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(Reciprocal)^2 (was Re: @NY Vol. 4, No. 28)
Bill's probably going to lose his lunch-money on this one.
Either the copy protection is hacked by cypherpunks for grins :-), or more
likely, artists, even the record companies themselves, will bypass it
because they will have a cash-settled auction market, paradoxically of
sufficiently *small* enough transaction-granularity, to sell their stuff
into unprotected. Small enough to get paid for a single play. Over the net.
The cheapest place to play things ever built.
However, this transaction does tell us how much this bet on internet music
distribution is worth. According to the apocryphal venture capital rule of
thumb, $15 million is supposed to be worth $150 million in 5 years.
There is, however, the, well, reciprocal, of the above equation. The hedge
on this investment would be, of course, underwriting lots of cheap,
easy-to-use, bearer-settled microcash to the internet. :-).
At 5:11 PM -0500 on 3/12/99, NPC, Inc. wrote:
> ^ START-UP GETS $15 MILLION FROM MICROSOFT FOR COPY PROTECTION . .
> .Reciprocal, the Silicon Alley and Buffalo, NY-based start-up, this week
> gained $15 million and a major partner in helping it become the standard
> for how consumers download copyright-protected music, games, and text over
> the Internet. Microsoft made the equity investment and has entered into a
> "strategic technology and marketing alliance" with the three-year-old
> privately-held firm that until recently was known as Rights Exchange.
> The company is in the business of protecting copyrights online.
> Reciprocal's technology allows content providers -- record labels, video
> game developers, e-books distributors -- to encase their digital offerings
> in a kind of encrypted "shell." After downloading the content, a consumer's
> software communicates with a Reciprocal database that determines if that
> consumer is authorized to have access to the file. If that person has paid,
> filled out a data form, or completed whatever value exchange the content
> provider requires, the user is allowed to open the file. Were that user to
> send that content to a friend, though, the file couldn't be opened until
> the new recipient fulfilled the requirements. Of course, the system, which
> the company says will work on many different operating systems, isn't
> immune to hacking. The CEO compares it to a lock on a car door -- a
> deterrent, not a guarantee.
> "Our product offering is at the intersection between the MP3 problem,
> e-books, and software distribution," said Paul Bandrowsky, CEO and
> President of Reciprocal. "You can imagine the ways in which what we're
> doing and what Microsoft does could work together."
> Although Bandrowsky won't get specific, the partnership could involve
> placing Reciprocal's software on the Windows desktop. Having that kind of
> distribution would give Reciprocal a leg up in wooing content owners to its
> platform, since the client software would suddenly have an enormous
> installed base and content providers wouldn't have to be in the business of
> distributing the software. "Clearly, it would be advantageous to us that
> our consumers wouldn't have to get [the software] from another source,"
> hints Bandrowski.
> Reciprocal (http://www.reciprocal.com) makes its dough from selling the
> encryption software, running the back-end that checks if a user is
> authorized, and consulting with content providers to help them develop
> strategies for making money in an age of digital media. Right now, though,
> the company, which has approximately 110 employees in Buffalo, New York,
> and Research Triangle Park, NC, apparently isn't making any dough at all.
> Its products are in beta or a "controlled implementation" stage, and the
> company hasn't announced any clients so far. Reciprocal's list of
> investors, though, is impressive. Besides Microsoft, companies like Chase
> Capital Partners, Constellation Ventures, Flatiron Partners and SOFTBANK
> Technology Ventures have stakes in Reciprocal. Although Bandrowski won't
> say how much of the company Microsoft got for $15 million, he would say
> that it's a "very insignificant portion".
> Reciprocal's solution is only one of many fighting it out in the highly
> competitive digital rights protection arena. IBM is testing a digital music
> distribution technology it calls "the Madison project." The five major
> record labels have signed on to participate in the trial. AT&T, Real
> Networks, Sony, and Liquid Audio are also working on solutions to combat
> the illegal distribution of copyrighted music that's blossomed with the MP3
> format. The challenge for Reciprocal and all of these companies is the
> usual chicken-and-egg problem of introducing a new format. You need plenty
> of good content in the format to convince consumers to download the
> software or learn the technology, and you need enough consumers using the
> technology to convince top-notch content providers to use your solution.
> The deal with Microsoft, though, may give Reciprocal a leg up on getting
> the consumer piece of the puzzle in place.
Robert A. Hettinga <mailto: firstname.lastname@example.org>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
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