Recording industry eyes battle as RIAA Chief tries to rally troops:
Letter from RIAA President & CEO to industry leaders
By Ben Silverman
Editor, Dotcom Scoop
Wednesday October 3, 2001 @ 12:01 A.M. EDT (Updated 3:10 a.m. EDT)
As the battle between the music industry and Napster nears an end, the major record labels are preparing to launch a new offensive aimed at wiping out the new breed of peer-to-peer file sharing services, and it may include help from inside the beast itself.
In a memo prepared by the Recording Industry Association of America (RIAA), exclusively obtained by Dotcom Scoop, the lobbying organization for the music industry outlines its strategy and findings to combat services that have quickly replaced Napster as the vehicle of choice for file sharing.
"We have solid claims against FastTrack, MusicCity, and Grokster of secondary liability for copyright infringement. The claims are not as strong as those against Napster, but they are also not so remote as to be wishful," reads an excerpt from the memo distributed on September 25, 2001 internally and eventually to some of the organization's member companies.
FastTrack, a Netherlands-based company, is the leading force in the post-Napster file swapping frenzy. The company has launched the KaZaA service and licensed its code to MusicCity and Grokster.
MusicCity is a Nashville outfit that's backed by Timberline Venture Partners, an affiliate of respected VC firm Draper Fisher Jurvetson. Grokster has incorporated in the tiny Caribbean island of Nevis.
The RIAA's strategy calls for litigation against FastTrack, MusicCity and Grokster, and possibly against Timberline Venture Partners. But the RIAA believes it has found a potential ally in FastTrack.
The memo states that FastTrack representatives are willing to sit down with the record labels and discuss alternatives to litigation. The RIAA recommendation is that after litigation is filed against the three companies, they enter in discussions with FastTrack.
"Immediately thereafter [ed. note; filing a lawsuit] initiating discussions with FastTrack about resolving our claims in a way that will provide us with useful information and testimony against MusicCity, and if possible obtain FastTrack's cooperation in shutting down or converting MusicCity and Grokster," states the memo.
The memo notes that the RIAA believes MusicCity is awaiting litigation and would like the RIAA to file a lawsuit.
A source close to the RIAA told Dotcom Scoop that the RIAA will be joined by The International Federation of the Phonographic Industry (IFPI) and The Motion Picture Association of America (MPAA) in litigation against the peer-to-peer networks. But the source warned that the RIAA's case is weak and the association will need cooperation from FastTrack if it wants to win.
"This scenario is very different from the challenge the industry faced with Napster," the source told Dotcom Scoop.
"[The RIAA] will be dealing with companies that are more rogue in nature and that have a better grasp of technology that masks actions and skirts copyright laws. They will need FastTrack in their corner. FastTrack controls the code that enables these three networks."
The RIAA has been working with Los Angeles-based network security solutions firm Vidius to study how peer-to-peer networks operate. The RIAA states in the memo that more information about how the FastTrack code utilizes supernodes, high-bandwidth computers that connect multiple "peers," is needed.
"Our claims would likely be strengthened by learning more about the designation of supernodes and the content of communications within the system. However, the encryption of this communication precludes further learning absent cooperation from one of these companies or court ordered discovery," the memo states.
According to the RIAA's findings, the supernodes effectively act as search agents for peers, or users, looking for specific data files. Computers designating as supernodes have been found at IP addresses linked to major universities and even NASA's Jet Propulsion Laboratory.
Because these peer-to-peer networks tap into the computing power of the users, it has been difficult to argue that the companies are directly breaking copyright laws. However, the memo states that the RIAA has been able to link a supernode directly to Grokster and that all three companies maintain log-in servers which facilitate file sharing.
In a separate letter, also exclusively obtained by Dotcom Scoop, distributed on September 25, RIAA President and CEO Hilary Rosen implores online music industry leaders to sit down and talk about the issue at hand.
"It is time to get coordinated and aggressive with the new round of peer to peer services. The amount of music being downloaded is, as you know, reaching unprecedented levels. Since college started last week Morpheus traffic was up to 19 million downloads per day. AND THAT'S JUST MORPHEUS. With the imminent launch of legitimate subscription services we have to get our customers back," Rosen told executives at various major labels, Yahoo, Real Networks, Microsoft and AOL in an email.
"I know you want your new businesses to be successful. So do I. Given the overwhelming volume of these alternative services, RIAA can't handle all of the enforcement alone. If they are not controlled more effectively and consumers redirected to legitimate offerings, there won't be new businesses. That's obvious," Rosen continued.
Rosen called on the executives to attend a meeting at RIAA headquarters in Washington, D.C. in the very near future. At the meeting Rosen hopes to discuss how to "spoof" the new file sharing technologies, how to promote existing services on legitimate file sharing services, a public relations campaign and general legal strategies and options.
She asked that only people in the capacity to make decisions and "commit to spending" attend and that other parties would eventually be brought in to provide input.
Dotcom Scoop contacted the RIAA and at their request, forwarded the association unedited copies of the memos.
"We are not confirming whether these are real emails. But if anyone thinks that the music community is sitting idly by while these services threaten our industry and our technology partners they are wrong," a spokesperson for the RIAA told Dotcom Scoop.
Last week Napster came to terms with music publishers, agreeing to pay out $26 million in damages. An October 10 court date to hear new motions in the case the RIAA has filed against Napster is on the docket. Napster is now backed by German media conglomerate Bertelsmann, which is attempting to legitimize the service.
A number of industry-backed online music and video on demand services are being prepared for launch.
MusicNet, a joint venture between streaming media firm Real Networks, AOL Time Warner's Warner Music, Bertelsmannís BMG Music, EMI Group and Zomba Music, is set to launch in the next sixty days. MusicNet will utilize Real Network's streaming media applications.
Meanwhile, Sony Music and Vivendi's Universal Music are preparing to launch pressplay with help from Microsoft's MSN, Yahoo and Vivendi's MP3.com. The pressplay service will use Microsoft's Windows Media Player software.
On Tuesday EMI broke ranks with its competitors and said it had licensed its catalog to pressplay, a move more likely engineered to quell antitrust fears.
Bertelsmann is preparing to re-launch the Napster service, which has been suspended since early this summer. Napster's CEO Konrad Hilbers has said the subscription service will cost $5 per month. Pricing for the other services has yet to be announced. Bertlesmann has also acquired online file storage firm myplay.
Vivendi has created an online music network by acquiring MP3.com, eMusic and GetMusic since the beginning of the year. Yahoo recently stepped into the fray with its acquisition of Launch Media.
In the past six weeks, all of the major motion picture and television production studios have entered into joint ventures with one another to provide online video-on-demand services.
The peer-to-peer file sharing services are some of the most popular downloads available online. The free softwares are used mostly to exchange digital music and movies files, with the vast majority being in violation of international copyright laws.
Representatives from MusicCity and Timberline Venture Partners did not return calls seeking comment.
Late on Tuesday, the RIAA and MPAA filed a lawsuit in Los Angeles against FastTrack, MusicCity and Grokster.
"We cannot sit idly by while these services continue to operate illegally, especially at a time when new legitimate services are being launched," Rosen said in a statement, according to CNET News.com.
The article does not specify the content of the lawsuit.