Digital Media in Asia Blog

Legendary Harvard Law School professor and cyberlaw and evidence expert Charles Nesson will speak to the Digital Media in Asia Project on Wednesday, Feb. 8 from 5-7PM (US Eastern Standard Time) at Harvard Law School (Pound Hall rm. 107).

Professor Nesson will lead a discussion on how the internet, weblogs, and the media/entertainment/sports industries can be utilized to create international bridges between cultures. The focus will be on China and Jamaica. We will be joined by special guest Berkman Center for Internet & Society fellow Rebecca MacKinnon, former CNN Beijing and Tokyo Bureau Chief and China/weblog expert. Refreshments will be provided.

Click here to listen to a live webcast of the event beginning at 5:00PM (EST). (For an http stream, click here.)

Currently, 75% of households in South Korea have high-speed broadband access. New types of businesses, not really found in other countries, have developed as a result of the growth of the broadband market in South Korea. 

There are companies in Korea that provide “video on demand” online, often even with high-definition video, for less than Americans pay to rent a DVD.  Companies that provide online gaming as well as services like the Cyworld blogging site have penetrated all segments of society and become a national obsession.

 

The following is an exclusive interview I had on 12/06/05 and 12/07/05 via e-mail with Mr. Jun Wu, President and CEO of R2G. R2G is a relatively new Chinese company that is in the forefront of piracy prevention in China. Most recently, R2G has through legal action successfully compelled major websites Baidu.com, the9.com, and 21cn.com to remove their links to unauthorized music content.

CHEN: How does R2G plan to reduce the impact of rogue BT
websites, rogue P2P file sharing software, and FTP servers that do not
distinguish between legal and illegal copies of songs?

WU: We will track each individual BT or P2P site down to
make sure that they do not distribute content that had registered with us.
According to the new Internet copyright bill that was introduced by the Chinese
government earlier this year, once we have notified these sites with the list
of illegal content, they will have to delist these content immediately. Our
tracking software is developed in house, and specific to each individual site.
It will be difficult for me to go into details one by one in an email.

CHEN: When a typical user is presented with a legit and
illegal venue, what will R2G offer to persuade him to pay more money for the
same song/movie? We’ve seen from the US that suing individuals for copyright
infringement alone isn’t an effective deterrent. Of course, offering a legal
venue will attract some users, but as long as a cheaper venue is available, how
does R2G plan to drastically convert users to legit methods?

WU: Our strategy is to focus on the service provider, be it
a search engine or a P2P service provider， making sure that it will be
increasingly difficult for an average consumer to be able to find illegal
venues to download pirated content. We believe that if we are able to cut the
current piracy rate from 95% to 50% (a ten fold improvement), it is more than
significant enough to make a big impact on the overall market.

CHEN: I understand that R2G has experienced success in
convincing large websites to de-list links to illegally distributed music. How
successful has R2G been in convincing smaller websites to become legitimate
distributors? What are the differences in strategy when dealing with smaller
websites, as opposed to larger sites?
 
WU: Even though we had not been focusing on the smaller sites very much,
generally we feel they are relatively easy to handle. Our experience so far had
been that the medium sized websites are the most difficult ones to deal with.
The logic is quite simple. In converting ones website from pirating to legit,
there is always this issue of timing. So these medium sized sites are always
afraid that they will loose traffic during the process of turning legit,
therefore loosing the possibility of ever competing against the big ones.

CHEN: Regarding P2P file-sharing, how does R2G plan to track and curb P2P
file-sharing? Are there any estimated percentage breakdowns of where a typical
Chinese person gets his music, movies, and other digital entertainment? (Legal
physical copies, legal online downloads, illegal websites, illegal P2P, illegal
physical sales, etc) Does R2G have any plans to turn P2P into a profitable mode
of file distribution?

WU: Yes, we are indeed working on the P2Ps as well. We hope to bring some good
news to the market around the Chinese New Year. The plan is to install a layer
of filtering function with our P2P partners so that R2G registered content may
not be pirated in amongst these P2P site/communities. The first batch of these
P2P sites all has a centralized server. We are working on ways to offer similar
functions for the Freenet like P2P community.  We believe that once one
can control what can be distributed amongst a P2P network, then there are many
ways to turn this into a profitable business. However, I don’t have any info
regarding the distribution at hand. My estimate will be, most of the younger
generation download their music from the Internet either through a search
engine or a P2P site.

CHEN: What demographics do the Chinese entertainment industry view as its
greatest asset and liability? What actions are entertainment companies taking
to maximize revenues from these assets and limit losses from the liabilities?

WU: The young generation (15-35) is clearly the main market for entertainment
content (especially in the case of digital distribution). In a way, they are
both asset and liability.  If the collective service offering is
acceptable to this segment, then there is enormous potential, otherwise it is
going to be an uphill battle.

CHEN: How does R2G and the entertainment industry plan to
scale their business model to serve college students, who typically have less
expendable income?

WU: Currently it is not on the top of our to-do list. Once
the overall piracy rate in the public network is reduced to a certain level we
will start addressing these niche market too.

According to the Korea Times, South Korea still remains the world leader in high speed Internet penetration:

Korea became an Internet powerhouse in the late 1990s thanks to its fast investment in the asymmetric digital subscriber lines (ADSL), which pump data at an average speed of 2.5 megabits per second, about 50 times faster than conventional dial-up modems.  Korea crossed the 20-subscribers-per-100-residents threshold as early as in the third quarter of 2002 at 20.6 and has remained over the coveted mark during the following nine quarters.  Currently, approximately 12 million of the country’s 16 million households are hooked up to the high-speed Internet and more than half of them are subscribed to ADSL.

In accordance with the high internet penetration, South Korea is known to have one of the highest rates of online piracy with respect to digital media such as movies, music, and digital books.  Clearly the actions taken by the Korean government have not been very useful as online piracy is continually growing. How will South Korea be able to control online piracy in the future?

What are Chinese companies doing to protect their intellectual property online?

To supplement governmental enforcement efforts, private companies, like R2G, have formed to help protect their clients’ intellectual property. According to Jun Wu, CEO and founder of R2G, via an e-mail interview, their strategy is to “track each individual BT or P2P site down to make sure that they do not distribute [their clients’ copyrighted] content.”  R2G will try to persuade these service providers to adopt a business model that compensates the copyright holders or else face lawsuits. The reason websites offer links to free media, Wu says, is mainly to attract traffic. Therefore, the hardest sites to convert are the medium sized ones because they are “always afraid that they will loose traffic during the process of turning legit, therefore loosing the possibility of ever competing against the big ones.”

Wu’s philosophy is that as R2G converts rogue websites to legitimate distributors: “It will be increasingly difficult for an average consumer to be able to find illegal venues to download pirated content,” and thus, users will switch over to legal sources. Of course, R2G is hoping that they can convert existing websites faster than new ones appear. R2G plans to focus on tracking public sites first, leaving potent niches like university networks and private FTP servers unexamined for the moment.

R2G has generally received favorable court opinions when suing websites for copyright infringement. They successfully forced China’s most popular MP3 search engine, Baidu.com, to remove thousands of links after filing an infringement lawsuit against the website. Shortly following the Baidu case, R2G sued similar websites, the9.com and 21cn.com, both of whom soon removed their links to pirated content.

The South Korean government has announced plans to pour US$90 million into the failing Korean music industry, which it claims is slumping due to the “rapid growth of digital music market and emergence of diverse high-tech music-listening devices.”

As part of the initiative, the government will expand its definition of the “music industry” to include not only record labels and live musical performances, but also “virtually every area regarding music, such as music education, production of musical instruments, performances by underground music bands, music management, online and offline circulation of music and ‘noraebang,’ rooms hired for karaoke singing.”

At least one blogger and a group of English football fans seem to think that the answer is China. A Chinese company called PPLive (English site) appears to have beat AOL and BBC, both of whom are still trial-testing their Kontiki-powered
P2P TV Streaming software, to the commercial release of a service that
provides Web users with live streaming TV through P2P technology.

P2P streaming is a breakthrough because it allows content providers to
broadcast video to a potentially limitless audience without the need to
pay for server space or bandwidth. As I understand it, PPLive’s
technology is similar to Bittorrent
in that it allows a single source to quickly spread data to a large
number of recipients by turning downloaders into sources for other
downloaders.

The developers of Sopcast, another
P2P streaming software, claim that their product allows any individual
to broadcast his own video. Though I have not tried this myself, the
implication is that a generous soul could broadcast his paid cable
connection, his DVD collection, or his collection of digital video
files to the world at no charge to himself or his audience.

I would appreciate comments on the following questions:

How will media companies respond? Is this new threat to copyright
holders easily defeated by technological measures or international IP
treaties?

How do PPLive and Sopcast technology compare to Kontiki’s commercial product in terms of video quality and network efficiency?

If copyright holders successfully attack PPLive, will PPLive still have
a viable business model? Are PPLive and Kontiki competitors, or are
their software packages capable of completely different applications?

In the first-ever bittorrent file sharing criminal prosecution, a Hong Kong man, Chan Nai-Ming, was sentenced to three months in jail November 7 for making available online copies of the movies “Miss Congeniality”, “Daredevil” and “Red Planet” without the owners’ authorization.

In the ruling, the judge acknowledged the man did not gain financially from making the files available, but said that fact and the high prices of legitimate DVDs are no justification for infringing copyright and do not allow him to escape liability. The judge also indicated that future convictions could lead to even stiffer penalties.

Customs officials claim that bittorrent use in Hong Kong has dropped by 80 percent since Chan’s arrest.

The ruling did not extend liability to downloading files, only uploading them–a fact that upset the entertainment industry, which wanted liability for both.

But that distinction does not seem applicable to bittorrent. From the South China Morning Post:

“Kevin Pun Kwok-hung, associate professor of computer science and law at the University of Hong Kong, pointed out that BT technology works with the downloaders also automatically becoming uploaders, and questioned the wisdom of launching criminal prosecutions against users of such technology instead of leaving it to businesses to take civil action. ‘If you say by placing something on the internet, you are committing a crime, you are saying all BT downloaders are criminals because their computers are downloading and uploading,’ he said.”

“‘The key issue is whether placing something on the internet amounts to distribution, but I personally don’t find the legal argument convincing — it amounts to authorisation but not distribution.’”

According to China Tech News, the Internet Society of China has announced it’s establishing a Broadband P2P Application Promotion Alliance to “encourage[] the development of intellectual property containing P2P network application core technologies, and … regulate the technology’s application and promotion based on intellectual property rights. It will also bridge the government’s supervisory role in this area.” The article goes on to say that “ISC plans to help regulate Chinese companies’ activities to ensure that illegal activities are not spawned by P2P in China.”

This is an interesting move, and the fact that it comes immediately on the heels of stepped-up US pressure concerning intellectual property protection is surely not a coincidence. The ISC, which is made up of the biggest Chinese media and internet players and governed by the Ministry of Information Industry, is sending a message that it means to get serious about cleaning up Internet piracy by regulating P2P. The move also parallels the Chinese government’s recent efforts to regulate blogs, as efforts to tighten control over online behavior increase.

It appears the ISC (and thus the government) envisions reigning in and controlling the unrulier, open aspects of P2P technology while promoting its development in officially sanctioned ways to further P2P’s “commercial application in China.” While I’m sure China would love to be a leader in the development (and patenting) of P2P technologies, it’s difficult to know just how effectively P2P systems–which have historically developed freely (though at times in response to stricter copyright enforcement)–can develop under ostensibly tight government supervision and in what will probably be proprietary formats.

Another question is, how might China’s regulation of P2P technology–assuming it is able to regulate it effectively–impact the technology elsewhere in the world? The article intimates that the government’s intention now is to regulate only Chinese companies’ use of P2P. But it does not seem like a quantum leap to imagine the government claiming jurisdiction to regulate any P2P network that crosses its borders. To what extent will China redefine P2P on its terms, for the world, with soft censorship baked into the next generation of P2P technology (to borrow a phrase from Rebecca MacKinnon)?

Though this announcement seems innocuous enough (and perhaps it is more harmless than I fear), I cannot help but feel it smacks of further official tightening of control over the Web in the name of IPR protection and economic/social development. Could this be another step toward a more subservient Web, envisioned by Prof. Tim Wu, who argues: “China’s long-term vision is clear: an Internet that feels free and acts as an engine of economic progress yet in no way threatens the Communist Party’s monopoly on power. With every passing day the Chinese Internet reflects that vision more closely. It portends a future for the Web that we’re only beginning to understand—one in which powerful countries refashion the global network to suit themselves.”

The CEO of Singapore-based Soundbuzz, Asia’s largest digital online and mobile music retailer, says they are preparing to launch the service in Mainland China, where online and physical piracy is ubiquitous. According to Soundbuzz’s CEO, the challenge is formidable but there’s reason to be hopeful a legitimate music download service will catch on in China. “The Chinese spend on mobile music, gaming, matchmaking, and all sorts of online services. The culture of paying for products there is not as alien as people would have us believe.”

The article goes on to observe,

Asia is going to continue to play the central role in the development of the nascent digital music industry. “The new business models in Asia are dramatically different from those in the West.” The US$4 billion Ringtone business is being replaced by “Truetones”, “Mastertones” and “ring-back tones”, all Asian developments. “Interaction with music is changing dramatically. Even ten years ago, the primary aim of music was to entertain. Now with digital music, a lot of music utilization is for expression. Asia is leading that.”