Peer-to-Peer white hot

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From: Gregory Alan Bolcer (
Date: Fri Jul 28 2000 - 11:04:46 PDT

Lightshare, Apple Soup, Napster.

Why all this hype in p2p commerce?
Right now you cantake *any* off the shelf e-commerce package and throw
it into Magi and have exactly what they are talking about.

No going back

    TECHNOLOGY: Entrepreneurs say, regardless of
    Napster's fate, the peer-to-peer computing concept
    can't be put back in the tube.

    July 28, 2000

    The Associated Press

    Napster's days may be numbered, but
    the technology bomb that the company
    dropped on the Internet has already
    altered the business landscape.

    The file-swapping computer network developed by Napster is so
    revolutionary that it's expected stick around even if a federal court
    injunction kills the company and its music-sharing service.

    "You can't litigate away a nuclear technology like this," said Bill
    Bales, a Napster investor and CEO of AppleSoup, a San
    Francisco company that is developing ways to exchange computer
    files without violating copyrights.

    "Napster marked the beginning of the end of the traditional business
    model," said Dan Stone, general manager of media and
    entertainment for Scient Corp., an e-business consultant. "The
    genie is out of the bottle, and the bottle is smashed."

    The phenomenon unleashed by Napster serves as another reminder
    of how the Internet has empowered ordinary people to effect
    extraordinary changes very quickly.

    When he came up with the software program that created Napster
    in his dorm room at Boston's Northeastern University last year, all
    19-year-old Shawn Fanning wanted to do is share some music with
    a friend living in Virginia. He had never written a software
    application before, let alone run a business.

    Yet Fanning devised a way for computer users to use the Internet
    as a channel for copying files stored on someone else's hard drive.

    Fanning didn't realize it at the time, but he had engineered a
    concept now known as "peer-to-peer" computing. The idea
    created a seminal company that could go down in Silicon Valley
    lore with the likes of Hewlett-Packard, Intel, Apple Computer,
    Yahoo and Netscape.

    "What Napster showed us is that the power is not in centralized
    servers kept on the Internet. The power really is in the hands of the
    people," said Clarence Kwan, CEO of Lightshare, a 7-month-old
    Palo Alto start-up inspired by the Napster model.

    "It made people realize that the average Joe out there has some
    really good content stored on his own computer hard drive."

    By last September, Bales had persuaded Fanning to move to the
    San Francisco Bay area to tap into the region's rich vein of venture
    capital. It didn't take long for music-hungry college students to fall
    in love with Napster, which became such a popular destination that
    some universities blocked access on their overloaded Internet
    access lines.

    Meanwhile, Napster raised about $2.5 million from individual
    investors and about $15 million from Hummer Winblad, a major
    San Francisco venture capitalist firm. Like so many Silicon Valley
    startups, Napster has yet to make money.

    Napster hasn't gone public either, making it difficult to appraise the
    company's value. David Boies, Napster's attorney, told The
    Associated Press in an interview this week that the company
    believes it is worth somewhere between $800 million and $1.5

    To enforce the injunction against Napster's music-sharing service,
    U.S. District Judge Marilyn Hall Patel is requiring a $5 million bond
    to protect Napster against potential losses.

    Even as Napster's fate remains in limbo, big businesses and
    entrepreneurs alike are studying ways to cash in on the
    peer-to-peer computing craze.

    Several other decentralized peer-to-peer networks, including
    Gnutella and Scour, have been operating for some time, although
    it's unclear how they plan to make money.

    Peer-to-peer computing is on the radar screen of big music, movie
    and publishing companies. The e-business consultants at Scient
    have been bombarded with inquiries from major media and
    entertainment companies looking for advice on how they can make
    money from file swapping.

    Although file-swapping has concentrated on music so far, most
    experts believe a wide range of copyrighted digital files will be
    exchanged in peer-to-peer computing as the Internet's pipes are

    "A legal means was found to shut down Napster," Stone said, "but
    I would hope that there are people sitting in meeting rooms now
    that it's time to incorporate this (peer-to-peer) thing into their
    business model and seize the opportunity."

    Entrepreneurs already have gotten the jump.

    Lightshare plans to use the peer-to-peer concept to create an
    Internet version of Amway, or other so-called multilevel marketing
    businesses. Under this plan, copyright owners would allow anyone
    access to the information on their hard drives for a fee. The person
    who downloads the information could then resell the files for
    another fee, with the original owner also getting a cut of each
    subsequent sale.

    Lightshare plans to make its money from transaction fees charged
    for its monitoring system to track peer-to-peer sales.

    The startup's backers include former executives and engineers for
    AOL TimeWarner and Netscape.

    Venture capitalists are intrigued by the peer-to-peer concept.
    "What is really interesting from a business perspective is that in the
    peer-to-peer environment, your marketing costs go way down,"
    said Peter Loukianoff, a partner with Technology Funding Venture
    Partners in San Mateo.

    Lightshare is on the verge of completing its first round of venture
    capital investment.

    AppleSoup already has raised $15 million and expects to close a
    second round for $20 million within 30 days.

    "Peer-to-peer is white-hot right now," Bales said. "It isn't going
    away, no matter what happens to Napster."


    Headquarters: San Mateo

    Service: Allows 20 million members via computer servers to share
    digitized tunes from their music collections.

    Ruling's implications: Disaster for Napster. Company can't
    distinguish between copyrighted song files it has been ordered to
    block and ones its users are allowed to download. Stage set for
    massive financial penalty against Napster, which has no revenue.
    Law provides for penalties of up to $150,000 per song.

    File-sharing services: Gnutella, Freenet, Wrapster, iMesh, CuteMX
    and Scour

    Lawsuits: Record companies in December sued Napster for
    copyright infringement; heavy-metal band Metallica and rap artist
    Dr. Dre filed separate lawsuits. And last week, record companies,
    music publishers and Hollywood film studios sued Beverly
    Hills-based Scour, which allows Internet users to trade movies and
    songs for free.

                    #1 newspaper in Orange County, California

                   Copyright 2000 The Orange County Register
                 Please send comments to

Gregory Alan Bolcer        |    | work: 949.833.2800
Chief Technology Officer   | | cell: 714.928.5476
Endeavors Technology, Inc. | efax: 603.994.0516     | wap:  949.278.2805

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