren't in bad shape because of piracy. They just need great records, and great songs and great artists will solve the problem."


Contrite, Besieged Music Industry Hosted An Uptight Grammys Show
Greg Kot

The 46th annual Grammy Awards telecast turned into an extended apology rather than a celebration Sunday, as the besieged music industry struggled to regain its dignity after some embarrassing nationally televised controversies.

The awards themselves became an afterthought, the sideshow to a public-relations counterattack. Beyonce Knowles won big, claiming five Grammys and tying a record set by Alicia Keys, Norah Jones and Lauryn Hill for the most trophies won by a female artist. The ailing R&B singer Luther Vandross captured four Grammys, including song of the year ("Dance With My Father"), which he shared with Richard Marx. And OutKast took home the big prize, album of the year, for "Speakerboxxx/The Love Below," only the second hip-hop act ever to win the honor.

The multiple winners also included the late Warren Zevon and June Carter Cash; Beyonce's collaborator, Jay-Z; the White Stripes' Jack White; Eminem; and Alison Krauss. Goth-rock band Evanesence won best new artist, besting thug-rapper 50 Cent, who was shut out despite five nominations. And Coldplay's "Clocks" topped OutKast's ubiquitous single, "Hey Ya," for record of the year.

But the real buzz was the lack of buzz, the earnest attempt by the uptight Grammy gurus to suppress the chaotic spirit that puts the sizzle in popular music. It was a telecast that practically begged listeners to take it seriously, a disconcertingly middlebrow showcase for what are, at their best, defiantly lowbrow art forms: the pop, rock and hip-hop that dominate the awards. Only a performance led by Parliament Funkadelic's cast of funk freaks suggested that this was about the glorious mess that is popular culture, rather than some bland, spontaneity-free recital for the censors' approval.

After a wave of manufactured televised "controversies" in the music world, the Grammy poobahs went the extra mile to keep the event as sanitized as possible. There would be no breast-baring, a la Janet Jackson or French-kissing, a la Madonna and Britney Spears, this night, at least not for nationally televised consumption, with a five-minute broadcast delay installed as an extra precaution against any potential offensive displays. More than ever, the show needed a host with a sense of humor, a Chris Rock to lob verbal grenades at how suddenly self-serious and defensive the music biz has become. Instead, we got a rotating list of co-hosts such as Queen Latifah who intoned, "Despite what you heard, music can be a powerful force for good in the world."

Justin Timberlake marched to the podium like a chastened schoolboy to accept his best pop vocal performance Grammy, and then caved in to the powers that be by issuing an apology for his role in Super Bowlgate, a k a the "wardrobe malfunction" incident. "I know it's been a rough week on everybody," he said, "and what occurred was unintentional, completely regrettable and I apologize if you guys were offended."

To complete the picture of wholesomeness, Timberlake brought his mother as his date. Jackson, in contrast, was disinvited after her scheduled award presentation to Luther Vandross was canceled because of the singer's health problems (Vandross instead appeared on video).

Christina Aguilera got in a dig while receiving an award for best pop female vocal. "I don't want to (do) the same thing Janet has done," Aguilera said, as she struggled not to fall out of her dress.

With everyone feeling so chastened, it might have been appropriate for the music industry to do a little apologizing of its own. Let's see, where to start: Apologize for the thousands of recording artists who have never seen a single royalty check? Apologize to the consumers of America for spending $14 million marketing dreck like the latest Jennifer Lopez album? Or perhaps apologize for suing its own fans over peer-to-peer file sharing?

No such luck. Instead, the National Academy of Recording Arts Sciences, the 16,000-member organization comprised of music business professionals that stages the Grammys, began airing ads during the telecast that discourage online music "piracy." The academy set up a Web site (whatsthedownload.com) that features artists discussing the impact they say online piracy has on their business, but the site's presentation is slanted in favor of those artists who have come out against file swapping.

"Our industry will emerge from what has been a perfect storm," said Neil Portnow, recording academy president. At least a beer company ad poked fun at the industry's plight with a "piracy is so wrong" tag line for a spot about refrigerator etiquette.


Anti-Piracy Ad Debuts on Grammys Associated Press

The organization best known for bestowing accolades on the music industry at its Grammy Awards will begin airing ads discouraging online music piracy with the awards show's Sunday broadcast.

The Recording Academy hopes the TV and radio spots will drive viewers to a website that features artists discussing the impact they say online piracy has on their business.

The downloading and sharing of songs via the Internet is blamed for declines in music sales that have reduced profits for record companies and royalties for artists.

"People still do not realize why it's illegal," Recording Academy President Neil Portnow said.

The television ad, to debut during Sunday night's Grammy broadcast, depicts a teenager downloading a song from the Internet while a crowd dances inside a nightclub.

When the teen completes transferring the song file to her computer, the music and the lights at the club suddenly turn off, leaving clubgoers confused over who pulled the plug on their fun. The ad closes on the Web address for the organization's information site.

The radio spot asks the listener, "Wouldn't it be great if everything were free? Music's free. Or is it?"

The Recording Academy's campaign comes almost a year after the Recording Industry Association of America, the industry's trade group, announced it would take legal action against people suspected of swapping music online. The RIAA has sued hundreds of people since September.

Portnow declined to say how much the Recording Academy spent on the campaign, which is scheduled to run through the end of the year. He said broadcast stations will run the ads as public service announcements.


Serious Crimes Tied To Online Dating Up 37%
Kyodo News

TOKYO — Serious crimes, including murder, robbery and rape, linked to online dating sites rose 37% in 2003 from the year before to 137 cases, the National Police Agency (NPA) said in a report released Thursday.

Rape accounted for most of the serious crimes, with 72 cases, up 19 from the year before. This was followed by robbery, at 37, and indecent assault at 18. There were six cases of kidnapping and abduction and four cases of murder. The number of all online dating sites- related crimes came to 1,746 cases.


AUSTRALIA & U.S. Free Trade Agreement With Copyright Provisions

Australia has concluded a free trade agreement with the United States. The agreement includes an extension of the term of copyright in Australia, the creation of an Australian process to allow copyright holders to engage ISPs to deal with allegedly infringing material, and tighter controls on circumventing technical protection measures.

Cautious Welcome For FTA Deal
James Riley

THE technology sector’s largest industry groups have cautiously welcomed the signing of the Australia-US Free Trade Agreement, pointing to improved access to the $78 billion US federal government IT market as reason enough to support the deal.

But while generally supportive of the FTA, lobbyists warned that much of the detail within the agreement had yet to be revealed, making it impossible gauge the impact of the deal in many important industry sectors.

Australian Information Industry Association (AIIA) executive director Rob Durie said the group was generally positive about the FTA’s signing, but added “until we see the text of the document, it’s difficult to understand precisely how it’s going to impact on us.”

The draft FTA document has yet to be put to Federal Cabinet for approval before the full text of the agreement will be released, a process likely to be expedited, but which could take several weeks nonetheless.

Mr Durie said the AIIA was especially pleased with what had been negotiated on government procurement - and the potential access to the $US59 billion ($78 billion) US federal government market.

The deal appeared to restrict the use of government procurement to back local companies as an industry development measure - giving Australian IT firms equal access to US federal government work, Mr Durie said.

“On procurement we are quite pleased with what has been negotiated,” he said. “Given that our government doesn’t really have any (procurement-related) industry development measures in place right now, we essentially haven’t traded anything away.”

Mr Durie said the draft FTA document appeared to be flexible enough to allow for government to use procurement policy to assist local SMEs - and urged government to start providing better support to small local firms.

“If we’re going to take advantage of (the US government procurement) opportunity, we’ve still got a lot of work to do,” Mr Durie said, “because it’s difficult for local SMEs to get access to our own government’s contracts, let alone US government contracts.”

Mr Durie said the provisions within the FTA that made “the movement of people” between Australia and the US were most welcome. By making it easier for small Australian companies to send executives to the US - without the administrative burden of having to apply for and maintain business visas - would be a financial relief for SMEs.

Internet Industry Association chief executive Peter Coroneos said there were some immediate “positives” that would result from the FTA, especially in the area of electronic commerce. In particular, Mr Coroneos pointed to the FTA’s commitment to standardisation of and mutual recognition of digital certificates as a means of improving security while opening up electronic trade.

But the IIA was more cautious about the FTA’s intentions for intellectual property legislation. Mr Coroneos said it was difficult to interpret the language of documents so far released, but the IIA was concerned that government intended to adopt legislation similar to the US government’s Digital Millenium Copyright Act.

Mr Coroneos said Australian IP and copyright legislation was more flexible that US law, and that a move toward the US system of governance would be a mistake.
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France Jails P2P Music Pirate

A Paris court has sentenced a Frenchman who illegally sold CDs made up of songs he downloaded off the Internet to six months in jail and fined him EUR 1,000 (USD 1,250).

Bruno Dugas, 38, was found guilty of breaking copyright by setting up his web-based business, in which he offered to sell CDs containing MP3 files of songs obtained from free peer-to-peer sites.

His fine was to go to the SPPF, a French body representing music producers and studios, according to the verdict handed down January 28. He was also ordered to publicise the judgement in two newspapers.

European music companies are following their US counterparts in cracking down on music file-swapping on the Internet.

They complain that the illegal practice, facilitated by sites such as Gnutella and Kazaa, is eating into their profits and threatens artists' livelihoods.

So far, legal action in Europe has been limited to prosecuting people who have tried to make money off the trend, but recording companies have warned that home users adding to their own and others' personal music collections could be next, as is already happening in the United States.


Paris Hilton Sues Internet Company Over Sex Tape

Reality TV star Paris Hilton has sued a Panama-based internet company for $US30 million ($A39.47 million), claiming that it illegally distributed a now-infamous tape of her having sex with an ex-boyfriend.

Hilton, who describes herself in the Los Angeles Superior Court lawsuit as a model and actress, sued Kahatani Ltd for violation of privacy, illegal business practices and infliction of emotional distress.

The 22-year-old socialite - best known as star of the Fox reality TV show The Simple Life - seeks $US15 million ($A19.74 million) in actual damages and another $US15 million ($A19.74 million) in punitive damages.

Hilton, whose grandfather founded the Hilton hotel chain, asserts in the lawsuit that the grainy, black-and-white videotape depicts her and then-boyfriend Rick Solomon in "intimate relations" and was not meant for others to see.

"Hilton intended the videotape only for personal use and never intended or consented that it be shown to anyone else or distributed to the public," the lawsuit says.

Solomon, a video entrepreneur, in November sued Hilton and her family, claiming that they slandered him by suggesting that he took advantage of her.


China Gears Up For RFID
ZDNet China Staff

The Standardization Administration of China has created a working group that will establish a national standard for radio frequency identification tags.

Called "electronic tags" in China, these small transmitters--essentially high-tech bar codes that can be scanned from a distance and even through the walls of boxes--are seen by many as the key to a far more efficient supply chain than is achievable today.

There is no single standard for RFID. The SAC said that it will try to draft its standard so that it will be compatible with similar technologies.

RFID companies are likely to closely monitor how the standardization process moves forward. Recently, the Chinese government demanded that the Wi-Fi chips sold in the country contain an encryption standard controlled by 11 local companies. To sell Wi-Fi parts in the large and rapidly growing market in China, foreign companies necessarily have to partner with Chinese companies or license the technology from them.

With manufacturers and distributors scrambling to meet those retail and military mandates, research firm IDC said it expects RFID spending for the U.S. retail supply chain to grow from $91.5 million last year to nearly $1.3 billion in 2008.

Privacy advocates, however, assert that the radio-tag technology could allow companies to track individuals. Although many in the industry have said this is more difficult than it sounds (RFID tags can be disabled by a trip through a microwave), some companies have backed away from trials.

Another controversy with RFID is finding companies to make the tags. Intel, IBM and others are very interested in the technology, but because it will allow them to sell more servers and software for managing networks of tags. The RFID tags themselves will only sell for a few cents when volume production begins.


Kazaa Files Motion To Delay Copyright Proceedings

Peer to peer music group Kazaa today attempted to delay proceedings for alleged

copyright breaches brought against them by the Australian record industry until a similar case in the United States is finalised.

The Federal Court last week gave five major Australian record labels permission to raid 12 premises in three states to collect evidence against Kazaa, the world's largest file sharing network.

The raids were conducted by Music Industry Piracy Investigations (MIPI) which is owned by Universal, Festival Mushroom Records, EMI Music, Sony Music, Warner Music Australia and BMG Australia.

But Kazaa, owned in Australia by Sharman Networks, today filed a notice of motion in the Federal Court in Sydney to stay the legal action until Federal Court of Appeal proceedings in the US are finalised.

"These proceedings, if they are to go ahead at all, ought not to go ahead until the end of the American proceedings," counsel for Sharman Networks, Francis Douglas, QC, said.

Outside the court, the trial lawyer in the US case, David Casselman, said the record labels wanted another opportunity to sue Kazaa after losing hearings in the US and the Netherlands.

"Now that they're losing in the United States they seek to come here and fight the same battle on Australian soil," he said.

Mr Casselman said suing Kazaa for breach of copyright would be no different to taking legal action against the producers of photocopiers.

"It's no different than the Xerox corporation when students use their copiers and they know that students use their copiers to make photocopies of protected works," he said. "Is the university liable if they know this?"

MIPI general manager Michael Speck confirmed that two people were assaulted during last week's raids.

He said the incidents had been referred to the NSW Police. The legal case was adjourned until February 20.


Perth Company Gives SCO Australia Deadline To Withdraw IP Claims
Sam Varghese

Perth-based open source company Cyberknights has written to The SCO Group in Australia giving the latter a deadline of February 13 to withdraw its claims that it owns IP in the Linux kernel which users should licence if they wish to use Linux legally.

Cyberknights director Leon Brooks made an initial approach to SCO on January 21 and then repeated the ultimatum on February 2.

On Monday, Brooks sent a registered letter to Kieran O'Shaughnessy, the SCO Group's regional general manager, Australia and New Zealand; he said he had received legal advice to do so. He also sent the same text by email.

In the letter, Brooks said: "The heart of the matter is that The SCO Group Australia and New Zealand (hereinafter TSG-ANZ) has widely published claims to "intellectual property" in Linux, and claims that users of Linux are required to purchase a licence from TSG-ANZ in the amount of AUD$999.00 for each single-CPU server running Linux," today's communication said.

"Take notice that such claims are fraudulent, and unless they are retracted as publicly as they were made, CyberKnights Pty Ltd (hereinafter CK) will vigorously pursue a conviction of fraud against TSG-ANZ," it said.

SCO filed a case against IBM in the US last March claiming breach of contract. It also claimed that Linux is an unauthorised derivative of UNIX and warned commercial Linux users that they could be legally liable for violation of intellectual copyright.

SCO later expanded its claims against IBM to US$3 billion in June when it said it was withdrawing IBM's licence for its own Unix, AIX. In July last year, SCO demanded that Linux users obtain licences for using what it claims to be its own UNIX code. Later in the year, SCO extended the deadline for obtaining these licences.

Novell has contested SCO's claims to ownership of UNIX and says that even though SCO has some UNIX rights, Novell has retained the right to compel SCO to waive or revoke any of its (SCO's) rights under the contract.

In his letter, Brooks quoted from IBM's latest submissions to the court and pointed out that, "a contract case has nothing to do with any other entity than the contracting parties, TSG and IBM."

He said that SCO's actions in claiming to own and control software which was essential to his business was damaging the reputation of CyberKnights and "engendering fear and uncertainty amongst clients and potential clients of CK as to the ownership, control and possible licence costs of said software, both directly and through association with statements by your parent company TSG Inc, TSG-ANZ is causing damage to CK which CK fully intends to recover."

Contacted for comment, O'Shaughnessy said he had not yet received either the latest letter or the version sent by email. "In any case, I have no comment and no interest in having a debate with Brooks through the media," he said.


New Zealand Journal

That P2P Snitch May Be A Neighbour Not A Cop

Little offending material officially classified by censors
Stephen Bell, Wellington

If you are unwise enough to trade illegal material through peer-to-peer networks, the person who dobs you in may be a fellow user rather than a government official.

Keith Manch, general manager gaming and censorship at the Department of Internal Affairs, says “approximately 95%” of the alleged offences on P2P were not detected in the first instance by the Censorship Compliance Unit but reported by “external sources”, including other government departments, overseas agencies and members of the public.

This makes the tactic explored by P2P users of denying the DIA “authority” to access their computers under the “anti-hacking” provisions of the Crimes Act passed last year a weapon of doubtful effect. However, Manch says the DIA unit must check for itself that the material in question is likely to be objectionable and is being offered by an New Zealand user, as alleged.

Manch says there have been, to date, no unsuccessful prosecutions for trading illegal material via peer-to-peer (P2P) links. However, in five of the 12 cases investigated as at December last year, “charges were not laid because inspectors issued warnings to the offenders”.

Computerworld requested the clarification on prosecution numbers and investigatory procedures because of another media report, which drew on our story. It implied, to Manch's reading, that there had been 111 completed investigations of P2P trading and only two successful prosecutions with another five in train. DIA refuted that and copied the letter to us. The department continues to progress through the rest of the 111 investigations, Manch says.

He also confirms previous indications that very little of the material that is the subject of online prosecutions is ever submitted to the official censors, the Office of Film and Literature Classification or OFLC, for a formal ruling on its “objectionable” status.

“If [the defendant] disputes that the material is objectionable, the court refers it to the OFLC for classification. To date, very few offenders have chosen to defend the charges on any grounds. Neither of the people convicted as a result of P2P activity defended the charges.”


User reportedly turns in hub.

Popular Filesharing Hub Shut Down
Adam Lewis

For some university students, Friday night was the night the music died.

The university's hub of the popular peer-to-peer (P2P) file sharing system Direct Connect was shut down this weekend after it was reported to the Office of Information Technology and CDReward, an anti-piracy rewards program run by the Recording Industry Association of America.

The hub was shut down by the system's administrators in an attempt to avoid legal action from the university.

Direct Connect is a free computer program that can be used to facilitate P2P sharing. Individual hubs allow those in close proximity to connect to one another's computers and share music, movies, computer programs and other files within a contained community.

The hub that was shut down this weekend was restricted to students at this university and the University of Maryland, Baltimore County.

OIT officials acknowledged that an inquiry into the extent of the hub's technology is ongoing.

"We have become aware of it and of students' concerns about it, and we are taking a look at the matter," said Amy Ginther, a spokeswoman for OIT's Project NEThics. "The matter is being investigated."

One of the system's administrators, university student Joe Barrett, released a statement on his website concerning the shutdown.

"We had hoped that nothing like this would happen, but with several thousand people using the service, it's not impossible that one individual can mess things up for everybody," the host wrote.

CDReward, run by the RIAA, is designed to reward people with up to $10,000 for information about to the illegal manufacture and sale of music CDs belonging to its member companies.

"People need to realize this activity is illegal and that musicians deserve to be compensated for their work," an RIAA spokeswoman said. "We have not been in touch with the university on this particular matter."

The person who reportedly turned in the hub, university senior Pavel Beresnev, was a longtime user of Direct Connect.

Angry students posted fliers at The Diner with Beresnev's picture and contact information this weekend, vilifying him for his role in taking Direct Connect away from university students.

Beresnev could not be reached for comment for this article.

The hosts of the university Direct Connect hub hope to clear the air about any rumors that have been floating around the campus regarding the demise of file sharing.

"The server has not been shut down by the RIAA," said a university student who identified himself as one of the system's administrators. "It's a common misconception. We're worried about the health of Direct Connect."

Barrett, a member of the university's Gemstone program, has been involved with research of P2P technology as part of the Network Securities Gemstone Team. The team has undertaken an investigation of uses of anonymous P2P file sharing systems and communication, which is expected to culminate in a final presentation and research project, according to Barrett's website.

Despite a seemingly insurmountable obstacle in their way, the hub's administrators are resolute in their commitment to bring Direct Connect back to the campus.

Barrett refused to comment for this report.


Downloaders Can Get Nothing for Something From Apple
David f. Gallagher

The top-of-the-line iPod music player from Apple Computer can hold four solid weeks of music. But what if you just want a little peace and quiet? As it turns out, Apple sells that too - sounds of silence for 99 cents.

Steve Halberstadt of Raleigh, N.C., made such a purchase last week after discovering that Apple's iTunes store, the Web's leading downloadable music outlet, had added "The Whitey Album," a 1995 release by Ciccone Youth, a jokey side project of the rock band Sonic Youth. The album's second track album, "Silence," consists of 63 seconds of exactly that. (The band has said, with tongue in cheek, that the track is a version of John Cage's famous silent composition "4'33"," only speeded up.)

After checking out the 30-second preview, which "seemed to be very representative of the rest of the song," Mr. Halberstadt said he could not help but make the purchase.

He described it as "the best 99 cents I've ever spent'' in an e-mail message last week to Jack Miller, the editor in chief of the news and gossip Web site As the Apple Turns (www.appleturns.com).

Mr. Miller mentioned the silent track on his site, and soon readers were submitting others they had dug up among the more than 500,000 selections in the iTunes store.

Most of the tracks were clearly meant to be breathers between songs, not silence for silence's sake, but in the automated process of chopping albums into files they had been given their own price tags.

Several were from an album by the hip-hop group Slum Village, and like all of the album's tracks, they bore an "explicit" label indicating profanity - or in these cases, explicit silence.

Using the readers' suggestions, Mr. Miller compiled a playlist of "nine tracks of professionally encoded silence, a total of 6 minutes and 44 seconds of the yawning void," downloadable from iTunes for just $8.91. He noted that as with all iTunes purchases, antipiracy measures allow the silence to be enjoyed on no more than three computers.

Late in the week, Apple made it impossible to buy the Ciccone Youth silent track by itself. An Apple spokeswoman, Natalie Sequeira, said such decisions were up to the artists, and "in this case they recently told us that they wanted it to be available only as part of the album."


Product review

For iPod, 6 Flavors of Flattery
David Pogue

EVEN this early in the campaign, the battle for the popular vote is really heating up; the incumbent is being challenged by lesser-known candidates from all over the country. The winner will be the candidate with the best balance of new ideas and appealing looks - and battery life.

I am referring, of course, to the battle for supremacy among portable music players.

So far, Apple's iPod is by far the best seller among high-capacity players. You can't stand in a public place without seeing a pair of those telltale white earbud cords pass by; for once in its life, Apple gets to find out what it's like to be Microsoft. The iPod's success has spawned an entire industry of iPod cases, iPod accessories, iPod software - and now, inevitably, iPod imitators.

The rivals come from electronics makers (Samsung) and from fellow computer makers (Dell, Gateway), as well as from veteran music-player makers (Rio, Creative Labs, iRiver).

Most have the familiar iPod ingredients: a screen, a tiny hard drive and a rechargeable battery, all packed into a rectangular case and accompanied by earbuds. Most come with jukebox software that loads your collection of music files - which you've either downloaded or "ripped" from music CD's - onto the player over a U.S.B. 2.0 cable.

The other notable feature of these competitors is a marketing message that's either "just like the iPod, only cheaper" or "just like the iPod, only better."

Now, you're a busy person, so here's the gist: most of these rivals are cheaper - usually $100 less. But "better" is another story. The iPod is still smaller, more attractive and more thoughtfully designed than any of the upstarts.

It's also much more than just a music player. The iPod can also display your calendar and address book, serve as a text reader and alarm clock, help you pass the time with a suite of games, and so on. And that's before you tap into the universe of add-on shareware programs. (One intriguing example is iSpeak It for the Mac, which converts any text file, Web page or Microsoft Word document into a spoken-word soundtrack, using synthesized voices.)

Even so, certain audiences will prefer the iPod alternatives. For many people these days, "cheaper" is better than "better." Maybe you crave this bell or that whistle that the iPod lacks - a built-in FM radio, say, or a built-in microphone. Or maybe your Windows PC doesn't have Windows 2000 or XP - a requirement for iTunes, the iPod's companion software. (The iPod works with both Mac and Windows; most of the rivals are Windows-only.)

Furthermore, if you want to shop at one of those $1-a-song music Web sites, buying an iPod pretty much limits you to Apple's iTunes music store. (The Apple store's AAC files play only on the iPod. The other stores, like Napster and Musicmatch, deliver WMA files that work on any player except the iPod.) Of course, that's like being "forced" to drive a Lexus or "limited" to staying at the Beverly Hills Four Seasons, but you get the point.

Finally, most of the iPods-in-training can run 13 to 16 hours per charge (manufacturers' estimates), compared with the iPod's eight. That may be important if you routinely commute from, say, New York to Tokyo, although bigger batteries add bulk.


As Newcomers Swarm, Sony Girds for a Fight
Ken Belson

KUNITAKE ANDO, the affable and self-deprecating president of the Sony Corporation, laughs as he holds up his digital camera to show off pictures of himself playing golf in Hawaii.

Yet when talk turns to the challenges facing Sony, Japan's best-known company, Mr. Ando, 62, turns deadly serious. And for good reason. At a trade show in Las Vegas in January, he got yet another glimpse of the chaos enveloping the consumer electronics business. Companies from Dell to Microsoft to Nokia want a piece of the market for home-entertainment hardware that Japanese companies, including Sony, once dominated.

For a company that has long flexed its muscles and built a reputation on being first, Sony is now in the awkward position of having to play catch-up, and Mr. Ando knows it. But, he says, Sony will prevail by leap-frogging the competition and developing a new generation of products that few consumers can now imagine.

"It's not scary for us" to compete against so many others, Mr. Ando said. "Offense is the best defense. Everyone is coming into this field, so we just can't wait and see what's going to happen."

Mr. Ando might have added that Sony has little choice. It is under attack from a number of electronics and software companies, many with billions of dollars to throw around, and it risks being marginalized if it sits tight. Just as worrisome, each new entrant to the business threatens to steal not just market share, but also the mantle of originality that Sony has built so carefully.

A few years ago, Sony would have sniffed at a low-cost computer maker like Dell producing flat-panel television monitors or a cellphone manufacturer like Nokia making hand-held video games. Not anymore. Sony executives know that these newcomers to the home-entertainment business can produce what they say they will, and do it for less than any company in Japan. Apple Computer's success with iPod, the digital music recorder, is also a reminder that Sony no longer has a monopoly on tech cool.

Sony, of course, has been under attack before, and often has rebounded in ways that few analysts had expected. Rarely, though, have so many competitors joined the home-entertainment market at once. Thanks to the commodification of the electronics industry, companies can buy components easily from suppliers in Taiwan, South Korea, China and even Japan. Having honed their cost-cutting skills, these companies can often produce products faster and more profitably than Sony can.

Having been upstaged by Apple, Samsung and others in certain product categories, Sony is taking action. Mr. Ando is one-half of a two-man team heading the company's ambitious, multipronged strategy, called Transformation 60. It is an effort to bolster profits, revamp the company's product lineup and repair what many critics see as a damaged reputation. To be completed by Sony's 60th anniversary, in 2006, the plan includes eliminating 20,000 jobs, cutting billions of dollars in expenses and quadrupling operating margins, to 10 percent.


The Virus Underground
Clive Thompson

This is how easy it has become.

Mario stubs out his cigarette and sits down at the desk in his bedroom. He pops into his laptop the CD of Iron Maiden's ''Number of the Beast,'' his latest favorite album. ''I really like it,'' he says. ''My girlfriend bought it for me.'' He gestures to the 15-year-old girl with straight dark hair lounging on his neatly made bed, and she throws back a shy smile. Mario, 16, is a secondary-school student in a small town in the foothills of southern Austria. (He didn't want me to use his last name.) His shiny shoulder-length hair covers half his face and his sleepy green eyes, making him look like a very young, languid Mick Jagger. On his wall he has an enormous poster of Anna Kournikova -- which, he admits sheepishly, his girlfriend is not thrilled about. Downstairs, his mother is cleaning up after dinner. She isn't thrilled these days, either. But what bothers her isn't Mario's poster. It's his hobby.

When Mario is bored -- and out here in the countryside, surrounded by soaring snowcapped mountains and little else, he's bored a lot -- he likes to sit at his laptop and create computer viruses and worms. Online, he goes by the name Second Part to Hell, and he has written more than 150 examples of what computer experts call ''malware'': tiny programs that exist solely to self-replicate, infecting computers hooked up to the Internet. Sometimes these programs cause damage, and sometimes they don't. Mario says he prefers to create viruses that don't intentionally wreck data, because simple destruction is too easy. ''Anyone can rewrite a hard drive with one or two lines of code,'' he says. ''It makes no sense. It's really lame.'' Besides which, it's mean, he says, and he likes to be friendly.

But still -- just to see if he could do it -- a year ago he created a rather dangerous tool: a program that autogenerates viruses. It's called a Batch Trojan Generator, and anyone can download it freely from Mario's Web site. With a few simple mouse clicks, you can use the tool to create your own malicious ''Trojan horse.'' Like its ancient namesake, a Trojan virus arrives in someone's e-mail looking like a gift, a JPEG picture or a video, for example, but actually bearing dangerous cargo.

Mario starts up the tool to show me how it works. A little box appears on his laptop screen, politely asking me to name my Trojan. I call it the ''Clive'' virus. Then it asks me what I'd like the virus to do. Shall the Trojan Horse format drive C:? Yes, I click. Shall the Trojan Horse overwrite every file? Yes. It asks me if I'd like to have the virus activate the next time the computer is restarted, and I say yes again.

Then it's done. The generator spits out the virus onto Mario's hard drive, a tiny 3k file. Mario's generator also displays a stern notice warning that spreading your creation is illegal. The generator, he says, is just for educational purposes, a way to help curious programmers learn how Trojans work.

But of course I could ignore that advice. I could give this virus an enticing name, like ''britney--spears--wedding--clip.mpeg,'' to fool people into thinking it's a video. If I were to e-mail it to a victim, and if he clicked on it -- and didn't have up-to-date antivirus software, which many people don't -- then disaster would strike his computer. The virus would activate. It would quietly reach into the victim's Microsoft Windows operating system and insert new commands telling the computer to erase its own hard drive. The next time the victim started up his computer, the machine would find those new commands, assume they were part of the normal Windows operating system and guilelessly follow them. Poof: everything on his hard drive would vanish -- e-mail, pictures, documents, games.

I've never contemplated writing a virus before. Even if I had, I wouldn't have known how to do it. But thanks to a teenager in Austria, it took me less than a minute to master the art.


Ohio Considers Electronic Tracking of Cats

More stray cats could find their way home under a proposed plan to implant microchips that would electronically identify the cats' owners.

Democrat Renee Greene introduced legislation Monday to implant microchips beneath the fur of 1,000 cats, giving the animals a permanent identification tag. A runaway cat's owner would be identified by scanning the chip, which would be about the size of a grain of rice, then checking the scan against a voluntary registry maintained by the city.

Buying and installing the microchips would cost the city nearly $10,000. The City Council still must approve the legislation.

The legislation is an amendment to a cat law passed about 18 months ago that added cats to the city's laws governing dogs and gave the city's animal wardens the right to capture free-roaming cats, which can be killed if they aren't claimed. The Summit County Animal Shelter, where stray cats are taken, already has the scanners that would be used on the microchips.

The cat law was considered controversial by some residents, and a nonprofit organization called the Citizens for Humane Animal Practices was formed to fight the law. The group has filed a lawsuit against the city, which is set to go to trial on May 17 in Summit County Common Pleas Court.

Greene said she introduced the amendment to ensure that ``the animal kingdom is well-represented and protected by this City Council.''

The legislation includes a $10 penalty for owners whose cats are picked up and returned to them.

Jeff Fusco, the city's deputy service director, said the city likely would charge about $10 for a microchip, which the Summit County Veterinary Medical Association would implant. Microchips normally cost between $70 and $120. The city would not charge residents to maintain the registry of owners.

The city also plans to host four free or low-cost spay-and-neuter clinics throughout the year, Fusco said.

Public hearings regarding the legislation will take place on Feb. 23.

Polly Grunfeld Sack, an attorney representing CHAP, said Monday she was grateful that the city is re-examining its cat law. However, Sack said 1,000 microchips cover only a fraction of the cats belonging to city residents.

``Certainly, it's a step in the right direction ... but there are so many better ways to spend that money,'' Sack said. ``The low-cost spay-and-neuter is starting to get to the problem --that's the only effective way to deal with free-roaming cats.''

Mayor Don Plusquellic said the legislation will help fulfill the city's responsibility to ensure that pet owners, regardless of their financial situation, won't lose their animals.

``We think we're fulfilling our obligation,'' Plusquellic said.


Trippi: Net Politics Here to Stay
Noah Shachtman

Forgive the hundreds of thousands of people who gave Howard Dean more than $40 million in contributions last year. They might have thought they were trying to elect a president, but they were wrong, according to Dean's former campaign manager, Joe Trippi.

Instead, he said, all that money was used to beta test a new, online revolution in American politics.

Speaking at the Digital Democracy Teach-In -- part of this week's O'Reilly Emerging Technology Conference in downtown San Diego - - Trippi issued a spirited defense of the former Vermont governor's campaign, and his role in Dean for America's mercurial rise and fall.

After Dean's worse-than-expected showing in Iowa, it became an instant media cliché to equate his campaign to the high-flying, fast-falling Internet bubble companies of the late 1990s. But Trippi said such comparisons were all wrong.

"This wasn't a dot-com crash," he said. "The Howard Dean campaign was a dot-com miracle."

"Revolution 1.0 was the 1700s," Trippi said. "We're in the middle of the beta stage of 2.0, where people have the tools to say, 'enough.'"

Many in the audience -- who gave Trippi a standing ovation after his talk -- seemed to agree.

"I was always a firm believer that there was always a future, a movement, a something, that happened afterward," said Robert Walikis, who writes the One Father for Dean weblog.

"The cat is out of the bag," said Scott Heiferman, CEO of Meetup.com. "People have it in their brain that they can organize themselves."


9th Circuit Reverses AOL DMCA Safe Harbor Decision

The 9th Circuit Court of Appeals has reversed a trial court decision which had ruled that AOL qualified for a DMCA safe harbor in a copyright infringement action brought by science fiction author Harlan Ellison. The court ruled that it was difficult to conclude that AOL had "reasonably implemented" a policy against repeat infringers as required by the safe harbor provisions. The court did uphold the dismissal of contributory and vicarious copyright infringement claims against AOL.

Case name is Ellison v. AOL. Decision athttp://caselaw.findlaw.com/data2/circs/9th/0255797P.pdf


Judge Cracks Hold on Windows Trademark
Brenda Sandburg

Microsoft Corp. suffered a setback in efforts to enforce its Windows trademark when a Seattle federal court ruled that a jury must consider whether the word was a generic term 20 years ago.

The software giant, which is suing Lindows.com for trademark infringement, had argued that the present-day usage of the word should be considered in determining whether it is generic. But U.S. Chief District Judge John Coughenour, of the Western District of Washington, ruled Tuesday that he would instruct a jury to consider whether the mark was generic in November 1985 when Microsoft Windows 1.0 entered the market.

"If the term is found to be generic, 'it cannot be the subject of trademark protection under any circumstances,'" he wrote, citing the 9th U.S. Circuit Court of Appeals 1999 opinion in Filipino Yellow Pages Inc. v. Asian Journal Publ'ns, 198 F.3d 1143.

Coughenour added, however, that "there is substantial ground for difference of opinion" as to the timing of the word's generic designation, and certified his order for interlocutory appeal to the 9th Circuit. The case, Microsoft Corp. v. Lindows.com Inc., 01-2115, had been scheduled for trial March 1.

Lindows.com attorney Daniel Harris, a partner at Clifford Chance's Palo Alto, Calif., office, said that before Microsoft launched its product, "windows" was commonly used by companies to describe an operating system's graphical user interface.

"People forget there were all these windows systems out there in the 1980s," Harris said. Now, "after $1.2 billion in advertising," people think of Microsoft when they hear the word.

The question, he said, is "whether it is valid to create a trademark by buying a word out of the English language."

Microsoft applied for registration of the Windows trademark in 1990 and was issued the trademark in 1995. Microsoft put a positive spin on the court's order. "We're very encouraged that the judge granted our request to ask the court of appeals to provide guidance before we go to trial," said Stacy Drake, a spokeswoman for Microsoft. She said the company intends to go to trial no matter how the 9th Circuit rules.

Microsoft had asked Coughenour to specify the proper time to consider whether its trademark is generic. "It is one of the world's most famous brands," Drake said. The term should be evaluated according to "usage and the understanding of present day consumers," she said.

Founded in 2001 by Michael Robertson, the founder and former CEO of the online music site MP3.com Inc., Lindows.com markets an operating system called Lindows OS. The system can run software applications developed for both the Linux and Windows operating systems.

Coughenour ruled in favor of Lindows.com two years ago when he denied Microsoft's request for a preliminary injunction. At that time he said there were serious questions as to whether Windows is a non-generic name.


Comcast Bids For Disney

No. 1 cable operator offers $54 billion for media company; Disney says it will evaluate the offer.
Paul R. La Monica

Comcast Corp. made a surprise, unsolicited offer to buy Walt Disney Co. for $54 billion Wednesday, a deal that would create one of the world's biggest entertainment companies.

Comcast, already the nation's biggest cable operator, if successful, would own one of the three dominant broadcast networks -- ABC -- as well as the Disney film studio, ESPN, and other Disney assets.

"This is a unique opportunity for all shareholders of Comcast and Disney to create a new leader of the entertainment and communications industry," Comcast president and CEO Brian Roberts said in a statement.

The proposed deal clearly puts more heat on Disney Chairman Michael Eisner, who is already facing trouble at home with dissident ex-Disney directors Roy Disney and Stanley Gold. They are leading a hostile campaign urging shareholders to oust Eisner.

Comcast said Disney Chairman Michael Eisner has been unwilling to discuss a merger.

Disney said in a statement that it "will carefully evaluate the unsolicited proposal from Comcast Corp." and urged shareholders to take no action.

But Disney (DIS: up $3.48 to $27.56, Research, Estimates) stock jumped about 15 percent and traded above the price Comcast offered, a sign that investors believe the bidding for Disney could go higher.

News Corp. CEO Rupert Murdoch said Wednesday that his company would not bid for Disney, according to Reuters. (For CNN/Money columnist Justin Lahart's take on a possible bidding war for Disney, click here.)

Under the deal, Comcast said it would issue 0.78 of a share of its Class A stock for each Disney share, valuing Disney at about $26.47 a share, or a total of $54.1 billion, based on Tuesday's closing prices. That's about 10 percent above Disney's closing price Tuesday.

Comcast would assume nearly $12 billion in debt under its proposal. (Click here to read Comcast's letter outlining its proposal).

But will the cable giant be able to pull off a deal? At least one industry analyst wasn't too excited about Comcast's offer.

George Smith at Davenport & Co. said the premium to Disney shareholders " was not sufficient."

"It will take a good deal more than that for such a large company like Disney. Some think that Disney's stock is undervalued as it is even without Comcast's bid. A premium closer to 30 percent could really heat up the talks."

Compounding matters for Comcast is that Disney reported sharply higher earnings Wednesday. Disney had been scheduled to announce results after the closing bell but moved up the release, reporting earnings of 33 cents a share, up from 2 cents a year earlier, and well above most Wall Street forecasts.

Matt Hemberger, an analyst with the Arbitrage fund, a mutual fund that invests in takeover situations, said that a fairer price for Disney is probably $30 to $32 a share. "I imagine that Disney's board would most likely reject the deal at this level," said Hemberger. "Comcast will have to come back to the table, especially in light of Disney's earnings."

But during a conference call to discuss the deal, Merrill Lynch analyst Jessica Reif-Cohen congratulated Comcast, saying a merger would be "an amazingly brilliant combination."

Shares of Comcast (CMCSK: down $2.63 to $30.31, Research, Estimates), which also reported results Wednesday, sank 8 percent. Comcast posted a net profit of $383 million, reversing a year-earlier loss. Revenue came in at $4.74 billion, in line with Wall Street's forecast.

Deal would create a media powerhouse

Disney (DIS: Research, Estimates) shareholders would own 42 percent of the combined company under Comcast's proposal.

Roberts said during the conference call that he has yet to speak with Roy Disney, Gold or any other Disney shareholders, adding he hopes Disney's board "would do the right thing". Gold and Roy Disney were not immediately available for comment.

Disney and Gold blame Eisner for mismanaging Disney over the past decade, noting the recent breakdown in talks with Pixar Animation to extend the computer animation collaboration that has brought Disney such hits as "Toy Story" and "Finding Nemo."

In an open letter Tuesday, Disney director and former Senator George Mitchell said the company's board met in January to consider a succession plan for Eisner and planned to explore the matter in greater depth in April.

During Wednesday's call, Comcast Cable president Stephen Burke, who worked for Disney for 12 years before joining Comcast, said Comcast's first goal would be to restore Disney to the level of profitability it had a few years ago.

"We are not talking about taking Disney to unseen heights," Burke said.

Comcast could do a better job of getting distribution for some of Disney's cable channels, such as ESPN, ABC Family and the Disney Channel, Burke said, adding Comcast could operate the ABC network on a break-even basis and boost how much cash it generates.

But Patricia Lee at CreditSights, a fixed income research firm, said that the biggest plus for Comcast would be control of ESPN. Several cable companies have been involved in contentious negotiations about the rates that ESPN wants to charge cable companies to carry its networks. Comcast competitor Cox has been especially vocal about this topic.

"This deal offers Comcast the ability to control sports programming costs and that's a major expense for cable guys," Lee said.

She said Comcast has the financial flexibility to do a deal for Disney. The company has about $27 billion in debt but it reduced its debt load by $7 billion last year. Much of that debt was from Comcast's last major acquisition, the purchase of AT&T's cable operations in 2002.

Comcast could also sell assets to reduce debt if needed, including shares of entertainment company Liberty Media and a stake in Time Warner Cable, which is owned by Time Warner, the parent of CNN/Money.

But one fund manager said he was skeptical a merger would be a success.

After all, big media deals such as Vivendi-Universal and AOL-Time Warner have had their share of problems, said Alex Vallecillo, co-manager of the Armada Large Cap Value fund, which owns Comcast shares.

"On paper, marrying content with distribution makes a lot of sense but in reality it's been a tough nut to crack," said Vallecillo. "If Comcast can figure out a way to get margins back to where they were five years ago, then it's a great deal. But that's a mammoth if."

-- Staff writer Parija Bhatnagar contributed to this story.


Gates Hooks Up With Mickey Mouse

Microsoft and Disney have agreed to would work together to develop new ways of securely distributing digital entertainment via the Internet, on portable devices and on future versions of the DVD. Under a multiyear agreement, Disney agreed to license Microsoft's Windows Media. The two companies also have agreed to collaborate on a broad set of issues related to electronic distribution of entertainment.


Court Is Urged to Change Media Ownership Rules
Stephen Labaton

Broadcasters and public interest groups on Wednesday urged the federal appeals court here to order the Federal Communications Commission to rewrite its new rules that govern the size and reach of the nation's largest media conglomerates. Many of the parties joining the fight against the F.C.C., however, are doing so for diametrically opposed reasons.

The case has enormous implications for the newspaper, television and radio industries. The new rules make it significantly easier for the biggest companies to acquire other companies both in their existing markets and in new ones. The rules have been supported by some media companies, opposed by others, and have been heavily criticized by many civic organizations on the grounds that they could reduce competition and diversity of views on the airwaves, as well as lead to reduced news coverage of local affairs.

At a hearing lasting more than eight hours, public interest groups and some smaller broadcasters urged a three-judge panel of the United States Court of Appeals for the Third Circuit to restore the federal restrictions that had prevented a company from owning a newspaper and a radio or television station in the same market. Asserting that the commission used the wrong standard of review and flawed theoretical models about consumer behavior to create the ownership rules, the opponents also asked the court to reverse rules that would make it easier for a broadcaster to own more television stations in one market.

On the other side, a group of newspapers, television networks and other broadcasters, including Clear Channel Communications, the nation's largest broadcast radio company, argued that the commission had not deregulated the industry enough. They urged the court to return the rules to the commission and order it to apply a higher standard of review in trying to justify all of its media regulations.

Trying to steer a middle course, the commission's general counsel, John A. Rogovin, asserted that the new regulations were grounded in law and competition policy and should be affirmed by the court.

The announcement on Wednesday by Comcast of Philadelphia, the nation's largest cable company, that it was making a $54.1 billion bid for the Walt Disney Company, cast a shadow over the court proceedings, even though that proposed deal is not affected by the rules at issue in the court case. Two years ago, a federal appeals court struck down the restrictions barring a single company from owning a cable operator and a broadcaster in the same community.


Guilty Plea For eBay Pirate
John Borland

A Minnesota man has pleaded guilty to selling pirated copies of movies on eBay, in the first such criminal copyright case brought by federal prosecutors.

According to the Department of Justice, 20-year-old Andre Pnewski testified that he downloaded the films from the eDonkey file-trading service and sold them on CDs through eBay. He was sentenced to six months of home detention with electronic bracelet monitoring and must pay $7,170 in damages to the Motion Picture Association of America.


TiVo Wins Pause Technology Patent Suit
Richard Shim

Digital video recording service company TiVo announced Tuesday that it received a favorable ruling in a patent infringement lawsuit brought against it by Pause Technology in 2001. Judge Patti Saris of the District of Massachusetts ruled TiVo does not infringe on Pause's patent, according to San Jose, Calif.-based TiVo. Pause's patent covered the pausing of live television, replaying portions of a program while it is being recorded, and fast- forwarding through recorded segments to "catch up" to a live broadcast being recorded. Pause said it first contacted TiVo about the infringement in April 2000 and then again in May 2001.

TiVo plans to file a motion requiring Pause to pay all of TiVo's attorney's fees and costs.


Downloads Outsell DVDs And Vinyl

Sales of legal music downloads have reached a new high to become the second most popular singles format in the UK.

More than 150,000 downloads were sold last month, exceeding sales of 12-inch, seven-inch and DVD singles, the Official Charts Company reported.

This included a record 50,000 downloads in the week after the 19 January launch of online music service MyCokeMusic.

CD singles remain the most popular singles format, however, with 341,461 sold during that week.

The Official Charts Company (OCC) began compiling legal music download figures in October, with a view to developing a separate download chart.

It said download sales had risen each month since October, but the January 2004 figures were the first to have been published.

The OCC also intends to integrate downloads into its Official Singles Chart later this year.

Meanwhile sales of CD albums rose by 5.6% in the UK last year, the British Phonographic Industry (BPI) reported.

New British artists and falling retail prices have helped the UK buck the worldwide decline in recorded music sales, it said.

The rise in sales resulted in a UK record industry revenue of £1,112m last year, an increase of 2.1% on 2002.

"This is an exceptional result considering the huge pressure the recorded music market is under worldwide," said BPI chairman Peter Jamieson.

Between 1998 and 2002, the last full year for which data was available, worldwide sales of recorded music fell by 18%. Over the same period the value of sales in the UK rose by 6%.

Mr Jamieson said the UK music industry was going through a "strong patch" thanks to high sales of albums by rock bands The Darkness and Lostprophets, and jazz stars Jamie Cullum and Katie Melua.

Traditional singles sales continued to fall last year, however, with the value of non-download singles sales dropping 33.6% last year to £64.4m.


Why the RIAA Likes the Per-Song Model
George Ziemann

As I wait patiently for the RIAA's top-notch accounting and fiction writing team to serve up the year-end statistics for our amusement and derisive comments, I'm giving this compulsory licensing thing a lot of thought.

After reading the analysis of Prof. Fisher's plan, I really don't understand the RIAA's reluctance to be pushing that route. It's like guaranteed income for them, just by virtue of the fact that they own most of the music out there. Fisher cut them into a $1.68 billion piece of pie that many of us think they don't deserve in the first place.

Remember, they turned Napster's 5 cents per song offer down. At today's Kazaa file-swapping levels (4 billion songs a month, last I heard), which works out 133 million songs a day, times a nickle, which gives us $6.7 million a day in royalty income. For a full year, that's a tidy sum running in the neighborhood of $2.5 billion.

So Fisher's $1.67 billion is a lot less than they could have taken from Kazaa. In fact, over the four years they've been fighting about p2p, the RIAA's members have effectively passed up on almost $10 billion in income that wasn't good enough for them.

While Forrester Research claims that unauthorized downloading costs the recording industry a mere $700 million a year, the RIAA likes to pretend that it's in the billions.

Reality, of course, is probably (but not necessarily) somewhere in the middle. It is all a guess though. There is simply no way the RIAA can reasonably or accurately estimate how many downloads would have actually turned into a sale had they not been available or, conversely, how many downloaded songs prompted consumers to go out and actually buy a CD.

But we can see how much they've lost by being arrogant, greedy bastards. It's easy, just add a nickle for every Kazaa download that goes by.

$10 billion and counting.

Personally, I would be glad to have a mere nickle for every time my songs were downloaded. For most of last year, that would have produced two or three hundred dollars in income every month. Not just for myself, but for several of the artists on my sites.

And Kazaa tried to negotiate with them to end the stupidity. Again, the copyright cartel refused to budge from their platform - "We own everything ever recorded."

So what is the RIAA actually after? It must not be the money because they have passed up so much of it. To make the puzzle even more conflicted, consider the down side of the iTunes Music Store, Napster, etc.

With CDs priced at $18.98 and averaging 12 songs each, you're looking at $1.58 per song. At CD quality, if anyone cares. 99 cents would be less, thus devaluing the physical CD, at the same time the RIAA is consistently trying to raise prices. Of course, the RIAA is ALWAYS trying to raise prices, so that's an easy jab.

So while they're still pretending to try and sell CDs in real record stores (okay, in Walmart), they're letting the online services shave about 33% percent off of the going retail price for a song, all the while screaming about fewer sales dollars.

So why Napster 2? Why iTunes? What makes these pay-per-song models so attractive to the industry?

Demographics and targeted marketing.

To buy music you have to pay for it, and until we figure out how to feed cash directly into the Net, that means a credit card. It also means you have been identified.

They can study your habits, to the point of offering you selections based on your prior listening preferences. This also gives them access to the wide-scale demographics -- who's buying what, where are they from, how old are they and what is their credit rating?

The RIAA will not get that valuable information from a $5 fee on your cable bill. Or even from traditional record stores, where they still accept that ancient anonymous payment mode known as cash.

But spend $5 at iTunes, and they've got your number. In return, you get digital rights management.


China Plans New Anti-Piracy Seals To Combat Rampant Counterfeiting

SHANGHAI, China (AP) - Is it a cheap fake, or the real thing?

Since buyers here can't always tell, authorities are planning new, high-tech identification seals for legal copies of audio and video products in China's latest effort to combat rampant piracy of movies and music, the Culture Ministry said Tuesday.

Despite tightened laws and repeated promises to crack down on widespread theft of trademarks, copyrights and other intellectual property, illegal copies of movies, cassette disks and books are widely available. Many of the counterfeit items carry seemingly authentic, but fake seals.

The new seals, made with a special ``biologically engineered'' printing ink and carrying 13 unique markings, will be used beginning Sunday to help consumers and inspectors to distinguish between illicit and legitimate products, said Chen Tong, division chief of the ministry's Audio and Video Products Department in Beijing.

According to Beijing-based Orient Anti-Forgery Technology Co., the company that made the new seals, each of the 13 markings will employ a different advanced technology, including ``stealth'' bar codes and handwritten Chinese characters.

The ministry will authorize 300 audio and video product makers and publishers to use the seals, which replace less sophisticated ones used since 1996, Chen said in a phone interview.

The old ID seals will be banned a year from now, he said.

Will the new markings prevent piracy? ``It's hard to tell,'' Chen said. ``At least it will make faking markings and sales of pirated products more difficult because it will be easier to tell which products are unlicensed.''

The ID marks used so far seem to have done little to prevent production and sales of pirated products. Peddlers of pirated CDs and DVDs sell their wares from openly sidewalk kiosks, and many bookstores have sections that specialize in pirated movies.

Movies like ``The Last Samurai'' are screened in Shanghai homes long before their premieres in local theaters. Sometimes, the laughably mismatched subtitles, poor sound and giggles from cinema audiences where the illicit copies were filmed are dead giveaways. But with some seemingly authentically packaged copies, it can be hard to tell.

Last month, Blockbuster Inc., the video rental unit of entertainment giant Viacom Inc., announced it was ending its Hong Kong business and dropping plans to enter the mainland Chinese market, citing rampant counterfeiting and high costs.

``The mainland is certainly an attractive market looking at the demographics,'' said Michael Wong, Blockbuster's marketing manager in Hong Kong. Research showed, though, that with pirated movies selling for less than 10 yuan (US$1.20) apiece, there was no way to earn a ``viable return,'' he said.

Chen, of the Culture Ministry, acknowledged that the identification seals would be no cure-all for the problem.

``Look, anti-counterfeiting technology for currency is already very sophisticated,'' he said. ``But there are still people faking it.''


Flak Over Flags

The FCC has green-lighted a flag that imposes copy controls on digital television. And there was much rejoicing?
Anush Yegyazarian

I remember when the term digital applied to clock radios and not much else. These days, it seems to modify every aspect of life, from dating, address books, datebooks, music, and photos to videos and broadcast TV. We've all been told that analog is passé, and that the quality, versatility, portability, and longevity of all things digital clearly make that media the superior choice.

And therein lies the rub. Digital media really can live up to the hype (we're mostly there). Copies of digital content are identical to the originals, and there's none of the degradation we lived with in the bad old analog days--which is why the people who create content that gets encoded digitally are so nervous. The free-for-all music grab that was Napster casts long shadows, and they'll be with us for quite a while.

Enter the broadcast flag, the latest of the entertainment industry's attempts to tame the lawless digital frontier. Approved by the Federal Communications Commission back in November, the broadcast flag applies to digital TV broadcast signals--which are supposed to be more or less universal by the end of 2006, although many experts predict that won't happen. It's supposed to restrict content copying, so that you can't transfer the latest, high-quality, digital episode of CSI from your TiVo to your PC and then let it loose on that crime facilitator known as the Internet.

But neither copy protection proponents nor critics are happy with the ruling, and both sides are gearing up for further battles.

Quick Flag FAQ

So what can you do when the broadcast flag gets activated? Here are answers to common questions about the technology:

Q. Can you still copy your favorite program, so you don't have to watch it at its scheduled time?

A. Yes.

Q. Can you copy it to a DVD?

A. Yes. Even if you stored it on a hard disk first, you should still be able to transfer that content to a single DVD--and possibly make a back-up copy, but that will depend on the specific restriction given to your recording device by the flag. I wouldn't count on lots of backups.

Q. Can you then copy that DVD for a few hundred of your closest friends?

Q. No. Not only is the flag likely to prevent that, but also existing copyright law prohibits that level of reproduction.

Q. Can you legally invite a few friends to watch the DVD you made of your favorite show?

A. Sure, as long as you don't charge admission.

Q. Can you legally play that DVD on your PC or your notebook when you travel?

A. Yes--that still counts as personal use, and you're not making multiple copies. However, if you recorded the DVD with a device that recognizes the flag, you won't be able to play it if your PC and notebook DVD drive can't read the flag.

Q. Can you legally transfer that episode from your networked personal video recorder to a peer-to-peer network to be accessed by millions of impatient freeloaders who can't wait for their local syndicators to get it?

A. No, precious. That's what they call piracy. And the flag is supposed to remove that temptation from your path.

Q. Can you legally transfer that episode from your networked PVR to another TV or recorder in your own home?

A. Maybe. The FCC isn't clear on that, although the ruling does allow for that possibility. It's only supposed to affect indiscriminate, widespread redistribution (read: via peer-to-peer). There seems to be no outright guarantee, however, that the glorious, easy-to-use home entertainment network promised by consumer electronics and computer vendors alike--the network that lets video and music content get shuttled around seamlessly from your living room DVD recorder to your upstairs TV to your PC in the office to your stereo in the den--will actually be possible.

Q. Do I have to get new equipment?

A. That's practically guaranteed. You should be able to view flagged content on legacy equipment (as long as that equipment can handle digital signals), and you'll still be able to record that content on your VCR. However, if you buy a DVD recorder or a new TiVo device that recognizes the flag- -as they're all supposed to do by mid-2005--and use it to record your favorite episode, you probably won't be able to play that disc back on older DVD players. In other words, once you've recorded it with a device or medium that sees the flag, that content is locked to devices that can't see the flag.

Q. Will every program be flagged?

A. Nope. That's up to the individual content provider. Pay-per-view content will likely have the most restrictions, and older reruns less--maybe even none. One curiosity: News programs probably will be flagged, even though there is no syndication issue with them and timeliness is, clearly, of the essence.

The Motion Picture Association of America and the Center for Democracy and Technology offer their own broadcast-flag-specific FAQs. As you might imagine, their views differ somewhat. (On its Web site, the CDT offers both a Cliff's Notes version of its broadcast flag proposal and a more in-depth report.)

For more on digital media do's and don'ts, see "Consumer Watch: To Copy or Not to Copy."

Nobody's Happy

Neither side particularly likes the broadcast flag as is.

Copy protection proponents, including the MPAA, think it leaves gaping holes through which the piracy-minded can easily swipe content. For example, the encryption standard just has to be strong enough to deter average users, not experts; the MPAA doesn't think that's good enough. Some digital rights management companies, like Digimarc, go one step further, arguing that the flag itself lacks both the flexibility and the robustness to really protect content. (Digimarc sells, and naturally champions, rival rights management technology known as watermarking.)

For the MPAA, that issue pales in comparison to what it calls the "analog hole." All of the rules discussed in my Q&A restrict digital content recorded by digital devices. If you re-record that content onto analog media or record it to analog in the first place, you bypass the flag and the protection. That doesn't even address the fact that most content today is analog--and it will likely stay that way for several years, digital TV deadline or not. As you may expect by now, the MPAA intends to pursue legislative relief for this, too.

The CDT, the Electronic Freedom Foundation, and other consumer rights groups worry that the flag's guidelines are too broad and may end up not only restricting what consumers can do, but also what technology can do. No more nifty new products if technology innovation is stifled by government rules, regulations, and red tape. Moreover, what's the incentive for someone to buy a new device that does less than the one they currently own? If consumers won't buy, innovation again loses.

The Fall of Fair Use?

In recent years entertainment companies have been fighting to define the notion of "fair use"--which lets people make copies of music, video, and other content they've paid for, as long as it's for personal use--more and more narrowly, or get rid of it altogether. Consumer groups are concerned that this type of government-endorsed regulation will drive another nail in fair use's coffin.

And then there's the privacy issue. Although TiVo can tell you how many of its users replayed Janet Jackson's MTV half-time show and what commercials didn't get skipped, people who watch over-the-air broadcasts don't get their viewing habits tracked to that extent. It's possible that the broadcast flag could be used to track who's recording content and what they're doing with it.

The Flag and I

For the moment, let's ignore the question of whether the FCC has the authority to set rules in this case. Like all government regulation, the broadcast flag is imperfect. Tensions between consumers and copyright holders are at an all-time high and, to be honest, both sides have good reason to feel threatened. No one likes to have their work stolen; and no one likes to be presumed a thief when they in fact have done nothing wrong. Hauling 12- year-olds into court doesn't help, either. This is not supposed to be a death match: Movie and music makers have something I want (their products), and I have something they want (my money).

Some degree of copy control is inevitable. Artists and the companies who employ them have a right to be paid for their work, and to prevent its distribution to the four corners of the world by any Joe or Jane with an Internet connection.

But entertainment companies have to remember that we are their customers, not their adversaries. There are things I want to do with content that makes it worth the money: Take these things away, and I'm less willing to pay.

Moreover, my needs are not static: I'm busy, and I'm not willing to consume things only when they're offered to me or in the way they're packaged. VCRs, TiVo, portable music players, CD burners and the like have taught me I don't have to. And these technologies also have implications for syndication as it exists today--namely, that it may not be able to exist tomorrow. None of this means, however, that I'm unwilling to pay for the flexibility I want and the programming I enjoy.


Mac info

File Sharing Tips from the Newest Take Control Ebook
Glenn Fleishman

Even non-techies know about file sharing, mostly due to music that's illegally uploaded and downloaded through peer-to-peer systems like Gnutella and Kazaa. Other types of file sharing exist, but they don't tend to make the covers of mainstream magazines. This article is about those other types - the routine file sharing that takes place in homes and offices for tasks such as managing project files shared by individuals in a group and creating a central archive of important files.

File sharing usually engenders frustration: we only think about sharing files when it doesn't work, or when a system we think we know acts unexpectedly. I'm fascinated by the topic, so I wrote "Take Control of Sharing Files in Panther" with the hope of taking the sting out of file sharing frustration and introducing you to time- saving techniques that will improve security, increase flexibility, and simplify file transfer. To give you an idea of what's in the ebook and provide some useful help, here are three of my best stand-alone tips from the book.

IP over FireWire for Small Ad Hoc Groups -- Mac OS X 10.3 Panther can use FireWire cabling as a networking method, just like Ethernet or AirPort. Because even FireWire 400 is a few times faster than 100 Mbps Ethernet, IP over FireWire can be a great way to hook up small networks on the fly.

You may already know about FireWire Target Disk Mode, in which you connect a laptop, for instance, to another Mac, and then power up the laptop while pressing the T key on the keyboard. When the laptop finishes booting, it shows a FireWire symbol on its screen (and nothing else) and on the other machine, the laptop's drive appears in the Finder just like any other mounted hard disk.

IP over FireWire extends and simplifies the Target Disk Mode notion and eliminates the need to put one Mac into a special state. You can daisy chain from 2 to 63 Macs together using standard FireWire cables, or link the computers via FireWire hubs.

You enable IP over FireWire just like any other network connection:

Open System Preferences.

Click the Network preference pane.

Choose Network Port Configurations from the Show menu.

Click New.

Choose Built-in FireWire from the Port pop-up menu. You might name the service "IP over FireWire".

Click OK and then click Apply Now.

Now, when you plug Macs together with FireWire cables, each computer assigns itself its own address, and the Rendezvous auto-discovery services enable each computer to see resources on other machines. You can even use Internet sharing (in the Sharing preference pane's Internet tab) to share an Internet connection over FireWire.

Turn Off Guest Access in Personal File Sharing -- There's a fundamental problem with Panther's built-in AppleShare server: when you enable it, a guest user - one without a user name and password - can connect and view or copy files from any user's Public folder. This is a security hazard, and one I think Apple should offer an easy way to disable through a checkbox.

Until they do, however, you can follow this procedure for turning off default AppleShare guest access:

Open the /Library/Preferences folder.

Find the file named com.apple.AppleFileServer.plist and copy it to the Desktop or another folder by pressing the Option key while dragging. (You may be able to edit it in place by authenticating when saving, but it's best to have a backup copy anyway.)

Open the file in TextEdit or any text editor, such as BBEdit.

Find the lines in the file that read:


Change <true/> to <false/>.

Save the file.

Drag the original com.apple.AppleFileServer.plist file to the Trash or save it in a backup location elsewhere.

Move your edited version back into /Library/ Preferences.

If you've already turned on Personal File Sharing, restart it by stopping it and then starting it in the Sharing preference pane.

Restore Jaguar-like Server Browsing -- Panther 10.3 through 10.3.2 creates a split in the way that you mount shared file servers compared to earlier versions of Mac OS X. Under Jaguar and previous releases of Mac OS X, all file servers were "hard mounted." A hard-mounted file server appears as an icon on the Desktop (assuming you have that option turned on in the Panther Finder's Preferences window), and is for most purposes exactly like a local hard disk. But with hard-mounted servers, if the server becomes unavailable - your network connection goes down, the server crashes - your Finder can lock up for quite some time, even under Panther, until it decides to release the missing server.

You can still hard mount servers under Panther by choosing Connect to Server (Command-K) from the Finder's Go menu and entering the server's details manually, but Panther also offers an interesting, but flakey, new option for mounting servers on a local network, long available in Unix: "soft mounting." A soft-mounted server is more like a folder. Instead of it showing on the Desktop, you browse to it using the Network browser (the Network icon in the Finder's sidebar). If the server or your network becomes unavailable, Panther doesn't complain or pause even when you try to access the unavailable server, of course - it's just not there any more. When the server becomes reachable once again, you can browse that folder and find the server's contents in it.

Originally, I thought that soft mounting was an excellent alternative to servers on the Desktop because soft-mounted servers are always available without any login process. But in practical use, I continually find strange behavior: having to re-enter a password, not finding servers that I think were soft mounted, mounting servers as both hard and soft at the same time. It's too much to manage compared with the relative ease and few disadvantages to hard mounting servers.

To avoid soft mounting entirely and to skip entering machine numbers or names in the hard-mounting dialog, you can mostly restore the Jaguar-style Connect to Server browsing dialog. My colleague Dan Frakes gave us this one-line AppleScript script which triggers a version of the old software interface.

From the /Applications/AppleScript folder, launch Script Editor.

Enter the following in the default Untitled window that opens:

open location (choose URL) with error reporting

Save the file in /Library/Scripts/Finder Scripts/ as "Old Hard Mount" or whatever you choose.

Turn on the Finder Script menubar menu by running Install Script Menu from the /Applications/AppleScript folder.

While in the Finder, select the script from the Finder Scripts submenu of the Script menu, and there's the beautiful old Jaguar network browser. This version, however, makes you select which type of server you want to browse for through a pop-up menu.

"Take Control of Sharing Files in Panther" -- In addition to the tips above, the 96-page ebook covers all the built-in methods of sharing files using the Web, AppleShare, Samba, and FTP (it even gives a few pointers on NFS and several lesser-known options), while guiding you through changing configuration files and using third-party software to avoid pitfalls and problems. For example, I give steps for changing Apple's configuration files to enable WebDAV file sharing using Panther's Apache Web server and to use Apache to share folders other than the defaults (a useful option that I also demystify for AppleShare and Samba).

For Panther users who find themselves in mixed Mac and Windows networks, the ebook covers both how to connect to a Panther system running the built-in Windows-style Samba file server, and how to connect from a Panther machine to a Samba file server running on a Windows computer (or another Mac or Unix system, even).

In researching the ebook, I found that Panther changed the equation for many aspects of file sharing, from browsing on a local network for servers to turning servers on with the right amount of security. I addressed these problems with specific, step-by-step instructions, plus I wrote a long section detailing how to connect to Panther servers from major platforms, including Panther, Jaguar, Mac OS 9, and Windows XP. The book also covers sharing music and photos with iPhoto and iTunes, both in ways that Apple recommends and in alternative, more flexible ways. I hope you find the book helpful!

<http://www.tidbits.com/ takecontrol/ panther/ sharing.html>

[Editor's note: If you've been following our Take Control ebook series, you've noticed that previous books have carried a $5 price. This one costs $10, but the increase is not simple price inflation of the sort Consumer Reports loves to document ("Smaller size, bigger taste, same great price!"). At 96 pages, Glenn's ebook is nearly twice as long as the others, was considerably more work for all of us, and will probably grow even larger when we release free updates. -Tonya]


2003 Overall Music Sales Declining among Teens -- and Their Parents
Press Release

Less excitement about new releases and more competition for entertainment spending dollars causing teens to spend less on CDs, says The NPD Group

According to recent news reports, the music industry began to show some positive signs of fiscal recovery beginning in 2003. The NPD Group, Inc. reports, however, that teen consumers are not on the leading edge of this industry upturn.

Overall dollar sales of music CDs fell eight percent last year compared to 2002. NPD estimates that three quarters of this decline can be directly attributed to unit sales declines last year, while the rest is attributed to recent retail price reductions. Among teens aged 13 to 17 years old, sales declines were even steeper reaching 15 percent in 2003.

"Certainly illegal peer-to-peer music file sharing continues to plague the music industry, but that's only part of a larger story" said Russ Crupnick, vice president of The NPD Group. "Another aspect of these sales declines is based on competition we're seeing from alternative entertainment-related spending options for teens, such as cell phones and video games. As music sales continued to fall, video games software unit sales rose 12 percent in 2003 among teens aged 13 to 17 years old."

NPD's information also suggests that the 2002 repertoire of new releases was more appealing to young consumers than were last year's releases. Thirty releases sold more than 500,000 units to teens in 2002, compared with only 15 releases that reached that level in 2003. Top- selling 2003 releases to teens included albums by such artists as 50Cent, Good Charlotte and Simple Plan; however, the overall music line up last year did not reach the levels seen in 2002, when Eminem, Nelly, Avril and Linkin Park dominated the charts.

Sales to the 35- to 44-year-old age group also declined sharply (down 13 percent), while gift purchasing of music among this demographic fell 20 percent. According to NPD's data, the younger age groups buy more music, but the 35- to 44-year-old group is the most important in terms of buying music for others. No artist approached the gift levels of Avril, Nelly and Pink among this age demographic.

"There are two negative effects here," according to Crupnick. "If kids aren't clamoring for music, not only do we lose sales to younger consumers, but also parents will be less likely to shop the music section on behalf of their children. On top of that, DVD's are to older demographics what video games are to teens. An October 2003 NPD survey showed that 26 percent of DVD purchases were made by 35 to 44 year olds. That's fierce competition for the consumer's entertainment dollar."

One bright spot in the CD sales landscape was found within an older demographic group. Dollar sales to the 55- to 64-year-old age group actually increased six percent, driven strongly by the continued sales of Norah Jones's 2002 release. In addition, new releases from Clay Aiken and Rod Stewart were also popular among this demographic, as were country music artists, like Alan Jackson and Toby Keith.

Source: The NPD Group's MusicWatch tracking service, which reports consumer buying patterns for music based on NPD's online panel. The data represent annual 2002 and 2003 periods, from a sample of over 100,000 music purchases per year. The video games data is sourced from NPD Funworld Video Games service.
http://home.businesswire.com/portal/...&newsLang =en


Altnet Reaches Milestone with Technology that Combats Online Piracy

300 Million Authorized Files Downloaded Through Peer-to-Peer Software
Press Release

Altnet, the secure peer-to-peer platform provider, announced today that it has reached a milestone of 300 million downloads of authorized content using Altnet technology.

"Having a legal downloading alternative is the most effective form of anti-piracy there is," said Derek Broes, Executive Vice President of Worldwide Operations for Altnet. "Fortunately, technology exists with a proven success rate for distributing fully licensed, compensated content over peer-to-peer software."

"Providing high-quality, legitimate files for easy downloading on software like Kazaa and Grokster is an effective anti- piracy method," Broes continued. "For every licensed file downloaded, that means one was not pirated. Consumers want the ease and convenience of downloading and the community features of file sharing. Altnet provides that and simultaneously provides the music and motion picture industries a way to profit from a distribution method that can efficiently reach millions of users. In this way, we are curbing piracy, one file at a time."

Altnet's technology works by obtaining preferred listing spots in the search results of the most widely used peer-to- peer software, including Kazaa, the largest and most popular file sharing application in the world, and Grokster, Edonkey and Overnet. Altnet technology delivers search results into the file sharing software when a search request is initiated. The Altnet results appear first, before any results appear from the shared directories on the user's computer. The Altnet results appear as gold icons and can occupy the top 50 slots when relevant content is available in Altnet's catalog. Other results provided by the shared folders of other users are not controlled by Altnet or the peer-to-peer application and these appear as blue icons which Altnet cannot monitor due to the decentralized nature of the technology. Altnet's current catalog consists of 5,000 files. The company is in the process of adding another 20,000 files over the next few months.

"The 5,000 music, video and other files Altnet now offers translates into 50 million authorized files being downloaded through peer-to-peer each month at current rates," said Broes. "We believe that inserting licensed files into peer-to- peer software is the most effective form of anti-piracy, and our download numbers support that. If the record labels were to provide their entire catalogs for distribution through Altnet, we estimate the number of legal downloads could soar to more than one billion per month, providing a significant revenue stream for the industry."


Intel Reports a Research Leap to a Faster Chip
John Markofb

Intel scientists will announce on Thursday that they have built a prototype of a silicon chip that can switch light on and off like electricity, blurring the line between computing and communications and bringing sweeping changes to the way digital information and entertainment are delivered.

For the first time, Intel researchers said, they have shown that ultra-high-speed fiber optic equipment can be produced at the equivalent of low-cost personal computer industry prices. Industry executives said the advance could lead to commercial products by the end of the decade.

As the costs of communicating in cyberspace falls, the researchers said, existing barriers to creating fundamentally new kinds of digital machines capable of far greater performance, and not limited by physical distance, should disappear.

The advance, described in a paper to be published Thursday in the journal Nature, suggests that Intel, as the world's largest chip maker, is on the verge of developing the technology to move into lucrative new telecommunications markets.

"Before there were two worlds, computing and communications,'' said Alan Huang, a former Bell Labs physicist who founded Terabit, an optical networking company in Menlo Park, Calif. "Now they will be the same, and we will have powerful computers everywhere."

The advance, scientists and industry executives said, should free computer designers to think about the systems they create in new ways, making it possible to conceive of machines that are not situated in a single physical place. It will also make possible a new class of computing applications to transmit high-definition video to homes hundreds or even thousands of times as fast as over today's Internet.


Pirate Grrrl. She’s Baaack!


The music pirates' manifesto.
Annalee Newitz

WITH A GROAN , I peeled the transparent sticker off my brand-new iPod. In the clean, cute font for which Apple is known, it read, "Don't steal music." Even the wrapping paper on my smooth little machine was full of antipiracy propaganda. But the software wrappings Apple places around the music the iPod plays are far worse than propaganda: they enforce, with no subtlety or charm, the licensing preferred by corporate copyright holders.

Once upon a time, Apple's slogan "Rip. Mix. Burn." meant "make as many copies as you want of your legally purchased music." Now it means "make the limited number of copies we deem appropriate." All that's being ripped, mixed, and burned are fair-use laws.

If you buy music from the Apple iTunes store, which is what Steve Jobs hopes you'll do, you pay 99¢ for a song but can only copy it onto three computers. What if those computers become obsolete or unusable in a few years? Too bad – no more copies for you. Your music dies with your computers. If you want to create a mix CD with your songs, you may burn only 10 copies, even though fair-use laws grant you permission to burn as many copies as you like for educational use. Ah, you say, but at least you can save iTunes songs onto as many iPods as you want! Isn't that fair? Not really – once you put music onto your iPod, you can delete it but you can't copy it anywhere else. The iPod is a one-way music device: music files go in but don't come out. It's all part of Apple's digital rights management (DRM) scheme ironically known as Fairplay.

Free-software activist Richard Stallman has dubbed DRM "digital restriction management," while the media industry views it as the latest killer app. For the past couple years the Recording Industry Association of America has been waging a losing war against people who share music over the Internet. The RIAA argues that music copyright holders like Virgin and Time Warner are losing millions of dollars a day because evil copyright infringers are freely trading music files on popular peer-to-peer file-sharing networks such as Kazaa, eMule, SoulSeek, and BitTorrent. But the RIAA's efforts to stop music sharing have ended in a series of public relations disasters, including suing a 12-year-old "pirate" for downloading copyrighted nursery rhymes and sending burly ex-cops in RIAA "uniforms" to bust music peddlers on the streets in Los Angeles. So the RIAA has turned to kinder, gentler solutions.

And that's where the high-tech industry comes into the picture. Software companies, eager to lap up profits any way they can, realized there would be a huge market for programs that could be wrapped around digital media or put into players to prevent piracy. Microsoft, Apple, and RealNetworks are at the forefront of this burgeoning market with their DRM schemes for music. Apple packages iTunes songs in its Fairplay software, while RealNetworks (maker of the popular RealPlayer) has just opened a music store full of DRM-shackled songs to compete with iTunes. Microsoft markets the Media Rights Management software package and is planning to include a controversial and elaborate DRM scheme called the Next- Generation Secure Computing Base (formerly known as Palladium) in the next version of Windows.

So far, the RIAA's efforts have met with confusion and resistance. Many consumers are puzzled by DRM – iTunes, for example, only explains its DRM policies on a part of its Web site that few customers are likely to read – and wind up with unplayable music files because they have unwittingly used up all their copies. Among hackers, DRM is a target for ideological reasons. Ian Clarke, project coordinator for anonymous file-sharing system Freenet, said, "DRM turns computers against their owners. I don't want a Disney security guard sitting in my living room watching my every move."

Jon Johansen, a Norwegian programmer who wrote the DeCSS program to break DRM on DVDs, has released a little chunk of code called QTFairUse for circumventing DRM on iTunes songs. And Princeton University graduate student Alex Halderman published a paper explaining how to bypass SunnComm's MediaMax DRM scheme by holding down the Shift key while the CD is spinning up.

What fuels the ire of hackers are what they consider the music industry's blatant lies about who loses when people share music. The RIAA claims music-sharing drives down sales and deprives artists of potential earnings. But Tom Mennecke, who analyzes peer-to-peer (P2P) trends for Web site Slyck (www.slyck.com), said, "People can see through the RIAA's argument. They know artists aren't being hurt, and that in fact P2P helps artists by putting people in touch with their music."

DRM industry consultant Bill Rosenblatt, who publishes the DRM Watch online newsletter, agreed. "No one has put any figures on the industry's revenue loss due to consumer piracy that have any credibility," he said. "Music industry executives estimate that 80 percent of all pirated content is a result of inside jobs, people at studios or mastering labs or other production houses." In other words, employees of the music industry are pirating far more than the consumers the RIAA is suing for infringement.

But it would seem the RIAA's scare tactics are working. A recent survey by the Pew Internet and American Life Project gathered statistics that revealed a precipitous decline in the number of people running P2P programs on their computers. One P2P program, Grokster, took a huge hit: according to Pew's figures, its users dropped by 58 percent over the past year. Mennecke disputed these figures, however. He pointed out that you can't track P2P use by measuring how many people download one or two programs since newer, better ones pop up all the time. "While some numbers were admittedly going down, a lot of P2P programs are doing quite well," he explained. "eDonkey has taken off, and BitTorrent is doing incredibly well. P2P is thriving."

Rosenblatt pointed out that the next move by DRM vendors will be to create P2P applications with built-in DRM. Entrepreneur and Napster founder Sean Fanning has been promising to roll out something like this with his music fingerprint database – a vast collection of copyrighted songs whose sounds have been digitally converted into unique "fingerprints." When a fingerprinted song passes through a P2P system, DRM software could recognize it no matter what format the song was in. Then the person downloading the song would be charged.

As copyright owners thrash around trying to protect the property they bought (often at painfully low prices) from artists, and DRM vendors get jiggy about selling their wares to paranoid RIAA members, consumers are left swinging in the wind.

I love music. You love music. So, why shouldn't we share it and help the artists we love get new fans? When Lynn let me rip one of her Mountain Goats CDs, I wound up buying five more of the band's CDs. After Victor gave me a copy of his solo album Bittersweet, I bought two copies of it for my friends. Charlie turned me on to funk music with a mix CD, and now I buy funk compilations at indie music vendor Amoeba Records. Steve gave me a pirated copy of an album by the Orb, and then I bought a legal version of it. I could tell countless other stories like this.

Activists like Stallman, along with vocal fair-use advocates like Seth Schoen and Fred Von Lohmann of the Electronic Frontier Foundation, are now fighting for our rights to share information legally. Stallman's classic essay "The Right to Read" warns of a future where people pay licensing fees for every piece of information and face severe penalties for sharing any kind of media. The EFF has fought in dozens of court cases to make sure this doesn't happen.

But while Stallman writes essays and the courts hash out what constitutes "legal sharing," what is a music lover to do? The answer is simple: share safely and wisely. Use P2P networks that allow you to be anonymous or hide the files you're sharing. The most popular P2P networks aren't always the safest. Bram Cohen, author of BitTorrent, warned, "Pirating with BitTorrent is stupid. BitTorrent, due to fundamental architectural decisions, is quite incompatible with anonymity. The newer apps are more robust distribution tools, so they keep running despite failures, but they aren't designed to protect end users from legal attacks."

The only truly anonymous P2P network is Freenet. On networks that use Kazaa Lite and eMule, you can choose not to display a list of the files you're sharing. While this doesn't keep you anonymous, it will prevent the RIAA police from counting how many files you're sharing and branding you a pirate. Mennecke noted that networks like SoulSeek, which specializes in rare and obscure music, are also relatively safe because the RIAA is mostly looking to bust people who are sharing Top 40 music.

Services like PeerGuardian (www.peerguardian.net) offer file sharers access to a "blocklist" of IP addresses known to be associated with the RIAA and the companies it hires to spy on the file-sharing activities of P2P networks. By using the blocklist, you can keep known copyright-enforcement agents from invading your network and looking at the information people are sharing on it.

You can also attempt to compensate artists by buying only from independent record labels that aren't a part of the RIAA. At www.RIAARadar.com, you can look up what albums are owned by RIAA corporations.

Freenet creator Clarke said our right to share any information, including music, is nothing less than a political philosophy. He pointed out it's often hard for people to see the connection between copyright law and censorship until they realize the Church of Scientology uses copyright law to keep former members of its sect from describing their experiences; Freenet includes countless testimonials from former Scientologists about being brainwashed and bankrupted. More recently, electronic voting software company Diebold tried to use copyright law to suppress memos in which employees discussed the security flaws in its software.

"My idea is simple: free communication is good," Clarke said. "It's essential to the maintenance of a healthy democracy. I see government power and corporate power as extremely similar – both need to be regulated, and you can't regulate something if you don't have access to information about it."

Until next week,

- js.

Current Week In Review.

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Jack Spratt's Week In Review is published every Friday. Please submit letters, articles, and press releases in plain text English to jackspratts (at) lycos (dot) com. Include contact info. Submission deadlines are Wednesdays @ 1700 UTC.
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