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Loudeye drops P2P protection baton

Falls back on music services

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Loudeye has dropped out of the P2P file protection business, closing its Overpeer operation, incurring just $200,000 in severance and related payroll costs. The low severance cost gives a good idea of how little the company still had committed behind the effort.

Overpeer has ceased operations effective immediately and will continue to pursue options to maximize the value of its assets, in other words sell off any software intellectual property it has.

Loudeye bought Overpeer in March 2004, and by July said that it had landed 16 deals by the end of its first quarter of operation, worth several million dollars, a doubling of the size of the business the company claimed.

Loudeye competes head on with Macrovision’s Hawkeye and they both place decoy copies of content files on file sharing networks, which are difficult to tell from the real thing, but which when downloaded just have part of the track or film in a loop, with the rest just made up of white noise. They populate up to 100 fake copies for every real copy making it virtually impossible to get a good copy.

In order to do this the software had to spoof file sharing services into thinking these dummy files were something they were not, and just last June it bought out a patent from the University of Tulsa that it says was key to this area.

One of the big problems with spoofing files is that using a process called “hashing a file” it can be easily identified accurately as the correct file, a film or music file for instance. Once a genuine copy has created a hash value then anything that doesn’t give that exact same hash value is ignored, and the defenses cannot fool filesharers.

This was perhaps one of the reason that it paid for the patent, because there are ways around this weakness. But at the same time it may also have found that the disintegration of the P2P networks has meant that there is less business to be had from the record labels and studios that are now anticipating a piracy free world. Most of the P2P networks are just as busy as they ever were, but many of them no longer have fresh copies of the software available for download because the companies running them have died or stopped operating P2P services.

Loudeye says that it will gain $1.6m in savings from the closure and continue to concentrate on its online music subscription services.

Copyright © 2005, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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