-Ian.

—– http://story.news.yahoo.com/news?tmpl=story&cid04&ncids8&e=6&u=/ washpost/20030724/tc_washpost/a32817_2003jul23 AOL Subscribers Down by 846,000 Thu Jul 24,12:23 AM ET

Add Technology – washingtonpost.com to My Yahoo!

By David A. Vise, Washington Post Staff Writer

America Online’s subscriber base plunged by 846,000 in the second quarter, as hundreds of thousands left for cheaper or faster Internet connections and a similar number were dropped because they had been mistakenly counted in the past, AOL Time Warner Inc. disclosed yesterday.

In addition, new disclosures about a federal investigation into improper accounting at Northern Virginia-based America Online Inc. showed that the division’s legal problems are hurting other parts of the AOL Time Warner media empire.

AOL Time Warner said yesterday that the Securities and Exchange Commission ( news -web sites ) would not allow it to spin off a portion of its cable television unit until it resolves a dispute over how to account for hundreds of millions of dollars in questionable revenue from a complex deal with German media firm Bertelsmann AG ( news -web sites ).

AOL Time Warner also said it may restate previously reported profits and sales linked to the Bertelsmann transaction. And the company indicated that it could not determine how long the SEC and Justice Department ( news -web sites ) investigations into its bookkeeping practices will last.

The company said its profit increased to $1.1 billion (23 cents per share) in the second quarter, from $396 million (9 cents) in the second quarter of 2002. Revenue increased about 6 percent, to $10.8 billion. The profit figure included a number of substantial one-time gains from the settlement of a lawsuit with Microsoft Corp. and the sale of various businesses.

Despite solid results in divisions other than America Online, AOL Time Warner shares fell yesterday by $1.14, or 6.8 percent, to $15.71, as analysts and major investors reacted to the continuing uncertainty caused by the SEC investigation, the threat of increasingly costly shareholder lawsuits, the deterioration in America Online’s performance, and disappointment that the strength of AOL Time Warner’s film, publishing and cable television operations did not prompt the company to substantially increase its financial projections.

“Our goal for the remainder of this year is to keep laying the foundation that will enable us to exit 2003 with more momentum than we had when we entered it, with an eye toward achieving, strong sustainable growth next year and beyond,” said Richard D. Parsons, chairman and chief executive of AOL Time Warner.

AOL, the nation’s biggest Internet service provider, has shed a total of 1.2 million subscribers over the past year and now has 25.3 million subscribers in the United States.

The company said the total includes 2.2 million high-speed subscribers, an increase of 300,000 over the past three months. During that period, AOL launched an enhanced high-speed offering and promoted it with an advertising campaign titled, “AOL for Broadband: Welcome to the World Wide Wow.”

In addition to losing dial-up subscribers faster than expected, AOL is predicting that its online advertising revenue will drop about 40 percent in 2003. The decline is occurring even though the total dollars spent on advertising online is growing nationally, a trend that can be seen in the financial results of some of America Online’s competitors, including search engines Yahoo and Google and many specialized Web sites.

AOL Time Warner had sought to persuade SEC investigators that they were mistakenly challenging the accounting for the two-part Bertelsmann deal. But the company said yesterday that the commission has refused to back down.

“The company and its auditors continue to believe the accounting for those transactions is appropriate, but it is possible that the company may learn additional information as a result of its own review, discussions with the SEC and/or the SEC’s ongoing investigation that would lead [AOL Time Warner] to reconsider its views,” the firm disclosed.

The Bertelsmann deal involved AOL’s sale of roughly $400 million in advertising to Bertelsmann in connection with the purchase of Bertelsmann’s stake in AOL Europe.

AOL Time Warner released its second-quarter results prior to the opening of stock trading yesterday morning. Although it cut its projections for America Online, the company beat Wall Street estimates as its cable television, motion picture and publishing businesses thrived.

“Our solid results in this quarter and the first half of the year give us confidence that we can deliver on all of our 2003 financial objectives,” Parsons said. He added that the company is continuing to reduce its hefty debt through the sale of businesses and the spending of billions of dollars of excess cash generated by operations.

The Warner Brothers and New Line Cinema movie units generated $572 million and $239 million, respectively, at the box office in the United States. “The Matrix Reloaded” led the way among new releases, while “Harry Potter ( news -web sites ) and the Chamber of Secrets” boosted DVD and CD sales.

“On balance,” said Deutsche Bank, “we think this report is good news.”

In a conference call with analysts, Parsons said he was no longer counting on the sale of stock in Time Warner Cable to generate cash for debt reduction this year. Instead, he said, the handling of any cable spinoff will be determined by broader issues, including the best way to help that subsidiary grow.

“The specific timetable for executing an IPO will depend on strategic considerations, not balance sheet imperatives, as well as the status of our SEC investigations,” Parsons said.

-Ian.

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Music Industry Ad Snipes at Downloaders 24 minutes ago Add Technology – Reuters Internet Report to My Yahoo!

By Michele Gershberg

NEW YORK (Reuters) – Music industry groups turned up the volume in their fight against song-swapping over the Internet on Thursday, warning Americans in a full-page newspaper advertisement that they could face legal action.

The advertisement is part of an aggressive initiative announced Wednesday by the Recording Industry Association of America (news – web sites), which said it plans to sue hundreds of individuals who illegally distribute copyrighted songs over the Internet.

The legal plans marked a sharp escalation in the battle against Internet piracy that until now had concentrated on shutting down the “peer-to-peer” services used for swapping.

Some experts said the group’s latest tactic will only alienate the general public.

“Next time you or your kids ‘share’ music on the Internet, you may also want to download a list of attorneys,” a bold print headline said in the advertisement in the New York Times, signed by 13 different music trade groups and associations.

The RIAA was a signatory to the Times ad, which argued that music can be bought online legally without harm to musicians.

“Stealing music over the Internet is no different than shoplifting CDs out of a record store,” the ad said. “It’s also a very public activity — meaning that offenders can easily be identified.”

More than 2.6 billion songs, movies and other files are copied over computer networks every month, according to industry estimates. Executives believe such trading has led to a 14 percent slide in revenues since pioneering service Napster (news – web sites) opened in 1999.

The RIAA, whose roster includes the five top record labels, has shut down Napster and several similar networks but failed to stem the tide of Internet sharing. It hopes the lawsuits and advertising might deter people in their own homes.

“We hope that parents will pay attention to what their kids are doing … that corporations will pay attention to what their employees are doing,” RIAA President Cary Sherman told Reuters.

Adam Cohen, a partner in the litigation department of Weil, Gotshal & Manges LLP, said the music industry in its battle shows “a lack of concern with alienating the consumer … It’s hard to imagine that this would really spur people to buy more records.”

Cohen, who has represented online radio and Webcasting services on copyright issues, noted the Napster case ended with a bankruptcy but left open the legal debate on targeting individuals who copy music for non-commercial purposes.

RIAA members include AOL Time Warner Inc.’s (NYSE:AOL – news) Warner Music; Vivendi Universal’s (NYSE:V – news) Universal Music Group; Sony Corp (news – web sites).’s (6758.T) Sony Music; Bertelsmann AG (news – web sites)’s (BERT.UL) BMG and EMI Group Plc (news – web sites) (EMI.L).

Bertelsmann is also the subject of lawsuits from EMI, Universal Music and music publishers for allegedly perpetuating online piracy with a previous investment in Napster.

-Ian.

—-

The Wall Street Journal Copyright (c) 2002, Dow Jones & Company, Inc. Tuesday, October 1, 2002

Five Music Concerns To Pay $143.1 Million In Price-Fixing Case Reuters News Service

NEW YORK — The world’s five largest music companies and the three largest music retailers will pay $143.1 million to settle a CD price-fixing case launched by New York and Florida two years ago, New York State Attorney General Eliot Spitzer said yesterday.

In August 2000, most U.S. states joined in a lawsuit alleging that an industry practice called “minimum advertised pricing” (MAP) artificially inflated the price of CDs between 1995 and 2000, violating federal and state antitrust laws. Under MAP, the labels subsidized advertising for retailers that agreed not to sell CDs below a certain price.

The five record labels — Vivendi Universal’s Universal Music Group, Sony Corp.’s Sony Music, Bertelsmann AG’s BMG Music Group, Warner Music Group, a division of AOL Time Warner Inc. and EMI Group PLC — and the three retailers, Musicland Stores Corp., Trans World Entertainment Corp. and Tower Records, agreed to stop using MAP policies as part of the settlement.

The companies, which didn’t admit any wrongdoing, will pay $67.4 million in cash to compensate consumers who overpaid for CDs between 1995 and 2000. The companies also agreed to distribute $75.7 million worth of CDs to public entities and nonprofit organizations throughout the country.

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—– http://story.news.yahoo.com/news?&u=/ap/20020603/ap_on_hi_te/napster_3

Napster Files for Chapter 11 Mon Jun 3,11:00 AM ET

SAN FRANCISCO (AP) – Napster (news – web sites) Inc. filed for Chapter 11 bankruptcy Monday, seeking court protection from creditors as music industry heavyweight Bertelsmann AG (news – web sites) follows through on a plan to take over what’s left of the Internet music-swapping service.

Bertelsmann said May 17 it would buy Napster for $8 million ‹ slightly more than half what it had previously offered to purchase the company ‹ to pay Napster’s creditors as part of a financial reorganization that included plans to file for bankruptcy.

As of April 30, Napster had about $7.9 million in assets and about $101 million in liabilities, according to the filings made in Wilmington, Del.

Calls to a Napster spokeswoman were not immediately returned Monday.

The bankruptcy filing is the swan song for a company that three years ago set off a frenzy of online song-swapping that attracted millions of users, as well as the ire of the recording industry, which sued for copyright infringement.

At its peak, Napster boasted some 60 million users and seemed at once to symbolize both the excitement of the digital revolution and the worst nightmares of the established recording industry.

———–

A day later, in case you live in a #^@$ing cave, Napster got burned at the stake by the San Francisco US Circuit Court, which upheld the earlier ruling that Napster IS in fact liable for the actions of their users. Sploosh! The billion dollar lawsuit will proceed.

This is the most comprehensive article I’ve found in the last couple of days.

Is it already a cliché to assert that Napster is really just the lightning rod for Big Music’s fear of the Internet?

-Ian.

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Tuesday February 13 6:31 PM ET Napster Prepares for the After-Life

By Sue Zeidler

LOS ANGELES (Reuters) – It could be curtains for Napster unless it can forge a duet with the recording companies who have been trying to get it thrown off the air.

The wildly popular song-swapping service, which has been told by an appeals court to stop its millions of users from trading copyrighted music, must either find the cash to pay mounting bills to keep a legal fight going or reach settlements with major record labels if it wants to survive.

“The challenge for them is how to go legit and still keep their business,” said Bill Burnham, managing director of Softbank Venture Capital.

Monday, the 9th U.S. Circuit Court of Appeals supported a District Court ruling that would effectively shut Napster down but asked the lower court to modify its original ruling. An injunction could be issued in days or weeks.

As millions of songs were being downloaded ahead of the injunction, Napster vowed to keep up the fight in the courts and in Congress.

Napster’s Chief Executive Officer Hank Barry said the company has the financial resources to keep going and planned to continue discussions with record companies.

The longer Napster is shut down, however, the greater risk it faces of losing fan and brand loyalty, said Aram Sinnreich, analyst with Jupiter Media Metrix.

“This ruling will accelerate settlement talks with other major labels simply because Napster doesn’t want to go for too long time with the service down,” Sinnreich said. He said Napster was likely to sweeten terms to recording companies.

COULD NAPSTER SELL OUT?

Many Napster users, which total more than 50 million, are already looking at alternative file-swapping sites to get their songs from once Napster is shut down.

Research firm Webnoize Tuesday said an estimated nearly 91 million songs were downloaded using Napster Monday following the ruling, compared with 130 million Sunday in anticipation of the appeal court’s decision.

Analysts, such as Phil Leigh, of Raymond James and Associates believe that Napster — which to date has only received about $17 million in venture capital funding and faces potentially billions in liability costs — may run out of money.

Leigh compared Napster’s predicament to that of Scour.com, another file-sharing community that was sued for copyright infringement and which filed for bankruptcy last October.

Scour’s assets, including its name and membership lists were ultimately sold in December for about $9 million in cash and stock to CenterSpan Communications (NasdaqNM:CSCC – news), which plans to relaunch the Web site as a subscription service.

“If Napster’s active membership drops to a fraction of its current total, it may seek to sell its assets, which might include the name and the membership list,” Leigh said.

Under a deal announced in October, German media giant Bertelsmann AG (BTGGga.D) agreed to loan Napster an estimated $50 million to keep the site operating and help transform the service into a viable, fee-charging subscription service.

Leigh said Bertelsmann might be a logical buyer of Napster’s assets, which could then relaunch the service with BMG content.

“Bertelsmann is also attempting to purchase EMI Group Plc’s EMI Music Plc (EMI.L) and if it can get access to the EMI catalog, the reborn Napster under BMG ownership might have enough content to make an interesting subscription service,” he said.

Some Believe Settlements Now Likely

The recording industry knows that in order for any music subscription to work well, it needs offerings from all the labels. Now that the record industry has won the appeals court ruling, settlement talks may speed up between the labels and the service that rocked the music world.

“No other major record companies have struck a deal with Napster since Bertelsmann and that could be because the business model wasn’t adequate from their perspective and also because they wanted a strong legal opinion,” said Cary Sherman, general counsel for the Recording Industry Association of America (RIAA), which represented the labels against Napster.

“Now that they have gotten a ruling they may be more receptive to negotiations that lead to a viable business model for this kind of service,” Sherman said.

Sinnreich said the heat is on Napster to relaunch a subscription service.

“Napster can offer the labels higher royalty rates, bigger equity stakes. They’ll bend even further backwards,” he said. ”I wouldn’t be surprised if the next company on board was either EMI or (AOL Time Warner’s (NYSE:AOL – news)) Warner Music.”

He cited EMI because it is in merger talks with Napster’s partner, Bertelsmann, and Warner because its new parent, AOL, is planning to launch its own subscription service.

“I think a Warner deal with Napster is very possible. It would make sense for Napster/Bertelsmann to have a reciprocal deal with Warner, which could then use Bertelsmann content on the AOL service,” he said.

Both EMI and Warner Music declined to comment on settlement discussions with Napster.

“EMI is open-minded and is prepared to do business with people who come up with viable business models that help us achieve the widest distribution of our music to consumers,” said Amanda Conroy, a spokeswoman for EMI.

But many music industry executives remained skeptical about settlements with Napster and said that efforts to launch other subscription services would likely garner more attention.

“There are many impediments to Napster relaunching a service. They’ll have to pay for past infringements, which would be part of a settlement, and raises the question of whether or not the business would be sustainable,” one record executive said.

-Ian.

http://dailynews.yahoo.com/h/nm/20000516/wr/terra_agreement_3.html

Tuesday May 16 7:49 PM ET Terra Agrees to Buy Lycos for $12.5 Billion By Jessica Hall NEW YORK (Reuters) – Spanish Internet group Terra Networks SA (NasdaqNM:TRRA – news) agreed on Tuesday to buy U.S. Internet search company Lycos Inc. (NasdaqNM:LCOS – news) for $12.5 billion in stock, in a move to create one of the world’s largest Internet companies and broaden its geographic reach.

Lycos’ novel online programming, as well as its youthful customer base, will help Terra turn its string of companies across Latin America and Europe into a World Wide Web powerhouse with broader global reach, industry analysts said. Lycos also will allow Terra, the fast-growing Internet arm of Telefonica de Espana SA (TRR.MC), to target the 30 million Spanish-speakers in the United States.

The merger, which was widely expected, as well an expanded partnership with German media company Bertelsmann AG and a new wireless joint venture with Telefonica, will help the companies better compete against Internet industry leaders America Online Inc. (NYSE:AOL – news) and Yahoo Inc. (NasdaqNM:YHOO – news)

“If your view of the world is that you need to be global, and you need to be in the U.S., then Lycos is a reasonable move,” said Warren Thune, vice president for Mercer’s Internet strategy group in Washington, D.C. “Lycos has knowledge about how to grow quickly and compete in the U.S., and Terra has knowledge about targeting niche market and Spanish-speaking customers that Lycos could capitalize on,” Thune said. Shares of Lycos surged about 60 percent in the past week in anticipation of the deal.

Terra agreed to buy Lycos Inc. for $97.55 a share, Lycos’ stock closed at 72-5/8, up 11, on Nasdaq. Terra’s stock fell 3-5/16 to 53-9/16 on Tuesday as investors feared that the acquisition may be too expensive.

The combined company, which will be called Terra Lycos Inc., will have pro forma 2000 revenues of about $500 million and together have an estimated 50 million unique users and 175 million page views per day. The company will have operations in 37 countries.

“Our combination brings together many complementary strengths that we believe will enable Terra Lycos to generate consistently higher growth in revenues, cash flow and users than either company could expect to achieve independently,” said Juan Villalonga, who is chairman of both Telefonica and Terra.

Villalonga will head the merged Lycos-Terra. Robert Davis, currently Lycos president and chief executive, will be chief executive.

Bertelsmann, Telefonica Play Significant Role As part of the merger pact, Bertelsmann, the third-largest media company in the world, agreed to purchase $1 billion of advertising, placement and integration services from Terra Lycos over five years.

Terra-Lycos, meanwhile, will gain access to Bertelsmann’s books, music, television, film and other media content, on preferred terms. This alliance builds on the existing Lycos-Bertelsmann joint venture in Europe — Lycos Europe.

“What will be interesting to see is what Bertelsmann can bring to the table, since that’s who has the most impressive content,” said Patrick Keane, senior analyst with research firm Jupiter Communications.

Terra Lycos also will have access to all of Telefonica’s media content. Telefonica is the largest broadcaster and the second largest pay-television operator in Spain and Argentina, where it also owns leading radio stations.

Terra Lycos will also own 49 percent of a new wireless joint venture being established in partnership with Telefonica. Terra Lycos will gain access to Telefonica’s extensive cable, fixed line, broadband, satellite and wireless networks, which now serve more than 60 million customers globally.

The relationships between the companies could become even more intertwined. Bertelsmann Chief Executive Thomas Middelhoff said a new deal between Bertelsmann and Telefonica could be announced later this week or the beginning of next week. He did not elaborate.

Terms Of The Deal Under the terms of the agreement, each Lycos share will swapped for $97.55 of Terra ordinary shares, or their equivalent in Terra American Depository Receipts. The deal is subject to a so-called collar, which protects against a decline in Terra’s stock price.

Terra shareholders, including Telefonica, will own between 54 percent and 63 percent of Terra Lycos, while Lycos shareholders will own the other 37 percent to 46 percent of the combined company.

As part of the deal, Telefonica agreed to underwrite a $2 billion rights offering by Terra. Upon completion of the offering, Terra Lycos will have more than $3 billion in cash.

The Lycos acquisition continues Telefonica’s Villalonga’s track record of aggressively bidding on acquisition targets. Previous bold moves include its bid for Brazilian fixed-line telephone company Telesp and a 5.5 billion euro all-share bid for Dutch television company Endemol Entertainment (EMOL.AS).

The Lycos deal may help Villalonga regain investor confidence after Telefonica’s failure to clinch a merger two weeks ago with KPN Telecom (KPN.AS) of the Netherlands, analysts said.

Some Concerns About Deal

While Lycos has been looking for partners or a buyer since its deal with Barry Diller’s USA Networks Inc. (NasdaqNM:USAI – news) fell through last year, some analysts expressed caution on the Terra deal.

Terra’s stock, although down from a 52-week high of 145, is still seen by some analysts as overpriced. Terra has a valuation of $10,000 per subscriber, compared with less than $5,000 for industry leader America Online Inc. (AOL.N), Salomon Smith Barney analyst Lanny Baker said in a research report. Concerns about Internet access pricing pressure, customer turnover and the shift toward high-speed Internet infrastructure could muddy investor enthusiasm for the deal, analysts said.

Terra Lycos will be listed on Nasdaq and Madrid’s stock exchange. The deal is expected to close in the third quarter of calendar year 2000.