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http://www.nytimes.com/2002/11/04/technology/04TUNE.html?todaysheadlines=&pagewanted=print&position=bottom
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November 4, 2002
Marketers Try to Turn Web Pirates Into Customers
By AMY HARMON
growing group of online marketers have a new name for the millions of people who use Internet file-trading software to steal music: "customers."
The ranks of these marketers include independent bands with little to lose and established companies like Microsoft. What they have in common is that they are starting to view the masses of Internet pirates as a possible source of revenue. They have begun to experiment with promoting their wares on file-trading services, which are typically used to obtain unauthorized copies of music, movies or software.
Some entertainment industry officials condemn those marketing efforts as giving support to services that encourage the theft of other people's intellectual property. But the organizations promoting file-traders see it as a way to lure people away from piracy by providing them with authorized material to download — and, in some cases, asking them to pay for it.
"We're going to find that people labeled as hackers, thieves and pirates will convert and change patterns to pay for content," said Kevin Bermeister, chief executive of Altnet, which acts as an intermediary for KaZaA, the most popular file-trading software, and organizations that want to distribute legitimate materials.
Under the deal with Sharman Networks, KaZaA's distributor, Altnet's Software is automatically installed whenever someone installs KaZaA on a PC. Companies and artists seeking to market music, software or other material to KaZaA users pay Altnet to place their material at the top of the results of searches. AltNet shares the revenue with Sharman.
Users who type in "Dave Matthews Band," for instance, will get a list of the artist's tracks on the screen. By clicking on a blue icon, they can download the music free. But now, Dave Matthews fans are also likely to see, at the top of the list, gold icons offering alternative acoustic rock from the Jay Quinn Band of Dallas. That is because Mr. Quinn's manager, Cornerband, is paying Altnet to have his music appear in KaZaA listings when someone searches for music by Dave Matthews, Moby, Beck and David Gray, among others.
Cornerband, in turn, charges artists to distribute songs in a technology wrapper, supplied by Microsoft, that can prompt users to pay for a track or buy a CD when they try to play the music after a preset time period. Since about three million people are typically using KaZaA at any time, the audience that has been exposed to Mr. Quinn's music since the promotion began in September surpasses the number who have ever seen him play in local Dallas clubs.
For Cornerband, the KaZaA technology is attractive not just because of the large, interested audience using it, but because Cornerband does not incur the transmission expense of distributing music from its own Web site. With KaZaA's peer-to-peer system, users download music or other material from each other, rather than from a central site.
The 29 entertainment companies that are suing KaZaA's distributor, Sharman, and other file-sharing companies, are more focused on what the mass audience is generally looking for: unauthorized copies of popular music and movies that they can get without paying. The mainstream entertainment companies take a dim view of those who are supporting the use of the technology, albeit for a legitimate use.
"At a time when the public is especially hungry for good corporate citizens," said Carey Sherman, a lawyer for the Recording Industry Association of America, "it's surprising that any legitimate interest would consider giving financial support to a pirate service like KaZaA that illegally traffics in the copyrighted works of others."
One executive at a major record company said that he and many colleagues would like to use a service like Altnet to distribute their material but that their lawyers would not allow it. Some entertainment industry lawyers fear that if Sharman can prove that KaZaA has legitimate uses, it will be harder to shut it down. Others, however, say that by displaying some material more prominently than others, Altnet's service helps to prove their point that KaZaA could block all copyright material from appearing in its search results. Sharman has maintained that it has no way to control what files users chose to use the KaZaA software.
Robert Schwartz, a lawyer for some of the studios and record companies, compared Altnet's role to that of people who hand out fliers at swap meets organized to trade bootlegged copies of movies and music. "It may or may not be illegal," Mr. Schwartz said, "but it seems like a crummy way to make a buck."
Microsoft, for instance, paid Altnet $5,000 to list the trailer for a Lions Gate film, "The Rules of Attraction," at the top of certain searches for 30 days when the film was released last month.
Lions Gate, an independent studio, wanted to reach KaZaA's large audience of college students because it thought that many would be interested in the film. Microsoft wanted to showcase its Windows Media software, which lets entertainment companies distribute material securely over the Internet with high-quality sound and video. When users download the trailer video, they are prompted to upgrade to the new version of the Microsoft software.
"We'll never spend as much as Sony, but this is one way we can compete with the big boys," said Tom Deluca, vice president for new media at Lions Gate, who added that after his trailer promotion, he had received several expressions of support, tinged with envy, from counterparts at Hollywood studios.
Microsoft also paid Altnet $12,500 last month for a 60-day promotion of a video for Tony Hawk's "Boom Boom HuckJam," a multimedia punk-rock tour. By Hollywood standards, the promotions were small, and Microsoft executives maintained that there was nothing inherently wrong with peer-to-peer technology like KaZaA's.
"Microsoft clearly does not promote or support piracy of any kind," said Erin Cullen, product manager for Microsoft's digital media division. "But in terms of looking at new ways to reach an audience in a secure way, this may be an avenue that will become useful."
It is far from clear whether people who come to a site intending to get free stuff can be induced to pay with a gold icon that promises a high-quality file, and the numbers so far are probably too small to draw a firm conclusion.
But AtomShockwave, an independent film and software distributor, said that 400 people had bought its PhotoJam software in the last month as a direct result of its promotion on KaZaA. The firm distributes a free version on the network; people can buy it for $35 to get more features.
Trymedia Systems distributes the first few levels of some video games over KaZaA and Gnutella, another peer-to-peer system, and prompts users to buy the software if they want to finish the game. The company says that with some products, like Beach Head 2002, a shooting game, as many as 10 percent of those who download the hobbled version from peer-to-peer networks go on to buy the software.
Of the three independent artists — Barrington Levy, Brooke Allison and Johnny Virgil — promoted by Altnet in search results in the last three weeks, about 20 people a day are paying 49 cents for a song when they are prompted to after a week of listening to it free. Soon, Altnet said, it will allow people to pay via their phone bills or with prepaid telephone cards.
Unless Hollywood companies begin paying to distribute mainstream material, analysts say it is difficult to imagine people turning to KaZaA primarily to buy digital media, rather than getting copyright works for free. And if a court orders that the software begin blocking copyright works, the market for legitimate material may quickly evaporate.
For now, however, the two continue to coexist. A recent search on KaZaA for Lions Gate's "Rules of Attraction" found several copies of the trailer available for downloading — as well as the full movie, which is still playing in theaters.
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The reasonable man adapts himself to the world; the unreasonable one
persists to adapt the world to himself. Therefore all progress depends on
the unreasonable man. -George Bernard Shaw, writer, Nobel laureate
(1856-1950)
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