Category: MediaCoverage

MUSIC E-TAILERS AGREE TO PLAY SIGHTSOUND’S TUNE

Settlement reached before case went to federal district court

VARIETY – By Paul Sweeting
02/23/2004

WASHINGTON — In an accord with wide-reaching implications for the music and movie download biz, Bertelsmann Music subsids CDNow and N2K have agreed not to contest a series of patents held by SightSound Technologies covering the commercial downloading of music over the Internet.

Agreement, part of an out-of-court settlement reached over the weekend in SightSound’s patent infringement case against the online music retailers, paves the way for Mt. Lebanon, Pa.-based SightSound to challenge other online merchants offering paid downloads of movies and music, including such studio-backed initiatives as Movielink and Apple’s iTunes service.

“Resolution of this dispute, after six years of vigorous litigation, is momentous,” said SightSound attorney William Wells. “SightSound can now look forward with renewed strength to licensing those in the music and movie industry who seek to employ SightSound’s patented technology in downloading music and movies over the Internet.”

Patents upheld

As part of the agreement, CDNow and N2K accepted a consent order issued by the court under which the SightSound patents are deemed “valid and enforceable.”

The retailers did not acknowledge any prior infringing activity related to their sale of music downloads, but agreed to pay SightSound $3.3 million.

Settlement was reached one week before the case was scheduled to go before a jury in federal district court in Pittsburgh.

“This matter does not affect our core business, which is the sale of CDs through traditional and online sales channels,” said a CDNow spokeswoman. “This settlement does, however, position us well for the future if we wish to engage in the sale of downloaded music.”

Case dates to 1998, when SightSound sued N2K for patent infringement after N2K began offering paid downloads as part of a deal with Liquid Audio. N2K was later acquired by CDNow, which in turn was bought by Bertelsmann and merged into BMG Online.

Earlier rulings followed

In a series of earlier rulings, the court upheld the patents’ application to Internet downloads and denied CDNow’s motions for dismissal of the case.

SightSound prexy and co-founder Scott Sander said Monday that the company has already been approached by several parties interested in acquiring the patent portfolio.

“We realize that someone bigger than us might have to have these patents for the industry to really move ahead,” Sander said. “We hope that with our success today the industry has entered a new era of respect for intellectual property, both copyrights and patent rights.”

SIGHTSOUND WINS DOWNLOAD DECISION JUDGE EXPANDS PATENT TO WEB

VARIETY – By Paul Sweeting
02/14/2002

WASHINGTON — In a twist that could put a kink in studio and record company online plans, a federal magistrate in Pennsylvania has ruled that patents held by SightSound Technologies for distributing audio and video files over telecommunications networks covers Internet distribution.

The ruling, in a suit brought by SightSound against CDNow, means that the online music distributors MusicNet and Pressplay are now vulnerable to patent infringement suits from SightSound for offering paid downloads over the Internet.

Online video-on-demand providers Movielink and Movies.com could also be vulnerable.

“This is an important step forward in the aggressive enforcement of our patent rights,” SightSound president and CEO Scott Sander said.

The suit dates to 1998, when SightSound charged CDNow with infringing SightSound’s patents on selling digital audio and video files over telecommunications networks.

CDNow (now owned by Bertelsmann Entertainment) argued that the “telecommunications networks” referred to in the patents did not cover the Internet and, therefore, it could not be sued for infringement.

Chief Magistrate Judge Kenneth Benson of the U.S. District Court for western Pennsylvania disagreed with that interpretation, finding that SightSound’s patents cover the Internet.

Ruling opens the way for the case to go to trial and leaves Bertelsmann open to potential damages if the trial court finds that the patents were infringed.

A Bertelsmann spokeswoman said the company does not comment on pending litigation.

The patents at issue were originally filed in 1988 by SightSound chairman and co-founder Arthur Hair and were issued in 1993.

Pre-Web origin

In those pre-Web days, the patents described a method for transferring digital audio and video files from the memory of one computer to the memory of a second, remote computer over “telecommunications networks” and collecting an electronic payment in return.

In patent cases, a separate proceeding is often held before the trial to determine the scope of the patents and whether the language in the patent is applicable to the challenged activity. In arguing that the language in the 1988 patents did not apply to paid downloads over the Internet, Bertelsmann was hoping to head the case off before going to trial and facing possible liability.

In its ruling, however, the court wrote that “the terms ‘telecommunications line’ … should not be interpreted as excluding the Internet.”

Although the case was brought against CDNow, SightSound officials believe the patents, as interpreted by the court, would cover the online plans of all record companies, as well as the studios.

Company has sent letters to both MusicNet and Pressplay, informing them of SightSound’s patent claims.

Despite the lawsuit, SightSound says it’s not an enemy of Hollywood.

“We’ve been extending an olive branch to Hollywood for years now, trying to persuade them that we can do it for them faster, better and cheaper than they can do it themselves,” Sander said. “We stand ready to work with all copyright owners, not against them.”

SightSound operates its own paid movie and music download service through its Web site sightsound.com.

VIRTUAL MAKEOVER

Variety – Justin Oppelaar
11/30/2000

SightSound retools for move from content to tech

NEW YORK — In an apparent move to distance itself from the perilous world of online entertainment distribution, SightSound.com is expanding and reorienting its corporate structure toward technology rather than content, as well as taking on a new name.

The Pennsylvania-based Web entertainment infrastructure company, henceforth to be known as SightSound Technologies, is dividing its businesses into three distinct units: SightSound Innovations, SightSound Systems and SightSound.com.

The Innovations division will function as a research and development lab, fostering new content delivery technologies and licensing the fruits of its labor to entertainment companies that want to put their content online. The company currently has four patents issued and roughly 30 under review by the U.S. Patent & Trademark Office.

SightSound Systems will design and build the backend infrastructure for film and music companies that want a turnkey system to get their wares into cyberspace, said SightSound prexy and CEO Scott Sander.

“We were approached by companies around the world and major studios in this country that asked if we would build them a similar system,” Sander told Daily Variety. “We wanted to capitalize on that demand.”

SightSound.com will operate the company’s online entertainment portal, which offers music and video content for download. The site’s offerings include full episodes of Comedy Central’s “South Park” and “Dr. Katz: Professional Therapist” animated series, as well as the original direct-to-Net sci-fi film “Quantum Project.”

Sander said the move reps a continuation of SightSound’s ongoing strategy to capitalize on its inhouse engineers, investing in new technologies rather than branding.

“While other people were spending their money on sock puppets, we were continuing to develop new products,” he said. “This is an expansion to recognize the interest in those innovations.”

“EXPENSIVE LESSONS”

eVariety – Justin Oppelaar
10/01/2000

With all the crowding by online media pundits lately about the impending broadband Internet revolution, you’d think everyone is now hooked up to the fat data pipe, enjoying all sorts of multimedia content at lightning speed. Hardly.

While ‘Net monitor Jupiter Communications predicts that over 15 million U.S. homes will have broadband access by 2003, that’s still only a small fraction of all homes wired to the Web. And currently, so few users (only a couple of million) enjoy a fast connection that major media companies are still sorting out how to make broadband content commercially viable. But don’t tell that to the throngs of online entertainment sites that have sprung up over the past year. Much of their content demands levels of bandwidth that most Web surfers won’t have for nearly a decade. But the desire to be a mover in what will eventually be a giant market is so strong, they’re diving in anyway.

Offering up everything, including short films, animation on demand, interactive multimedia and live radio Webcasts, these sites have inundated surfers with new content, but have spawned only a few breakout hits.

Among them are MediaTrips.com’s “George Lucas In Love,” a spoof that, when released on VHS, topped Amazon.com’s bestseller list for several weeks. IFilm.com’s “405,” about a commercial jet landing on that famous Los Angeles freeway, has also garnered substantial buzz and recently won its creators, Bruce Branit and Jeremy Hunt, a deal with Creative Artists Agency.

STEPPING UP

SONGS AND SHORTS ARE ONE THING, but one online entertainment firm, Pennsylvania-based SightSound.com, has decided to take it to the next level, even as some critics wonder whether there is a next level.

SightSound’s 32-minute “Quantum Project,” starring Stephen Dorff and John Cleese, cost $3 million, and is available solely via the Web. Customers shell out $3.95 per copy, or slightly more than the average rental fee at a video store.

For their money, users get the file, which weighs in at 165 megabytes for the high- resolution version, as well as a decryption key needed to make the file viewable.

Pic was produced by indie house Metafilmics, best known for the expansive (and expensive) 1998 Robin Williams film “What Dreams May Come.” Barnet Bain, who co-produced “Quantum” along with Stephen Simon, says he jumped at the chance to leapfrog the Hollywood establishment and pioneer features on the Web.

“We realized that there was a very brief window of opportunity in which a small independent could be a leader,” Bain says. “We have a chance to do the equivalent of making ‘The Jazz Singer’.”

To many Hollywood veterans, it may smack of heresy to put the release of “Quantum Project” on par with the first talkie, but “Quantum’s” creators and backers believe the effects on the industry could be equally dramatic.

Scott Sander, SightSound.com’s CEO, says the film’s biggest impact could be on the realm of traditional movie distribution, especially in light of recent concerns over online piracy via file-sharing utilities like Gnutella and Freenet.

In fact, the company’s model of distributing the “Quantum” download for free and then selling a digital key to unlock the file is well suited for thwarting piracy on those networks, he contends.

“ ‘Quantum’ acts just like a vaccine” in file sharing networks, Sander says. “We are able to take it and (safely) pump it into Gnutella’s file sharing network.”

Since people who swap and download the file still need the key to open it, the piracy element is effectively defused, he said. That means SightSound.com has already solved a problem to which the film industry is only beginning to awaken, he added.

“I’m not saying they need to change their business practices overnight, but one thing the Internet has taught us is that there are brutal repercussions for waiting,” Sander says. “Just ask the music industry.”

CASH STASH

One thing the film does keep a keen eye on –the gross- is still a well-kept secret for “Quantum Project.” Sander, again citing the IPO quiet period, would only reveal that it has been downloaded in 60 different countries. However, Sightsound recently inked a deal to bundle a free copy of Quantum Project with downloads of Microsoft’s Windows Media Player 7, implying that outright sales may not be as robust as had been hoped.

But Sander insists that his focus is on a different number. “The traditional Hollywood way to look at “Quantum” is to say ‘what did you do on opening weekend?” he said. “Here’s the key number: everybody bought it; nobody stole it.”

Adds Metafilmics’ Stephen Simon, “Quantum’s” co-creator: “I really don’t think this $3 million was extended by SightSound.com with the idea that they’ll get 750,000 people and break even,” he said. “This was (more) an effort to be a pioneer in a new realm.”

But that’s a substantial price to pay for the privilege of being first in a very unproven market –especially when longer-format entertainment isn’t necessarily the best thing to watch online, according to Matt Hulett, chief marketing and online officer at Atom Films.

“The short is going to be the preferred medium in an online environment, even after broadband access is widespread,” he says. “Watching movies on a PC, you’re pretty much set up to be distracted.”

“We like to use the ‘sitting forward versus sitting back’ analogy,” says Gene Klein, content VP for Gotham-based indie film site Reelshort.com. “If you’re watching a half-hour movie on a PC at your desk, that’s a long time to be sitting forward.”

David Beal, CEO of Gotham-based entertainment portal Sputnik7.com, is impressed by the initiative taken by SightSound.com in producing “Quantum,” especially since it takes steps toward upending the traditional Hollywood model for distribution.

“The film business’s distribution channels haven’t really evolved,” he said. “They’ve been pretty much controlled exclusively by Hollywood.” “Quantum” could have a hand in changing that, he added, but the real test will be whether it becomes popular enough to warrant release on several different distribution channels –the Web included.

Even as “Quantum Project” is being debated in ‘Net circles, another filmmaker is laboring to break into the longer-form Web film market on a markedly different path. Los Angeles-based former programing designer Helmut Kobler is fashioning a 23-minute science-fiction film in the California desert on a shooting budget of $80,000.

Production of the pic, called “Radius,” is being painstakingly documented on Kobler’s Web site, www.makingofmovie.com, for both marketing and interactive education purposes. “We thought of it as a way to create awareness even before a frame is shot, a la ‘Blair Witch,’” he said.

Kobler, like Metafilmics’ Simon, is not banking on the possibility that his film will be profitable. Compared to “Quantum,” however, “Radius” is a relatively minuscule financial risk, and the upside in terms of exposure and experience is considerable, he said.

The director has not yet gotten a distribution partner for “Radius,” but he said he has talked to several Netcasters, including MediaTrip, about a possible deal. The film would be distributed free, perhaps in multiple episodes, with an eye toward a DVD release and potentially a licensing deal thereafter. “I want to be seen in as many places as possible,” he said.

Despite the divergence between his strategy and that of SightSound.com, Kobler gives credit to “Quantum Project” for its ambition and pioneering spirit. But he maintains that pay-per-download still needs time for fine tuning and market acceptance before it can become a viable commercial model.

The original concept of “Quantum” was definitely interesting to me, and it still is,” he said. “But whenever there’s new territory being explored, there are always going to be some mistakes.”