.Pirates of the Web: At World’s End

Thieving scalawags of the cyberseas, meet your copyright-policing nemesis.

Gracenote vice president Jim Hollingsworth sits at a long conference table narrating a PowerPoint presentation that flashes on one wall. It’s like Best Buy in here. The wall mostly consists of shelves bearing dozens of electric components. There’s a sixty-inch flat-screen LCD TV, five-disc CD changers, car stereos, home entertainment hubs, and DVD players. All of which dip into some flavor of the Emeryville tech company’s secret sauce, which most people use without knowing it.

When your computer automatically enters a new compact disc’s name, artist, and track titles into iTunes, that’s Gracenote.

When your new Lexus LS 460 displays metadata from random MP3s playing on the stereo, that’s Gracenote.

And when your next Sony Ericsson Walkman phone plays “name that tune” with anything it hears, that’ll be Gracenote, too.

One of the company’s musicologists demonstrates the cell-phone trick. “Pick a random song from the library,” he says. We select metal. Megadeth. The music starts playing from nearby computer speakers and the Walkman phone speaks: “Megadeth. 99 Ways to Die.” The phone can access Gracenote’s servers, which allows it to recognize sixty million different tracks, the musicologist says. The company adds thousands of new songs a day to its database of more than five million albums.

It’s a killer gimmick, and Gracenote has a half-dozen other whiz-bang ideas for individual consumers in 2007. But the two-hundred-employee global company also has killer apps that will let massive corporations limit the ways consumers use music and movies. Gracenote has emerged as a key player in a fast-growing and lucrative niche that enables copyright cops to scour the Internet for illegal content and eradicate it. “It’s become a new business arena in a short time period because consumers, mostly unwittingly, started to use copyrighted material,” Hollingsworth says. “This is a whole new area coming up — media monitoring and content filtering. And the question is, ‘What’s the correct use?'”

The copyright holders need to know what people are uploading, he says: “Is it legal? Maybe, maybe not. Who owns the rights? The band, or the label? Is it being given away legally? The majority of content isn’t.”

For years, the recording and motion picture industries have dreamed of putting the Internet piracy genie back in the bottle. Now the techies who once proclaimed “information wants to be free” are lining up to help the big boys make people pay. And whether that’s good or bad for artists and consumers depends partially on how much they think stealing is okay.

‘Last to Market’

The Recording Industry Association of America has filed more than 15,000 piracy lawsuits to date, yet just last year kids pilfered five billion songs from peer-to-peer networks, a 47 percent increase from 2005. Those numbers have risen consistently despite what happened in July 2001.

That summer, a court injunction shut down Napster’s main server in Silicon Valley. Within 24 hours after the company’s final appeal was denied, a lone switch was thrown on the back of a computer at Napster HQ and the brains behind the biggest music swap meet on Earth went dark. Victory for the RIAA? Not.

Former Napster lawyer Christian Castle fought to legitimize the company and stay the injunction. Shutting down its servers didn’t make much of a difference, he says. Peer-to-peer networks simply switched from Napster’s one-hub model to a multihub model like, say, al-Qaeda. Hard to stop.

Offshore and overseas servers called “ghost ships” now do Napster’s job through programs like LimeWire, eDonkey, or BitTorrent technology. Castle says the industry trade groups Recording Industry Association of America and Motion Picture Association of America continue to fight for their lives because the downloading has decimated CD sales twice over. The reluctance of RIAA members to evolve hasn’t helped, he says.

“Back in 1998 I was trying to get permission from a record executive to start up a digital distribution store,” Castle recalls. “He had a classic line. He said, ‘Well, you know, we’ve decided we’re going to be last to market on this one.’ I have plenty of my own issues with record companies, but thousands of people have lost their jobs.”

TOC Fingerprints

As industry profits waned, Gracenote grew quietly in the East Bay. In 1998, the company was still called the Compact Disc Database, or CDDB. It was run by engineers Ti Kan and Steve Scherf as an open-source, user-generated UNIX project. In 1993, Berkeley resident Kan had grown tired of hearing people talk about an easy way to quickly identify the contents of compact discs, and simply invented one.

His method hinged on something every CD contains: a table of contents that tells a disk player where each song begins and ends. That’s it. For example, “Speak to Me,” the leadoff track on the 1993 remaster of Pink Floyd’s Dark Side of the Moon, runs from zero to 73 seconds. Its TOC entry reads “Track 1: 0-73.” “Breathe” runs from second 75 to second 242 and shows up as “Track 2: 75-242,” and so on. Kan repurposed this track data as a form of fingerprint. Entered into his custom database along with the CD name, artist, and song titles, it provided a way for a computer to quickly recognize any disc and its content. “It’s really the only way to identify a CD,” Hollingsworth says.

Kan then invited the online world to add to his database, and the world obliged. From 1993 to 1998, the CDDB grew rapidly. It first began serving music data for free in 1996. By 1998, digital was primed to explode and CDDB was the fuse. Lacking such a database, for instance, an avid iTunes user would face the cumbersome task of entering thousands of song and album titles by hand. Kan’s database made digital music convenient for the masses.

“Smart businesspeople simultaneously had seemed to have an epiphany that this database was the keystone to Internet music, and they descended upon us from all quarters,” Steve Scherf explained in a Q&A published last fall on Wired.com. “We resisted, but they threatened us in a way that our lawyer told us was essentially extortion. We needed to find a safe haven soon, and along came Escient.”

Escient bought the CDDB and put it to use as the brain behind its Tunebase music player. The private Indianapolis company renamed its acquisition Gracenote, spun it off as a separate company, closed its source code to outsiders, and embarked on six years of patent fights and lawsuits — the corporate equivalent of harsh elbows thrown to secure its position in the marketplace.

Gracenote sued former licensee Roxio in 2001 for switching to a free version of its database. When that case was settled the following year, Gracenote sued Musicmatch, another licensee, and reached a settlement in 2004. The company now licenses its database to more than four thousand companies at between $10,000 and $100,000 per year.

The Gracenote database is truly a phenomenon. It handles eighty languages and codes for 1,800 global microgenres (because it’s not “J-pop” in Japan, it’s just “pop”). With the help of seventy data editors, the company adds 2,500 new CDs a day and has begun fingerprinting the waveforms of songs, allowing it to recognize individual tracks even more precisely than it identifies albums. Its computers churn through 100,000 new prints each day, and so far have covered a sixth of the company’s overall collection. On the consumer end, Gracenote hosts 1.2 billion searches each year for 200 million users around the world. “There’s six hundred different masters of Eminem’s 8 Mile,” Hollingsworth notes. Gracenote can tell them all apart.

Although the private company doesn’t disclose annual revenues, Hollingsworth says its major venture capital backers, such as Sequoia Capital, haven’t had to provide additional funds in twenty months. And the company’s bottom line is being bolstered by a powerful new customer — one that is under intense pressure to crack down on piracy in its midst.

WhoSpace?

Launched in 2003, MySpace boasts more than 120 million users and adds 240,000 new ones daily. It takes about two minutes to fill out a profile, and the site commands so much traffic that Rupert Murdoch’s News Corporation snapped it up for $580 million in 2005.

With its youthful demographic and hipness factor, the site has become central in the dissemination of digital music and other media. Three million unsigned bands have pages on MySpace, making it a primary locale for A&R reps and journalists trolling for the next big thing.

It’s a boon for the bands as well. “I used to have to go sell my CDs out of the trunk of my car at the mall,” says Young Stunna from up-and-coming Berkeley rap act the Pack. “Now I just sit at home in my boxers and click ‘add,’ ‘add,’ ‘add,’ ‘add.’ I’m adding friends from all over the world. Japan. Turkey. You name it. Our success wouldn’t be possible without it.”

At last count, the four high schoolers of the Pack lead the Bay on MySpace with eleven million song plays and four million page views. They’ve landed a record deal with Jive, which will release their new album and provide tour support this summer.

But while MySpace is easy to use, it’s also easy to misuse. Copyrighted songs are easily uploaded and downloaded, meaning the social network can function exactly like a peer-to-peer server. That’s according to Alex Rofman, an ex-Napster employee and now an executive at SNOCAP, which enables bands to sell digital downloads directly from their MySpace pages. “Social networks are the new peer-to-peer,” Rofman says. “They have all the content, all the people.”

Now they have all the lawsuits too. After killing off Napster and offshoots such as Grokster, the media giants have discovered a new target. “MySpace is a willing partner in theft,” Universal Music Group charged in a federal suit filed against the popular site last November. The record conglomerate seeks unspecified damages, including up to $150,000 for each unauthorized music video or song posted on MySpace. Likewise, Viacom has sued YouTube claiming copyright infringement. MySpace ignored numerous requests for comment from the Express, but has issued a release stating that it is in full compliance with copyright laws and it will win in court.

The infringement case will likely drag on for years, but it’s already taming the Internet, says Brian Zisk of the Future of Music Coalition, a DC lobbying group that supports artists and consumers. The social networks, he says, are trying to protect themselves against huge lawsuits, and Gracenote’s copyright filtering technology will be a key part of their defense. “It’s not out of any altruistic motives,” he says. “They’re using Gracenote to reduce liability. MySpace is part of a major media company that has to balance the demand for revenue while minimizing liability.”

In other words, if social networks are the new peer-to-peer, they’ll need a good hall monitor to avoid Napster’s fate.

MyNote

MySpace announced last October that it would use Gracenote’s technology to police its members’ uploads. “Utilizing Gracenote’s MusicID audio fingerprinting technology and Global Media Database, MySpace will review all music audio recordings uploaded by community members to their profiles,” the Internet’s top social networker said in a statement. The technology, the company explained, would let it identify copyrighted music on behalf of “designated rights holders” and prevent it from being uploaded.

Neither company will discuss how many illegal songs Gracenote nabs each day and how effective the system has been, but an initial test suggested the policing is pretty vigorous. I created an account for fictitious band Taints4Ever and prepared one illicit track from the Midwestern rock band Ladyhawk (go see ’em at Bottom of the Hill on May 2 — they rock!). After disguising the name of the MP3 file as “Taint Anthem,” I tried uploading it to the servers. Almost immediately I received a note to my profile saying that my upload privileges were revoked. I would have to take a Copyright Education Program Course to regain any upload privileges.

The course in question spans five minutes and comprises a one-page, second-grade-level copyright walk-through. “Owning the CD and owning the copyright in the songs on the CD are not the same thing,” it states. “You own your CD, but you do not own the copyright in the songs on the CD.”

MySpace has since added Audible Magic, another Bay Area digital hall monitor, to its suite of filtering companies. SNOCAP, which hosts individual music stores on MySpace pages, already fingerprints every major-label song to thwart pirates. Meanwhile, the social networker has begun to block outside companies that host music, images, and video on MySpace. Among these so-called third parties are IMEEM, Revver, and Photobucket, which have lost millions of slideshows, videos, and song playlists due to MySpace lockouts. They have been directed to register with the filtering services.

IMEEM spokesman Steve Jang says his company’s small, music-focused social network is in the process of researching the various filtering companies. He knows MySpace did what it had to do: “For a long time the users had total control of what they did with content,” he says. “Filtering puts some control in the hands of the content creators to decide how and where their content can be used. It’s really important because in the end you want to be able to give granular control from the indie to the major to the label promo guy, and technology is the best way to do it.”

Hollywood seems to agree. This month, the MPAA is asking the top dozen video-filtering software companies to demonstrate how they would police digital film copyrights online. Gracenote and Audible Magic are among the contenders for those lucrative future contracts. “There’s a lot of work out here to be done,” says Castle, the ex-Napster lawyer. “It’s the people that have the fingerprints that I think are going to be the most successful. For the moment there’s no way to argue with them.”

Easier to Buy, Harder to Steal

As CD sales freefall, the recording industry has finally begun to flap its arms. In March, British megalabel EMI announced an unprecedented move into the sale of MP3s, the same unprotected file format that fueled Napster. Castle considers it a sign of the industry’s faith in a new, two-pronged approach: Make music easier to buy and harder to steal.

“If I had to point to one failing of the music business, and it has been consistent for years: We make it very difficult to buy music, whether it’s breaking a fingernail opening the stupid wrapper on a CD, or DRM, or whatever,” he says.

He’s talking about digital rights management. Up until now, much of the music sold online has come with digital locks that limited where you could play the songs. Problem was, the same music is available for free without the locks, much of it ripped from compact discs, which generally have no such restrictions. By inconveniencing its customers, Castle says, the music industry effectively crippled itself online, and EMI has finally wised up. “The record company’s take is, ‘We can’t complain until there’s a legal alternative,'” Hollingsworth says. Gracenote is now in the enviable position of a company that can both provide and help enforce that alternative.

The industry has also proven more effective at policing sites that provide free song lyrics and guitar tablature. After years of growth, most of the sites are nearly extinct thanks to cease-and-desist letters from content owners. In their place have emerged monetized, label-owned lyric and tab sites. Gracenote just announced its lyrics service this week.

“They’re going to sue over everything,” Castle says of the industry. “They’re going to enforce their rights over every single thing, because they’ve never had a single situation where they’ve had so many people who are trying their best to destroy them.”

People who argue that bands benefit from the exposure of illicit trading and other uses don’t know what they are talking about, Castle says. He mentions an obscure band with one million downloads on Kazaa and no record sales. “People die from exposure,” he says. “I don’t really believe in this exposure business.”

He continues, “For the first time I’m having young musicians ask me, ‘Is it even going to be possible to make a living doing this now?’ And being a musician was never easy before.”

Indeed, UK electronica kingpin Amon Tobin, who is slated to come through the Bay Area in May, says Foley Room, his latest CD on the Ninja Tune label, will have a smaller pressing because the market for electronic music is so soft. He adds that fans will get what they pay for if they keep stealing: “I don’t want to be the Lars of electronic music,” Tobin says, referring to Metallica drummer Lars Ulrich, who appeared before Congress in 2000 to testify against Napster, “but I can’t continue to put out high-quality albums if I don’t have the money to make them.”

Critics of Gracenote-style copyright policing gripe that money never seems to flow back to artists from their labels anyway, so helping labels control their content may not help artists very much. Whatever the case, we can expect to see more of it, as well as newer, toothier legislation from Washington. Capitol Hill is moving toward an antipiracy tipping point, Castle says. Stiffer fines and penalties are in the works, and US Attorneys are feeling increased pressure to enforce laws already on the books.

In another antipiracy development, Bay Area startup Attributor just raised $10 million in venture capital. The company aims to monitor all content on the Internet with crawlers, programs that search servers for specific things. Pictures, video, MP3 files, even sentences cribbed from The New York Times can be policed anywhere, says spokesman Jesse Odell. Already the service, which debuts later this year, has indexed ten billion pages.

The copyright cops won’t be the end of sites like MySpace, says Zisk of the Future of Music Coalition, but they may be the end of a certain kind of MySpace user. And if the industry can end piracy in all the Internet’s big, popular locales while criminalizing its obscure corners, then the music market might just recover.

“All-you-can-eat, unlimited access to content will likely not exist in 2012, and the risk of being charged for it later or fined for illicit activity is going to increase,” says Gracenote chief technology officer Ty Roberts. “For those who want everything for free everywhere, well, that’s just not a very realistic environment. Technology is getting too sophisticated to support the Wild West forever.”

In the interim, Zisk predicts firms like Gracenote will be the big winners. “I hope for my friends who were in early that it goes public,” he says.

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