Web wars
battle of the e-vikings
Free downloads ahoy! As the debate over online entertainment royalties rages, Scandinavian entrepreneurs are floating some smart ideas
words by Barry Mansfield
illustration by Totto Renna
Scandinavian countries have been at the vanguard of the online entertainment business, playing an important role as the Web emerged as the distribution platform of choice for video content, as well as music – rivalling cable, satellite and terrestrial broadcast. But a storm is brewing as content providers, on one hand, seek to protect their intellectual property rights, while ragtag bands of ‘e-Viking’ entrepreneurs strike back at what they see as a coordinated attempt by governmental organisations and global media giants to control the future of the internet.
Sweden in particular has emerged as a hotbed of copyright rebellion in the wake of a 2005 law banning the sharing of copyrighted material on the internet without payment of royalties, in a bid to crack down on the free downloading of music, films and computer games. Since then, the country has become famous as the home of Pirate Bay, founded two years previously by Swedish anti-copyright organisation Piratbyran (The Piracy Bureau). The Pirate Bay is known in the file sharing community as one of the more prominent websites which distributes torrents that point to unlicensed copies of copyrighted material.
However, government attempts to shut down the Bay have, so far, been futile. In 2006 its premises were raided by Swedish police who seized servers, but the site was only down for a couple of days before it was back in full force. Last year the Bay hit headlines again with its attempt to buy the micronation of Sealand in the North Sea, which apparently had been put up for sale. It raised around €125,000 with a view to hosting the site from a new jurisdiction, although ultimately the sale didn’t go through.
Joining the fight is Relakks, a tiny startup based in Lund, near Malmö in southern Sweden, which prides itself on official ‘pirate’ endorsements and intelligent outmanoeuvring of the online barriers enforced by governments and corporations. Relakks is part of a struggle pitching ‘hacktivists’ against corporate interests that wall off websites to control territorial rights. These walls are meant to block people in Europe from downloading TV series from US sites, for example, or bar Americans from viewing programmes on sites in Europe. In August 2006, Birgersson’s company started selling ‘country shifting’ capabilities in a monthly subscription service costing €5. This service allows internet users to effectively change a computer’s ‘passport’ and surf the Web under a new national identity, unrestricted by territorial barriers.
The struggle has intensified with the passing in April last year of the EC’s Second Intellectual Property Enforcement Directive. Although last-ditch amendments to the Directive excluded P2P file sharers, ‘serious’ intellectual property cheats will face a maximum sentence of at least four years in prison and a €300,000 fine. Against this backdrop, Relakks has earned the support of the Pirate Party, which fields candidates under a banner of copyright reform. The Pirate Party attracted almost 35,000 votes in Sweden’s last general election, emerging as the 10th largest party in the country. Its plans now are to field Pirate Party candidates in the 2009 elections for the European Parliament.
Relakks’ debut was so successful that its system could not support the traffic of 20 subscribers per minute, according to Birgersson, but technical problems were soon overcome and the company quickly signed up 50,000 users. It is now offering a free one-month trial. Other multimedia startups are trying to identify a middle ground that is acceptable to big business. In the opposing camp to Birgersson, entrepreneurs are opting to tread safer legal waters by entering into official partnerships with major commercial interests in music and TV. Their goal is to offer advertising-supported free content, sharing a slice of that revenue with the content providers. A good example is broadband TV service Joost, launched in August 2007 by Skype founders Janus Friis and Niklas Zennström. The startup now has licensing agreements in place with Viacom, Ministry of Sound TV, Aardman Animation, Warner Music and CBS, among others, with over 40 advertisers currently signed up, including BMW and Sony Pictures. The deal with MTV owner Viacom was sealed shortly after the company had warned US site YouTube to remove 100,000 potentially infringing videos.
Joost has attracted more than a million users so far, in addition to €28.5m in venture funding from Sequoia Capital, Index Ventures, Chinese billionaire Li Kashing and Viacom itself. But what’s really remarkable about Joost is the change of tack it represents for onetime rebels Friis and Zennström, who infuriated the entertainment industry with their hugely popular Peer-to-Peer music download application Kazaa at the start of the decade. It wasn’t until 2006 that Kazaa became a fully paid-up digital music distributor, settling out of court with the Recording Industry Assocation of America (RIAA) in a deal that saw it hand over €63m. Although the duo by then had sold Kazaa to Australian firm Sharman Networks, they daren’t set foot in the US until the lawsuit had been resolved.
Joost enables you to message your friends while you watch TV. Today it boasts over 350 channels and 17,000 programmes. “We’ve reached a critical mass, so we can start building the user experience more,” explains Friis. “We’re still a long way from a scenario where you have all the best movies and all the best hit TV shows all on one service on the net. At the moment there’s a landscape of non-exclusive deals, and this is typical in a new marketplace. We’re in an early era of internet-based TV. I would compare it to filesharing in 1999 or VoIP in 2002.”
Following a similar path is Spotify, a Stockholm- and Gothenburg-based startup founded by Swedes Daniel Ek and Martin Lorentzon that has been described as ‘Joost for music.’ It is based on P2P, like Kazaa, but it’s legal, aiming to pay its way with advertising. Spotify provides a smooth iTunes-like interface where it’s possible to listen to radio adapted to what decade and music type you like, or search for any song or artist, and it is immediately streamed on the site. However, Spotify faces competition from Peter Gabriel’s startup We7, which is based on a similar idea and already boasts 130,000 users and a deal with Sony BMG. In the words of technology commentator Henrik Torstensson, “If Spotify gets the label deals, it is going to be big,” but the site is still in private beta and the founders are tight-lipped about the nature of the deals they’ve signed so far.
Even though companies like Joost and Spotify have formed partnerships with the industry, this won’t protect large media companies from piracy. There is a final word of warning from Birgersson, who points out that opposition to more restrictions on the internet won’t disappear. “Certain forces are trying to achieve greater control of the internet, mostly commercial interests and corporate lobbies or religious countries like Iran,” he says. “They may think they can take control, but there’s a lot of smart people out there who’ll never give up.”
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