SPECIAL REPORT: Web copyright wars

As the Napster copyright hurricane continues to swirl, the online content industry is still searching for a way to market and distribute its digital wares. The quandary for the industry is how to make money from its content and, at the same time, eliminate the threat that its wares will be traded for free by users who do not want to pay for them. "[Companies] see in the Internet and the new distribution systems it creates both a tremendous threat and opportunity," said Jonathan Rosenor, partner for new ventures at PriceWaterhouseCoopers. "[Companies] want to protect the opportunity and ward off the threat. ... Our [copyright] system is dependent on incentives being in place, and this system can't operate in a free-for-all where people don't respect other people's rights," he said. Napster's popularity shows that consumers are eager for digital content, and a new stage of content marketing experimentation is reaching beyond the music industry into markets such as digital video, online books, and other publications. Large organizations are pursuing digital rights management technology, whereas others are moving toward sharewarelike content options and partial reliance on the honor system to collect payment, but no one has yet found the perfect answer to legally replace Napsterlike services. Jay Fenello, founder of Atlanta-based Ths-music.com, which launched last week, is seeking to improve on Napster with the addition of "The Honor System" policy: Ths-music.com requests that after downloading and listening to songs for 30 days, users send in a fee of $2 per song. After that, they are welcome to trade or distribute the songs, even on Napster, Fenello said. Files will not expire after the 30 days, so Ths-music is putting its trust in the users to send in the fees. "Other people are trying to figure out how to do the encryption or expiration and protect digital rights," Fenello said. "Unfortunately, history has shown us that all of those protection schemes have been overcome by the Internet community." Ths-music.com denotes its music with the "ths-" prefix so that users know it has already been copyright-approved and they are not in danger of "being sued or having some subpoena or other nasty-gram showing up in [their] mailbox," Fenello explained, adding that copyright issues will continue to plague content distribution until the mind-sets of the industry and community changes a bit. Another case of the honor system emerged last week as author Stephen King posted the first segment of his macabre novel The Plant online, requesting that those who download the book send him a $1 payment via Amazon.com, the same company that fielded King's first entirely online novel. King was also able to wield a threat to ensure high compliance levels with the payment policy: If he did not receive payment up to a certain percentage, he would leave readers hanging by not posting the book's next section. "[King] may be paving a new road with this," said Jim Shaffer, CEO of Clickshare Service. "Ultimately, people are going to have to be paid to make content, or they won't make content at all." Clickshare, launching early next year, offers technology that allows the charges for online content purchases to be aggregated at an "agent" site, such as a bank or cell phone service provider, with the total charges showing up on the user's monthly bill from the agent company. "What the marketplace needs is an easy way to do the right thing rather than an easy way to do the wrong thing; the natural inclination of people is to be honest when presented with prices and processes that are reasonable," said Bill Densmore, vice president and founder of Clickshare. One way to make the content access problem less complicated is through a subscription service, where fees are collected up front and content can be distributed or downloaded automatically. Organizations with newsletters and magazines are pursuing this route, as is eMusic.com, which launched eMusic Unlimited last week to give users unlimited downloads for a set monthly fee; artists are compensated based on a percentage of total quarterly downloads. "[Subscriptions] are an alternative solution that's still good for the fans, because they're paying one low price and you're removing the 'transaction tedium,' explained Steve Curry, spokesman for eMusic.com. Curry added that Napster and similar technologies have done a good service in proving that people are willing to steal online content if a better alternative is not available, a fact that should prod content owners into creating their own content services. "The longer the major labels take to come up with an alternative, the longer the next generation will be familiar with the idea of 'Music should be free.' So, in a way, the industry has brought it on themselves," Curry said. Napster appeals injunction MP3 music file-swapping company Napster this week successfully appealed an injunction that would have banned it from letting users exchange MP3 music files via its Web site. The injunction was served as part of the ongoing lawsuit between Napster and the Recording Industry Association of America (RIAA), which moved forward in a San Francisco court last week. The RIAA is suing Napster for allegedly infringing music companies' copyright by allowing its users to trade MP3 music files for free. The injunction has now been stayed until an appeal against it is heard. That appeal is scheduled for August 18. Presiding US District Judge Marilyn Hall Patel listed three illegal uses of Napster's technology that were to be stopped under the terms of the injunction: using MP3 files, helping people use the files, and copying the files. If its appeal had not been successful, Napster would have had until midnight on Friday, July 27, to comply with the order. Napster gave several reasons for its need to fight the court injunction, claiming, among other things, that the court failed to recognize evidence that the site might actually be promoting sales for the music industry. In addition, Napster suggested that court proceedings earlier in the week ran too short, not giving Napster enough time to present all of the applicable evidence. Judge Patel denied a request for an evidentiary hearing. During the court hearing, Napster's defense has rested upon the claim that it is not breaking copyright laws because it does not host the copyrighted material on its Web site - the Web site just facilitates the exchange of files held by its users. During Napster's defense arguments, the company's lawyer, Daniel Johnson, argued that the true responsibility belongs with technology companies that created the MP3 music format. "[The music industry] has created their own monster, and the monster is the MP3," Johnson said. Digital rights tackled at show In a releated development, digital rights management and electronic books will be the major topics at the Seybold San Francisco 2000 publishing show next month, event organizers said last week. Microsoft is preparing a raft of announcements both prior to and during the event, including information about its own digital rights management product, according to a company representative. In a conference keynote, Dick Brass, Microsoft vice president for technology development, will address the issue of how to protect intellectual property in terms of both copyright protection and combating piracy, according to Mario Juarez, a spokesman for Microsoft. Looking at protecting intellectual property, Microsoft officials refer to the three Es: encryption, enforcement, and education, Juarez said. "You will see our digital rights management software soon in the marketplace," Juarez added. The forthcoming Microsoft product involves technology licensed from ContentGuard, the company's partner and digital rights management specialist. "We will meet the needs of publishers and sellers, and consumers won't mind the product," Juarez said. Turning to eBooks, Microsoft is actively looking at supporting operating systems and devices other than its own, Juarez said. Seybold San Francisco will also feature an eBook special interest all-day event, with updates on the progress of technology, eBook "war stories" from the likes of publisher Random House, and an open microphone session where eBook publishers, buyers, and sellers can discuss pertinent issues relating to the adoption of the technology. The Seybold San Francisco conference will run from Aug. 27 to Sept. 1 and will take place at San Francisco's Moscone Convention Center.

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