The race is on to serve up a kinder, gentler and of course moneymaking Napster to Hollywood’s content providers, and local powerbroker Howard Weitzman is one of the latest and most ambitious to jump into the fray.
Weitzman, the famed Hollywood trial attorney and former Universal Studios executive, announced last week that he, along with Michael Kassan, who formerly ran the media-buying firm Western Initiative Media, will lead the newly formed Centerspan Digital Media and Entertainment Group, a division of Hillsboro, Ore.-based Centerspan Communications Corp.
Their mission impossible: To sell a skeptical Hollywood on Centerspan’s secure and legal peer-to-peer content distribution.If it works, the Centerspan technology would allow content owners from Viacom Inc. to Walt Disney Co. to sell, rent and monitor the use of their digital content to consumers, who would be able to, in some cases, share files.
According to the Motion Picture Association of America’s chief technology officer Brad Hunt, the studios are investigating concepts like Centerspan’s, but they are “waiting to see what’s out there.”
“The MPAA doesn’t select or endorse any models,” he said. “We simply analyze and provide information.”
Hunt declined to comment specifically on Centerspan, but he said the digital rights management (DRM) software the company uses from Microsoft Corp. is widely respected by studios.
“The MPAA-member companies have said they want to pursue pay-per-view download business models,” Hunt said. “They want to provide a legal alternative to Napster.”
If Hollywood is going to listen to anybody on this, it would be someone with the local clout of Weitzman. He first gained prominence in the early 1980s by successfully defending John De Lorean against fraud and other charges. Other high-profile clients in need of help followed, including O.J. Simpson, who called on Weitzman first for help after the 1994 slayings of Nicole Brown Simpson and Ron Goldman. Weitzman made a more official jump into Hollywood in 1985 when he became vice president of corporate operations for Universal Studios. That’s where he met Frank Biondi, who would later help Weitzman to start Santa Monica-based Massive Media Inc.
Software provider
That private company, which launched early last year, provided DRM applications, which the company licensed from Santa Clara-based Intertrust Technologies. Massive Media apparently didn’t hook a huge number of studios or record labels and may shut down when Weitzman and Kassan jump ship for Centerspan.
“Massive Media is only a software provider,” Weitzman said. “Centerspan is a much larger opportunity to shape the direction of a multibillion-dollar business.”
Indeed, a legal Napster for digital movies, songs, books and other content has become the Holy Grail, even more so in the wake of last week’s U.S. Ninth Circuit Court of Appeals’ ruling against Napster and its free file sharing.
A slew of companies, including Napster and its partner Bertelsmann AG, is angling to create the definitive business model that will reel in a Napster-like audience and make it safe and profitable for content owners.
Selling these nascent business models to Hollywood gatekeepers is no small task, which is why Centerspan tapped Weitzman and Kassan.
Entertainment executives are skeptical about the reliability of any legal Napster-like services and are afraid they may ultimately make their content more prone to pirating.
“We’ve been a technology company, and now the time is right for us to begin our content relationships,” said Centerspan corporate marketing director Keith Halasy. “Michael and Howard, who are both very well connected, will provide the leverage.”
Founded in the early 1980s as a provider of game-controlling equipment, Centerspan has been focused more recently on the development of peer-to-peer infrastructure. The company bolstered its peer-to-peer offerings in December when it acquired the assets of Scour Inc. for $9 million. Scour is the Napster-like service based in Beverly Hills that went bankrupt when several record companies hit it with a lawsuit.
Centerspan’s finances are less than cheery. Forget about profits. The company hasn’t even generated any revenue for the past five quarters, because it has shifted its focus to R & D; for peer-to-peer technology, according to Halasy. The company posted a net loss of $2.4 million (39 cents a share) for the third quarter ended Sept. 30, compared to a net loss of $1.7 million (35 cents a share) in the like year-earlier quarter.
Halasy said that the company currently has cash reserves of about $10 million. Centerspan’s stock was trading at slightly above $17 a share late last week, down from a 52-week high of $33 last February.
Nonetheless, Centerspan proved enticing to Weitzman for several reasons.
First, the combination of Centerspan’s existing peer-to-peer architecture with Scour’s technology and, importantly, Scour’s registered user base of 5 million sets Centerspan apart, he said.
The company is also brand-agnostic. It is not controlled by any one studio or label, “unlike Napster, which has to answer to Bertelsmann,” Weitzman said.
“If this is going to work, it’s going to have to be as if the consumer walked into a brick-and-mortar store in terms of all the choices available,” he said. “It’s also going to be a combination of creating and completing Beta versions to show that the systems work and to show content providers that Centerspan can scale up and serve a large number of consumers.”
Centerspan said it would launch those Beta versions next month.
Despite the Napster ruling, Hollywood content providers are still wary of opening up their libraries.
“They know that they can never stop piracy and that they can only attempt to control it,” Hunt said. “Hackers are always looking at how they can hack and attack these DRM systems.”
