Calling All Lawyers! uTorrent Increases “Privacy” and Counters Mass-Monitoring of Downloads

BitTorrent, Inc. may have finally made the mistake that content creators and owners around the world have been waiting for.  Content owners have been able to successfully sue and recover hundreds of millions of dollars from Napster, Grokster, Bearshare and Limewire, but until recently have been unable to sue BitTorrent, Inc for its role in assisting hundreds of millions of people to illegally consume billions of media products.  Many people are amazed to learn that BitTorrent, Inc., the technology we believe is primarily responsible for the decline of recorded music, home video and video game revenues, has received more than $40m in venture capital investment from Silicon Valley’s Accel Partners.  The legal loophole that allows BitTorrent to exist is the famous “betamax” case, where the court ruled that as long as the VCR (Video Cassette Recorder) had one legitimate non-copyright infringing use, it was a legal technology.

The VCR however, did not restrict its features after years in the marketplace to make it easier for people to commit infringement without getting caught.  In our opinion, that is what BitTorrent, Inc. announced today.  In our opinion, they are restricting the existing long-standing features of their product for the the sole purpose of making it easier for people to use their software to distribute copyrighted content without getting caught and prosecuted.

TorrentFreak reported that “To protect the privacy of its users BitTorrent Inc. therefore decided to randomize the peer-id uTorrent users display to other peers.”  Among other things, the peer-id tells other computers using BitTorrent what software brand and version the other computer is using.  This information improves the performance of the file transfer by enabling peers to use all of the latest features available when communicating with another computer.  TorrentFreak writes, “Thanks to the new feature it is no longer possible to track BitTorrent users based on their peer-id for a longer period of time.”  BitTorrent’s own words are “Feature: don’t use a consistent peer-id (to mitigate tracking)”

In describing the peer-id, BitTorrent says:

“The 20-byte peer id field sent [has] been used not only to identify peers but also to identify the client implementation and version.

A number of clients begin the peer id with a dash followed by two characters to identify the client implementation . . .The remaining bytes are random. An example is -AZ2060-” This means the software brand is Azureus and the version is 2.060.

What is Accel Partners’ motivation to invest in BitTorrent, a technology that is devastating the media industry and has no sustainable legal business model?  As advertisers are beginning to be held accountable for their role in sponsoring piracy, how does BitTorrent make money?  In 2007, Accel invested $47m in Admob which they sold to Google for $750m in Google stock in 2009.  BitTorrent is the largest peer-to-peer platform and according to Sandvine, 30% of European and Asian internet traffic is peer-to-peer filesharing in 2012 and 15% of US traffic.  According to Envisional, 100% of the top 10,000 torrents infringed on copyright in 2011.  What percentage of Google’s ads are served on pages that refer people to get files from the 30% of all European and Asian and 15% of all US traffic used for infringement?  As long as BitTorrent provides a reason for people to search for illegal content that they find on sites that have ads from Google’s ad networks, Accel’s investment in Google stock keeps going up.  When Accel sold Admob for Google stock it was $572 a share.  It is $733 today.  Neither Google, Accel Partners nor BitTorrent needed to pay any of those pesky content creators!

Why does BitTorrent, a company backed by a large shareholder in Google need to reduce the functionality of its software in order to help people hide from law enforcement?  Why do its users need to hide?  Because in our opinion, both BitTorrent and Accel Partners are well aware that their technology is primarily used by people to break the law.  Prior to BitTorrent restricting features to help users hide from law enforcement, the Betamax decision was the thin legal thread they hung onto.  It is our opinion that now that they go out of their way to restrict their long-standing features to empower their users to hide from legitimate and legal law enforcement monitoring, that they have crossed the line and opened themselves up to liability.

Google Will Censor Legal Firearms – Not Illegal Content

This is a short post, because it only takes a few sentences to make this point.  Google Shopping sent an email to merchants updating its new policy of censoring Google Shopping results.  When you read this realize that in our opinion, Google is the primary tool that people all over the world use to find links to acquire illegal content.  The latest fun Google search to try is “21 Jump Street Free” and see all of the links on Google to watch this first run movie illegally for free.

Their email to merchants states that they will censor shopping items that do not confirm to their “values.”  They have the audacity to put the following in print, “Our company has a strong culture and values, and we’ve chosen not to allow ads that promote products and services that are incompatible with these values.”  Yet, they will block out their logo on the #1 web page on the internet to advocate for their “rights” to display billions of links to help people access illegal content.  The access that Google provides to free content hurts real people.  According to the Bureau of Labor Statistics, “Musical groups and artists” income plummeted by 45.3 percent between August 2002 and August of 2011.  Google’s “values” don’t seem to include helping tens of thousands of songwriters, musicians, authors, screenwriters, cinematographers, photographers, software developers and game designers who have lost jobs or are underemployed due to billions of units of lost sales resulting from links to their products available illegally free on Google.  Here is their email:

Dear Merchant,

We’re writing to let you know about some upcoming changes to the product listings you submit to Google. As we recently announced, we are starting to transition our shopping experience to a commercial model that builds on Product Listing Ads. This new shopping experience is called Google Shopping. As part of this transition, we’ll begin to enforce a set of new policies for Google Shopping in the coming weeks. A new list of the allowed, restricted, and prohibited products on Google Shopping is available on our new policy page – http://www.google.com/appserve/mkt/ApI7UWRj6OCZpd.

Based on a review of the products you’re currently submitting, it appears that some of the content in your Merchant Center account, HamLund Tactical, will be affected by these policy changes. In particular we found that your products may violate the following policies:

Weapons

When we make this change, Google will disapprove all of the products identified as being in violation of policies. We ask that you make any necessary changes to your feeds and/or site to comply, so that your products can continue to appear on Google Shopping.

To help you through this new set of policies and how to comply with them, we would like to give you some specific suggestions regarding the changes needed to keep your offers running on Google Shopping.

Weapons

As highlighted on our new policy page http://www.google.com/appserve/mkt/ApI7UWRj6OCZpd, in order to comply with the Google Shopping policies you need to comply first with the AdWords policies http://www.google.com/appserve/mkt/StQ08jAzM4fVtG.We do not allow the promotion or sale of weapons and any related products such as ammunitions or accessory kits on Google Shopping. In order to comply with our new policies, please remove any weapon-related products from your data feed and then re-submit your feed in the Merchant Center. For more information on this policy please visit http://www.google.com/appserve/mkt/GbBNIGHOribLzf.

We’re constantly reviewing our policies, and updating them when necessary, to ensure we’re offering the best experience possible to our users. We’ve identified a set of policy principles to govern our policy efforts on Google Shopping in the U.S. These principles are:

1) Google Shopping should provide a positive experience to users. Showing users the right products at the right time can truly enhance a user’s experience. When people trust us to deliver them to a destination that’s relevant, original, and easy to navigate this creates a positive online experience to the benefit of both users and merchants.

2 ) Google Shopping should be safe for all users. User safety is everyone’s business, and we can’t do business with those who don’t agree. Scams, phishing, viruses, and other malicious activities on the Internet damage the value of the Internet for everyone. Trying to get around policies or “game the system” is unfair to our users, and we can’t allow that.

3) Google Shopping should comply with local laws and regulations. Many products and services are regulated by law, which can vary from country to country. All advertising, as well as the products and services being advertised, must clearly comply with all applicable laws and regulations. For the most part, our policies aren’t designed to describe every law in every country. All advertisers bear their own responsibility for understanding the laws applicable to their business. Our policies are often more restrictive than the law, because we need to be sure we can offer services that are legal and safe for all users.

4) Google Shopping should be compatible with Google’s brand decisions. Google Shopping must be compatible with company brand decisions. Our company has a strong culture and values, and we’ve chosen not to allow ads that promote products and services that are incompatible with these values. In addition, like all companies, Google sometimes makes decisions based on technical limitations, resource constraints, or requirements from our business partners. Our policies reflect these realities.

We’ve given much thought to our stance on this content, as well as the potential effect our policy decision could have on our Merchants, and we apologize for any inconvenience this may cause you.

Sincerely,

The Google Shopping Team

Wozniak, Megaupload and Kim Dotcom

Here at Ethical Fan we have nothing but respect and admiration for Apple co-founder Steve Wozniak.  But we feel that his statements and photograph with Kim Dotcom really illustrate the blind spot that many skilled and ethical technologists have regarding the rights of creative people and the preventable harm that some internet technology is doing to them.

Steve’s full quote is here:

“How unfair that the United States will allow him living expenses out of his frozen assets but not give him any legal fees,” Wozniak said. “The side with access to the funds spends millions on lawyers hoping the other side goes bankrupt and gives in. Shame on the system that permits this one-sided advantage. Kim is well enough liked and respected that his legal team is working without up-front payment.”

“I scratch my head wondering why the studios went after the guy doing more than can be imagined to remove the links the studios wanted removed,” Wozniak noted in his email. “Heck, I use my iDisk (MobileMe) and dropbox to share files by sending links to friends. They might even be copyrighted materials. I might even send a song in an e-mail to my son, although if I think he’ll keep it I will use the ‘Buy gift’ feature in iTunes. But there are so many legitimate uses to peer-to-peer file sharing and cloud storage.”

In this post, we provide screen shots from August 17, 2011 when Megaupload was the 92nd most popular site on the web.

It is our opinion that these screen shots show that Megaupload was a criminal enterprise selling stolen content.  Who wouldn’t want justice if their property was being stolen and someone was making millions of dollars from their stolen property?  

These screen shots clearly show that Kim Dotcom’s Megaupload was selling streaming movies that it did not have the rights to sell.  That is criminal copyright infringement.  The great majority of Americans know that if you are selling bootleg DVD’s you could get arrested. That is why Kim Dotcom was extradited, he was selling “bootleg” streaming movies on a massive and unprecedented scale.

Steve says that Megaupload was responding to take down requests.  We are not sure that Steve understands that Megaupload was paying uploaders per stream from files they uploaded to Megaupload.  That is why there were so many links that Google autopopulated Megavideo after you entered Star Wars in the search field.

Then Google estimated that there were 4.3 million web pages that had the words “star wars megavideo” on them.  Legitimate file locker sites like Dropbox, don’t allow any public links to copyrighted content.  In fact Dropbox just banned Boxopus, a torrent tool from using its API.

Megavideo let you play the first 45 minutes of Star Wars and thousands of other movies for free (after they had served you and profited from dozens ads) . . .

 

But then, to watch past 45 minutes, you had to enter your credit card and pay $9.99 a month to keep watching.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Let us not forget Carpathia Hosting, the CDN that the FBI raided becuase they were getting paid for caching these illegal movies for Megaupload.  Here is data from a packet analysis we ran in July 2011.  86% of the first 45 minutes of the Star Wars stream captured above came from IP address 173.245.127.21, who ARIN says is assigned to Carpathia Hosting.

IP 173.245.127.21     Packets 39,908 Bytes 60,314,666 IP Assigned To: Carpathia Hosting, Inc. % of Total Packets 86.2%

Google was making money selling ads on landing pages to Megaupload links, Megaupload was making millions selling subscriptions to content they didn’t own without paying the owners, uploaders were getting paid for uploading content they didn’t own and Carpathia was getting paid to cache the content.  Who wasn’t being paid?  The people who actually made and own the movies.  That is why we have laws and law enforcement.


Comcast May Owe Content Owners $1.6B A Year Or More

Much of United States copyright law is a civil, not criminal in nature.  The ability of citizens and corporations to bring lawsuits in civil matters is good for society.  As an example, the removal of cancer-causing asbestos from many residential and office buildings in the United States was brought about by the use of civil lawsuits.  Building owners now use more expensive, but safer, materials to avoid lawsuits, benefitting society.  The same process was used to radically clean up America’s waterways.  Before many successful lawsuits against polluters, in the 1970s you could literally light many polluted lakes and streams on fire.  Corporations didn’t spend billions on treating water and disposing of chemicals out of altruism, they did it to avoid lawsuits.  Copyright laws allow authors, songwriters, singers, guitarists, software and game coders and publishers to be able to make a living, get investors, employ teams and maybe even make a fortune from their creative output.  The primary tool for copyright enforcement is and has always been the civil lawsuit.  Unfortunately, in our opinion, ISPs in the United States have a business model today where they get paid billions of dollars to provide internet service that now comes with unlimited illegal free movies, music, books, software and video games.  In the modern “open internet”, the ISP gets paid, but the content owner does not.  Now, rather than help content creators and owners in any meaningful way, it is our opinion that the largest US ISP is refusing to allow the nation’s copyright holders access to the only tool currently available to them to enforce copyright on peer-to-peer networks.

Attorneys for Comcast (CMCSAtold the court on June 1st, 2012 that:

“plaintiffs should not be allowed to profit from unfair litigation tactics whereby they use the offices of the Court as an inexpensive means to gain Doe defendants’ personal information and coerce “settlements” from them.”

In response, our opinion is that:

Comcast (CMCSA) should not be able to continue to profit from forcing content owners and creators to have their products distributed on their network without compensation.

ISPs have known for years that the legal framework in the United States was such that they either would have to assist copyright owners in curtailing peer-to-peer consumption on their networks, pay royalties or face the threat of lawsuits based on their vicarious and contributory liability to copyright owners.   If they are going to block copyright enforcement, then in our opinion, they need to return to the idea of paying royalties. Verizon (VZ) recognized this in 2002 when they offered to pay a $1 royalty per broadband subscriber per month for peer-to-peer music downloads.

It is our opinion that Comcast (CMCSA) is making billions from providing access to other people’s property.  Comcast’s last annual report states that it has 18.1 million high-speed internet subscribers generating $8.7 billion in revenue in 2011.  18.8% of all North American internet traffic was used for peer-to-peer filesharing in 2011 and more than 99% of that traffic violated the owner’s copyrights.  It is our opinion that if Comcast is going to profit from blocking content owners from suing subscribers who are illegally distributing their content, then Comcast at least needs to compensate the content owners: 18.8% of $8.7 billion is $1.63 billion potentially owed to content owners.  Comcast can afford to pay because in 2011, they had earnings of $19B on $58B in revenue.

How would that break down?  If we allocate by percentage of bandwidth used, Envisional found that 35% of BitTorrent traffic is used to illegally upload and download movies (non-pornographic), 14% for television and 2.9% is used to do so with music.  (It would be hard for them to argue against this – this study was commissioned by NBC Universal now owned by Comcast.)  It is our opinion that allocated by bandwidth, Comcast may owe movie owners 35% of $1.63 billion or $572 million, owners of television shows $228.9m and may owe music copyright owners $47.4m – just for 2011.  To put this in perspective, Comcast has approximately 20% market share of US broadband households.  Therefore, we believe that if we allocate by bandwidth used, ISPs as an industry may owe movie owners $2.8 billion, owners of television shows $1.1 billion and owe music copyright owners $237m – just for 2011.  (Music files are much smaller than movie files, so an actual deal would not be based on percentages of bandwidth.)

Unfortunately, that still does not make up for the amazing losses all of those industries are facing due to piracy – this Comcast bandwidth is not just being used to consume media, it is being used by Comcast (CMCSA) subscribers to distribute media illegally to consumers all around the globe, everyday, all day long.  If we allocate on a per unit basis, we believe that there were 132 billion illegal uploads and downloads of music files in the United States and 11 billion illegal uploads and downloads of movie files in 2011.  It is our opinion that approximately 26 billion illegal music file uploads and downloads and 2.2 billion illegal movie file uploads and downloads occurred on Comcast’s network in 2011.  If we assume only one in twenty music downloads was a lost sale, at the average $0.99 price on Amazon, that is $1.2 billion in lost music revenue.  If we assume only one in ten movie downloads was a lost sale, at the average $4 price on Amazon, that is $880 million in lost movie revenue – just on Comcast’s network.  In our opinion, we start to see where $6B a year in lost music and $8B a year in lost home video revenue went – right into Comcast’s $19 billion in 2011 earnings. (We think the ratios of pirated files to lost sales are higher – but we would like to see the copyleft argue that they are lower than what we present.)

Lastly, Comcast (CMCSA) now owns NBC Universal.  We initially were excited that with the nation’s top ISP now owning a movie and television studio that some level of balance might enter copyright enforcement on the Internet.  This court filing shows that not to be the case.  Why isn’t Comcast / NBC Universal standing up for content owners, since they are a content owner?  Their own annual report says that piracy is decreasing their home video revenues:

“piracy and intense competition for consumer discretionary spending and leisure time, are contributing to an industry-wide decline in DVD sales both in the United States and internationally, which has had an adverse effect on our filmed entertainment business€ results of operations.”

Why aren’t more movie studios standing up to Comcast (CMCSA)?  Because as piracy has increased and home video sales are collapsing due to piracy, movie studios are more dependent than ever on the pay-per-view (PPV) and video-on-demand (VOD) revenue streams from the cable providers like Comcast and many other ISPs.  PPV and VOD are the next revenue windows after theatrical release.  DVD revenue used to offset potential losses from movies that underperformed at the box office.  Now, if movie studios are too aggressive in enforcing the law, they may end up suffering in negotiations on PPV and VOD revenues with the cable companies who in our opinion, also sell services that provide their products for free.

In our opinion, Comcast (CMCSA) now profits from “shielding” their subscribers from content owners who are trying to stop illegal distribution on Comcast’s network.  Many of the companies trying to stop their content being given away for free are Comcast’s competitors.  Is it possible that enabling piracy has become the secret weapon to provide unfair competitive advantage to Comcast?

Piracy appears to us to have given Comcast/NBC Universal an amazing ability to unfairly compete against other content producers who do not have the profitable revenue streams from selling internet services that come with illegal free content.  Comcast/NBC Universal does not seem motivated to help stop massive illegal distribution of Disney (DIS), Sony (SNE), Warner Bros or Paramount (VIA) product on their networks.  In our opinion, this legal position may show that they are motivated to profit from those who are willing to pay for content but also willing to let their subscribers take their competitors’ product without restraint – they make money either way.  Better yet, by communicating to the market that you can’t get caught for downloading and distributing movies on Comcast, they may gain more market share.

Who is the biggest loser here?  The honest consumer.  By Comcast (CMCSAeliminating the tools content owners need to enforce copyrights and with p2p “filesharing” forecast to double in data volume by 2016, the end result will be more expensive prices for honest people.

If the movie and television studios who do not own internet networks and lack a revenue stream from their stolen content start to collapse the way EMI and other music labels have (Home Video is down 25%, where music was in 2005), Comcast might scoop them up for a song  and we will have a smaller consolidated ISP / content monopoly that employs less people and makes less quality content.  Copyright was one of the barriers to such consolidation that increased access to markets.  Without copyright, we will just get more power in the hands of fewer players.

Advocates for weaker copyright claim that copyright restrains innovation.  Is this innovation?  Is this the bright future of the “open” Internet?

TAGS:  COMCAST, PIRACY, BITTORRENT, DATA CAPS, DATA THROTTLING

TICKERS:  NASDAQ:CMCSA

Google’s “Transparency” Masquerade

There are many stories coming out today about Google providing information about the quantity of DMCA take-down requests to which they respond.

According to VentureBeat, “ In the past month, the report indicates that 1,246,854 URLs have been targeted for removal from over 24,000 domains.”

The picture being painted by the anti-copyright press is that Google is doing their part to help copyright owners.  Nothing could be further from the truth.  If we just look at one search for “Adele Download” we see 138,000,000 search results.  This number of 138 million is the number of times that Google estimates that it sees the word “Adele” and the word “Download” on a web page (URL) that they are tracking to be included in search results.  The screenshot below is 90 pages deep into these search results.

So Google is trying to get people to think that processing 1.2 million take-down requests a month is somehow helping enforce copyright, when their own search engine shows 138 million results for just one artist’s links to downloads, 99.9% of which are to links that not only violate copyright but provide the copyrighted product for free, many with advertisements served by companies that Google owns.

Additionally, the top two web sites on page 90 are for the web site 4shared.com (see hundreds of links to pirate sites on all 90 pages).  If there was any pretense of Google actually helping enforce copyright, they would simply not display search results from 4shared that include the word “Adele.”  How would they know that 4shared.com is different from Rollingstone.com or Amazon.com? Because they have received literally thousands of take-down requests for the word Adele on the web site 4shared.com for months, and 4shared.com keeps posting links to illegal Adele downloads.  Google is in possession of copious data that show that 4shared.com and probably most of the other 24,000 domains are REPEAT INFRINGERS and should not enjoy the same free speech protections as Rollingstone.com or Amazon.com from which they have received little or no DMCA take-down requests.  In our opinion, the reason why they appear to willfully ignore the logical ethical response of discontinuing showing links to 4shared.com in “Adele Download” searches is because they make billions from playing this cat and mouse game with the law.  It is our opinion that this behavior deprives thousands of people of their legitimate income and benefits no one save for enriching Google and their illegitimate business partners who profit from providing illegal access to content.

It takes a team of professionals to get a great product like her’s to market, most of whom are not wealthy and many who depend on royalties from music sales.  When people buy her music, many people who are not wealthy receive their fair compensation for their work.  Google made $14 billion in profit in the last twelve months in part by getting paid to direct people to obtaining Adele’s music for free and depriving many, many people of their legitimate income.

Lastly, due to Google’s current practices of willfully ignoring web sites that repeatedly assist people in stealing content, copyright owners, who are already experiencing reduced revenues due to piracy, now have to pay money to technology companies to find these URLs and send the take-down notices to Google.  This was not how the Safe Harbor given to companies like Google was intended to work.  It was not intended to enrich gatekeepers like Google and reduce the income and wages of content creators.

US Internet Piracy Is On The Rise [STATS]

In 2011, piracy in terms of volume of data used for illegal filesharing grew by more than 20% over 2010.  We calculate that in the US in 2011, there were 132 billion mp3s illegally downloaded and 11 billion movies.

According to Global Internet Spring Report 2011 from Sandvine, in March 2011, P2P filesharing accounted for 61.4% of North America’s daily upstream traffic and overall 18.8% of North American network traffic was used for peer-to-peer file sharing.  In plain english, 61% of all files being uploaded in 2011 in North America were pirated movies, music, television, games, books and software.

On a percentage basis, overall P2P traffic as a percentage of total traffic shrank from 19.2% in 2010, but in that year global internet traffic grew from 20,197 Petabytes to 27,483 Petabytes.  So overall data volume used by P2P continued to grow 20% year over year.  This was widely mischaracterized in the Copyleft press as a decrease in piracy.  On a data volume basis, i.e. number of files downloaded, piracy continues to grow.

Cisco forecasts that P2P will triple between 2010 and 2015.

According to Envisional, all of the top 10,000 torrents (filesharing compilations) that they sampled violated copyright. They found that 35% of BitTorrent traffic is used to illegally upload and download movies (non-pornographic), 14% for television and 2.9% is used to do so with music.

Piracy has grown at more than 20% annually since 2005.

Piracy Growth 2005 to 2011

The chart above was generated from data by Cisco in its “Global IP Traffic Forecast and Methodology, 2006-2011” and featured at www.satmagazine.com.  The 2005 data in the chart is actual, the 2010 actual figure exceeded this forecast at 14,955 Petabytes with 24% of global traffic used for P2P in 2010.

Doing the math based on traffic figures supplied by Cisco (CSCO), this leads to some staggering numbers of copyright violations per household in the United States.(1) If every household were participating, and if each transaction requires one upload and one download, that would mean that on average, US households illegally download 132 movies each year. In other words, every household watches a movie illegally every five days on average. If half the households are participating, this means that they watched an illegal movie every 2.5 days.

(1) Cisco states that North America used an average of 9,947 Petabytes (1 million Gigabytes) a month in 2011, which would mean that 7,899 Petabytes were used to illegally use movies, 3,141 Petabytes to illegally use television shows and 650 Petabytes were used by illegal music consumption in 2011. Assume that the average movie is 700 Megabytes. If we divide 7,899 Petabytes (1 million Gigabytes) by 700 Megabytes, we get 11.2 billion movies uploaded and downloaded illegally in 2011 (infringements). If we divide 11.2 billion movie infringements by 85 million broadband subscribers in the United States, we get an average of 132 movies uploaded and downloaded per household in the United States in 2011.  If we divide 650 Petabytes by an average mp3 file size of 5 Mb, we get 132 billion mp3s downloaded in 2011.  If we divide 132 billion mp3s by 85 million broadband households, we get an average of 1,531 mp3s downloaded per US household in 2011.  The most popular illegal downloads in 2011 were entire artist discographies and “top 500″ compilations which are usually compose of hundreds of songs.  It would only take an average of five such downloads per household to explain this figure.