Kim Dotcom’s Just Getting Started

Self-styled digital Robin Hood Kim Dotcom’s highly effective PR machine successfully secured him vast media coverage this week for the launch of his new locker service Mega, which as the Register’s Andrew Orlowski correctly points out, isn’t actually anything particularly new or innovative.  But in some ways that doesn’t even matter. Kim Dotcom matters most to media companies now because he is a focal point of anti-media-establishment sentiment.  He’s the plucky start up taking on the fat cats of the media industry.  Except of course that he’s done a pretty impressive job of establishing himself as an fat cat too as this and this reveal. Ironically Kim Dotcom has made his money using the same assets as the media fat cats: i.e. music, movies and TV shows.  The difference being that Kim Dotcom doesn’t finance the creation of the content. But Dotcom’s supporters are willing to turn a blind eye to his play boy ways because it is all done while sticking a proverbial finger up at the old guard

But all this is old news and obscures why the media industries should actually be afraid of Kim Dotcom, very afraid.  Dotcom has the vision for a differentiated consumer experience that no other ‘piracy’ innovator has yet had.  Prior to his much publicized FBI raid and the closure of Megaupload.com, Dotcom was on the verge of launching a new, interactive, multimedia content service called Megabox.  It didn’t happen, but – judicial wrangles permitting – it will, and will likely be built upon the foundations of the newly launched Mega.

Piracy Cold War

To date file sharing (by which I mean all forms of unlicensed content downloading and uploading, not just P2P) has been in a secrecy arms race with the media industries.  Every time the media industries have caught up with file sharing, the networks and services have devised new means of evading policing and enforcement.  Although media companies have always inherently been trapped in reactive mode, unable to set the terms of engagement, this strategy has nonetheless been highly effective at keeping file sharing services on the back foot.  As with the cold war two super powers have expended vast resources staying still, investing heavily in being armed to the teeth.  The net result is that piracy has continued to grow but hasn’t been through any transformational innovation in years.  Also the sites and services have become progressively more complex and sophisticated to use and navigate. Pushing them slightly further away from the mainstream.

But what happens when someone finally decides to innovate the file sharing user experience?  When someone scales down the combat zone investment and focuses instead of delivering a great user experience in the way that licensed services do.  That is when media companies need to start worrying.  As I wrote back in February last year:

The nightmare scenario for media companies is that the pirates turn their attentions to developing great user experiences rather than just secure means of acquiring content.  What if, for example, a series of open source APIs were built on top of some of the more popular file sharing protocols so that developers can create highly interactive, massively social, rich media apps which transform the purely utilitarian practice of file sharing into something fun and engaging?  If you though the paid content market was struggling now imagine how it would fare in the face of that sort of competition.

Kim Dotcom has the requisite combination of vision and balls to take piracy through a user experience revolution.  If he does then piracy will become a vastly more worrying adversary for media companies than it currently is.

Megaupload: Another Mole Down The Hole

By utterly amazing coincidence, ahem, just as the US Congress is considering Sopa and Pipa, cloud locker service Megaupload gets closed down and its top executives arrested and refused bail.  The timing is of course important, but nature of the media industries’ latest scalp is even more intriguing.  Megaupload, along with Rapidshare, Filestube and other such services, has been more than a thorn in the side of media businesses, it has been making tens (perhaps hundreds) of millions of dollars of annual revenue by essentially sticking the middle finger up at copyright owners.

Megaupload’s closure has wreaked the wrath of the hacker community with Anonymous taking down various sites in retaliation.  But Anonymous’s anger is misjudged.  This is no blow against Internet Users’ rights, and Megaupload is no evangelist for the hacker community.  Napster’s Shawn Fanning thought he was changing the world, the Pirate Bay’s Peter Sunde thought he was leading a revolution in copyright.  But Megaupload’s Kim Schmitz (aka Kim Dotcom) had no such ideals, for him it was all about the cash.  Just take a look at the opulent excess of his mansion and fleet of luxury cars with registration plates such as ‘Mafia’ and ‘CEO’.   Schmitz earned his wealth not just through advertising but also by charging users premium fees for better download speeds, thus charging people to download illegal content.

Megaupload et al are an interesting anachronism in the digital piracy landscape.  The overriding trend has been for piracy destinations to get more sophisticated and more difficult to tackle each time the media industries take a step forward.  Think darknets, encrypted P2P applications, anonymous networks etc.  Commercial locker services though are easy targets, typically with central servers and clearly defined commercial operations.  If anything, it is surprising that it has taken so long to get Megaupload taken down.

But as with any piracy victory for the media companies, the sweet taste of triumph will be short lived.  Close down one upload site and another one will arise.  In fact there are already alternative IP addresses for Megaupload circulating around Twitter.

So Megaupload’s takedown is simultaneously a landmark victory and just another furry head smacked downwards in the never ending game of digital-piracy-whack-a-mole.