Free Pony Theory ~ Story of napster, Kazaa, et all.

Joined: 23 Sep 2006 Posts: 1088

On October 2, 2001, the weight of the global entertainment industry came crashing down on Niklas Zennstr�m, cofounder of Kazaa, the wildly popular file-sharing service. That was the day every major American music label and movie studio filed suit against his company. Their goal was to shutter the service and shut down the tens of millions of people sharing billions of copyrighted music, video, and software files. Only problem: Stopping Napster, which indexed songs on its servers, was easy - the recording industry took the company to court for copyright infringement, and a judge pulled the plug. With Kazaa, users trade files through thousands of anonymous "supernodes." There is no plug to pull.

Nor, as attorneys would soon discover, was there even a single outfit to shut down. That's because on a January morning three months after the suit was filed, Amsterdam-based Kazaa.com went dark and Zennstr�m vanished. Days later, the company was reborn with a structure as decentralized as Kazaa's peer-to-peer service itself. Zennstr�m, a Swedish citizen, transferred control of the software's code to Blastoise, a strangely crafted company with operations off the coast of Britain - on a remote island renowned as a tax haven - and in Estonia, a notorious safe harbor for intellectual property pirates. And that was just the start.

Ownership of the Kazaa interface went to Sharman Networks, a business formed days earlier in the South Pacific island nation of Vanuatu, another tax haven. Sharman, which runs its servers in Denmark, obtained a license for Zennstr�m's technology, FastTrack. The Kazaa.com domain, on the other hand, was registered to an Australian firm called LEF Interactive - for the French revolutionary slogan, libert�, �galit�, fraternit�.

Confused? So were the copyright cops. "It's hard to know which one to sue," complains Michael Speck, an investigator with the Australian Record Industry Association. Hollywood lawyers figured the best way to bring Kazaa to justice was to squeeze Sharman. Trouble was, Sharman, which operates out of Sydney, had no employees. All its workers, including CEO Nikki Hemming, are contracted through LEF. The names of Sharman's investors and board members are locked away in Vanuatu, a republic that bills itself as an asylum whose "strict code of secrecy" is "useful in any number of circumstances where the confidentiality of ownership, or control, want to be preserved."

Why all the subterfuge? It's an international business model for the post-Napster era. A close look at Kazaa reveals a corporate nesting doll that frustrated Hollywood attorneys for more than a year. From Estonia to Australia, they pleaded with courts to force Kazaa's operators out from the shadows. Meanwhile, every week that Sharman was able to hold the law at bay, countless copies of Kazaa software were being downloaded. In the last six months alone, PC users have downloaded more than 90 million copies. Kazaa has 60 million users around the world and 22 million in the US - an irresistible audience to marketers. Last year, Sharman raked in millions from US advertisers like Netflix and DirecTV, without spending a penny on content. The chase could have gone on forever.

http://www.wired.com/wired/archive/11.02/kazaa.html

via slashdot
http://slashdot.org/articles/07/08/11/015244.shtml

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Joined: 23 Sep 2006 Posts: 1088

The public wasn't willing to wait for Sony and the rest to wake up and offer a service that was as compelling, exciting, and versatile as Napster. Instead, they flocked to a new generation of services like Kazaa and the various Gnutella networks. Kazaa's business model was to set up offshore, on the tiny Polynesian island of Vanuatu. Kazaa bundled spyware with its software, making its profits off fees from spyware crooks. Kazaa didn't want to pay billions for record industry licenses -- it used the international legal and finance system to hopelessly snarl the RIAA's members through half a decade of wild profitability. The company was eventually brought to ground, but the founders walked away and started Skype and then Joost.

Meantime, dozens of other services had sprung up to fill Kazaa's niche -- AllofMP3, the notorious Russian site, was eventually killed through intervention of the U.S. Trade Representative and the WTO, and was reborn practically the next day under a new name.

It's been eight years since Sean Fanning created Napster in his college dorm room. Eight years later, there isn't a single authorized music service that can compete with the original Napster. Record sales are down every year, and digital music sales aren't filling in the crater. The record industry has contracted to four companies, and it may soon be three if EMI can get regulatory permission to put itself on the block.

The sue-'em-all-and-let-God-sort-'em-out plan was a flop in the box office, a flop in home video, and a flop overseas. So why is Hollywood shooting a remake?

http://informationweek.com/news/s...1400131&pgno=2&queryText=