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By Jennifer Netherby Sat Mar 1, 9:10 PM ET

NEW YORK (Billboard) – Amid ongoing competitive pressure from Facebook, MySpace is taking its latest shot at entering the music business as other social networking peers, such as Last.fm and imeem, are making big audience gains with ad-supported music offerings.

According to sources, MySpace is planning a service that would combine free ad-supported music listening with paid MP3 downloads and music subscriptions.

MySpace parent company News Corp. has approached the major labels about forming a joint-venture music site, similar to its partnership with the major Hollywood studios for video site hulu.com.

The new service would be operated by MySpace and seemingly be positioned to compete against every offering from iTunes to subscription service Rhapsody to social networks. Details are still unclear on MySpace’s plans, but it is expected that MySpace will build the music service on its existing social networking base, which draws nearly 70 million U.S. users each month.

MySpace did not return calls for comment.

During the last year, the four major labels have warmed to the idea of allowing users to share music on social networking sites, inking deals with Last.fm and imeem for a cut of advertising revenue. Music is the central connector on both sites: Users create and share playlists with their favorite songs, find and add friends based on their music preferences, listen to full-length songs on demand and purchase downloads through links to Amazon and iTunes.

CBS-owned Last.fm reported a 92 percent jump in U.S. users in the span of the last month, making it one of the fastest-growing music networks. Last.fm now claims 21 million unique visitors per month, close to the 23 million unique visitors of rival imeem, which has also seen strong growth in the last year.

ROOM FOR GROWTH

But only a minority of consumers use social networking sites to access music. According to NPD Group, just 14 percent of Internet users report getting music through social networking sites in 2007. Among teens and college-aged users, the proportion is 25 percent.

Execs at imeem and Last.fm shrugged off MySpace’s impending entrance. “MySpace is a bit late to the table, to be quite honest,” Last.fm co-founder Martin Stiksel said before adding, “MySpace is always a force to be reckoned with.”

Forrester Research analyst James McQuivey predicted in a recent report, “The End of the Music Industry As We Know It,” that in five years social network-enabled music purchases will be the primary way people buy music.

Stiksel believes the ad-supported model is an even better way for consumers to get music and for labels and artists to get paid.

“When you buy a CD, the artist and the label get paid once,” he said. “On Last.fm, music gets monetized perpetually every time someone presses ‘play.”‘

Imeem is pushing its business as an alternative to piracy for a young audience that isn’t purchasing music.

“Social networking has the opportunity to be the best hope for the online music experience for the fans, the artists, the industry,” imeem chief marketing officer/head of business development Steve Jang said. “If we can do it in a controlled way where we’re getting marketing and promotion and also revenue, that’s great. It will eat away at a lot of illegal usages online.”

Music social networking still has its challenges, the biggest being whether users will put up with ads to hear their favorite songs. Execs from imeem and Last.fm say users don’t mind ads so long as they don’t get in the way of music playback.

“They certainly have a tremendous opportunity,” NPD VP/senior analyst Russ Crupnick said. “On the other hand, nobody has really done a particularly good job so far of challenging Apple. The thing about iTunes with younger consumers is that linkage back to the iPod. It’s hard to separate the device from the music storage and software application.”

McQuivey points out that even if social networking does emerge as a dominant model for listening to music, it could benefit Apple by selling more music online, which could help sell more iPods.

Reuters/Billboard

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ISPs could face piracy sanctions

Andy Burnham

The proposals are part of a strategy on the creative industries

Internet service providers must take concrete steps to curb illegal downloads or face legal sanctions, the government has said. The proposal is aimed at tackling the estimated 6m UK broadband users who download files illegally every year.

The culture secretary said consultation would begin in spring and legislation could be implemented “by April 2009”.

Representatives of the recording industry, who blame piracy for a slump in sales, welcomed the proposals.

“ISPs are in a unique position to make a difference and in doing so to reverse a culture of creation-without-reward that has proved so damaging to the whole music community over the last few years,” said John Kennedy, head of the International Federation of the Phonographic Industry (IFPI).

A spokesperson for the Internet Service Provider’s Association (ISPA) said that creating appropriate legislation would be very difficult.

“Any scheme has got to be legal, workable and economically sustainable,” the spokesperson told BBC News.

He also said that ISPs were already pursuing self-regulation, which was the government’s preferred route.

Privacy issue

“The government has no burning desire to legislate,” Andy Burnham, culture secretary, told the Financial Times.

However, he said that the proposals signalled “a change of tone from the government”.

Its intentions are outlined in a creative industries strategy paper called Creative Britain: New Talents for the New Economy.

The document is a broad ranging paper that sets out government support for the creative industries.

The document commits the government to consulting on anti-piracy legislation this spring “with a view to implementing it by April 2009”, according to the FT.

“We’re saying we’ll consult on legislation, recognising there are practical questions and legitimate issues,” Mr Burnham told the paper.

In particular, any legislation would have to take account of the 2002 E-Commerce Regulations that define net firms as “conduits” which are not responsible for the contents of the traffic flowing across their networks.

European laws on online privacy could also create problems for any new legislation.

Earlier this year it was reported that the government was considering a “three strikes” approach to tackling persistent offenders in the report.

But Mr Burnham denied this was the case and told the FT that the strategy had “never been in the paper”.

If the government goes ahead, the UK would be one of the first countries to impose sanctions.

“This is a sea-change in attitude and I believe it is now up to governments elsewhere in Europe and further afield to follow their example,” said Mr Kennedy.

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By Mark Ward
Technology Correspondent, BBC News website


Space shuttle takes off, AP

All net firms keep an eye on how much people download

UK net firms are resisting government suggestions that they should do more to monitor what customers do online.

The industry association for net providers said legal and technical barriers prohibit them from being anything other than a “mere conduit”.

The declaration comes as the government floats the idea of persistent pirates being denied net access.

And in the US one net supplier has admitted to “degrading” traffic from some file-sharing networks.

Traffic control

Net firms have been stung into defining their position by the emergence this week of a draft government consultation document that suggests ISPs should be drafted in to the fight against piracy.

It suggested that people who persistently download and share copyrighted material could have their net access removed.

A spokesman for the Internet Service Providers Association (ISPA) said the 2002 E-Commerce Regulations defined net firms as “mere conduits” and not responsible for the contents of the traffic flowing across their networks.

If they didn’t do traffic management we would all complain
Gavin Johns, Epitiro

He added that other laws on surveillance explicitly prohibited ISPs from inspecting the contents of data packets unless forced to do so by a warrant.

The spokesman said technical issues also made it hard for net firms to take action against specific types of traffic.

For instance, he said, while some people use peer-to-peer networks to download copyrighted material many commercial services, such as Napster and the BBC’s iPlayer, use file-sharing technology to distribute music and TV legally.

In the US, Comcast admitted in documents filed with the Federal Communications Commission that it does “degrade” some traffic from peer-to-peer networks.

The spokesman added: “We know that all ISPs are involved in traffic management but that is to optimise the service for all their customers.”

A spokesman for Virgin Media said its traffic management system came into play during peak times – between 1600 and 2100.

Action was taken against any customer whose usage exceeded a limit associated with their tariff during that five hour window, he said.

“If you exceed that threshold we will drop your speed for five hours from when the excess is recorded,” he said.

Hand on computer mouse, Eyewire

Browsing speeds are most often managed during the busiest times

Andrew Ferguson, an editor at Think Broadband, said net service firms manage their bandwidth in many different ways.

Almost all, he said, manage traffic but at certain times impose other systems to smooth out the peaks.

“Some firms will happily let you use as much as you like but will charge you accordingly, and business products that are more expensive often allow unlimited use,” he said.

Others impose charges on customers who regularly exceed their download limits and a few manage their system so users cannot exceed a monthly download cap. The limits that firms impose can also vary widely.

“Any ISP that does not do traffic management is not going to stay in business very long,” said Gavin Johns, managing director of net management firm Epitiro.

He said it was essential to ensure that services which have to be delivered in real time, such as voice and streaming video, were usable.

“Different applications use different ports and have different payloads,” said Mr Johns, “They look completely different from a network point of view.”

“If they didn’t do traffic management we would all complain,” he said.

Mr Ferguson from Think Broadband said although traffic management was common, net providers imposed it in contrasting ways.

“What varies is the degree it impacts users and the openness of providers in telling users it exists and what is and is not managed,” he told the BBC News website.

“Traffic management has a poor reputation as in many cases it is used to keep bandwidth costs down for a provider with little respect to the consumers’ wishes,” he said.

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By AOIFE WHITE, AP Business Writer 

BRUSSELS, Belgium – Record labels and film studios cannot demand that telecommunications companies hand over the names and addresses of people who are suspected of sharing copyright-protected music and movies online, the EU’s top court ruled Tuesday.

But European Union nations could — if they want — introduce rules to oblige companies to hand over personal data in civil cases, the European Court of Justice said.

The court upheld the Spanish telecom company Telefonica SA‘s right to refuse to hand over information that would identify who had used the file-sharing program Kazaa to distribute copyright material owned by members of Promusicae, a Spanish trade group for film and music producers.

EU law does not require governments to protect copyright by forcing companies to disclose personal data in civil legal actions, the Luxembourg-based court ruled.

They could draft national rules to change this, but they will then have to balance the right to privacy against property rights, a court statement said.

Both are fundamental rights, the court said, and governments will need to find ways to reconcile them and allow copyright holders seek some kind of compensation.

A Spanish court had asked the European court to give guidance on the case after Promusicae complained of Telefonica’s refusal to hand over details identifying the people who used the computer addresses linked to the illegal downloads.

Telefonica claimed Spanish law only allows it to share personal data for criminal prosecutions or matters of public security and national defense.

The EU ruling is important because courts across Europe have been moving in different directions.

A Belgian court last July said a local Internet provider should install blocking software to stop illegal downloads within six months — while a German court in August refused to order Internet providers to give record labels information identifying file sharers.

A music industry group, the International Federation of the Phonographic Industry, said record labels would push on with their campaign against Internet piracy and the court had confirmed the need to have effective tools to tackle illegal copying.

“Copyright theft on the internet is the single biggest obstacle to the growth of the music business today,” said IFPI head John Kennedy.

“The judgment means that music rights owners can still take civil actions to enforce their rights, and it has sent out a clear signal that (EU) member states have to get the right balance between privacy and enforcement of intellectual property rights and that intellectual property rights can neither be ignored nor neglected.”

The European branch of the Motion Picture Association — which represents American film studios such as Universal, Walt Disney, Paramount and others — welcomed the ruling as balanced because the court had held up copyright as a fundamental right alongside the right to privacy.

The MPAA claimed in a 2005 study that U.S. film industry lost $6.1 billion to piracy worldwide that year, most of it outside the United States.

Millions of people use file-sharing software to download both legal and illegal copies of albums, films, TV episodes, computer programs and even books.

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