ITP Techblog

Yesterday will have been a particularly bleak winter day for Kim Dotcom as he wandered the grounds of his mansion outside Glenorchy.

In the High Court at Auckland, Bram van der Kolk, 39, and Mathias Ortmann, his former colleagues at file hosting company Megaupload, were pleading guilty to a raft of charges, including participating in an organised criminal group, causing loss by deception and using a document for pecuniary advantage. The charges carry maximum penalties ranging from 5 to 10 years.

For a decade the pair, estranged from Dotcom for the last eight years, stuck to their story that they didn’t know Megaupload was one of the biggest sources of pirated content on the internet. It seemed like the three of them would fight the US Government’s efforts to extradite them to the bitter end.

But Ortmann and van der Kolk obviously tired of the farcical Megaupload saga, which has overshadowed their lives and efforts to grow Mega, the company that grew out of the ashes of the illicit file-sharing hub and which has amassed millions of users all over the world in its own right. The terminal illness of another co-accused, Finn Batato, who died of cancer a few weeks ago, will have helped focus their minds.

The summary of facts of the case released this week confirms just what a massive, illicit money-making machine Megaupload was. The site generated revenue by selling advertising and subscriptions. In year one of operation alone, it turned over US$175 million.

     Kim Dotcom living it up in Queenstown

Mega spend-up

“Mr Dotcom received approximately US$100 million from Megaupload,” the statement of facts reads.

We had to endure Dotcom as a public figure blowing a chunk of that cash on mansions, cars, helicopters and his own dance albums over the years, as he live in exile in New Zealand.

It was all a bit ridiculous, from the raid on the Dotcom mansion to the protracted legal cases that followed. Dotcom in his trademark black tracksuit, played the jester in chief. At one point, he even launched a bid for political relevance with the Internet Party. But Megaupload is estimated to have caused financial harm to copyright holders to the tune of US$500 million.

Ortmann extracted US$19 million from Megaupload as a 25% shareholder while van der Kolk came away with a modest US$3 million.

Dotcom’s lieutenants were in no doubt about what Megaupload’s appeal to users was,  and played a key role in “disguising the volume of copyright-infringing content available” and “deliberately frustrating the efforts of copyright owners to prevent the unauthorised copying and distribution of their works, including by taking steps that deceived copyright owners.”

While the US entertainment industry’s efforts to crack down on piracy in the mid-2000s as file sharing sites and BitTorrent peer-to-peer downloading took off won them little sympathy, the scale of the Megaupload offending is sobering.

This random group of geeks used their technical knowledge to copy Rapidshare, the reigning file-sharing kingpin of the day. Were it not for the fact that van der Kolk and Ortmann jetted into New Zealand to visit Dotcom for his birthday just prior to the police raid on his mansion, they wouldn’t even be here. Now they will likely give evidence against Dotcom who faces a massive fight to avoid the extradition the US Government has been so determined in pursuing.

You don’t have to look far on the internet to see that the illegal trade in copyrighted material is still massive. But the entertainment industry belatedly came to the conclusion that they should throw their innovation efforts not into developing digital rights management systems, but in leveraging the internet to build out video streaming platforms that people would be willing to pay to subscribe to.

Streaming was the answer

As a result, hundreds of millions of people pay a monthly fee for content instead of taking a punt on a file-sharing site that could deliver them some malware-ridden, poor-quality knock-off, lining the pockets of the new generation of Kim Dotcoms in the process.

The lesson from the Megaupload saga is that if you give people real choice and convenience, they will do the right thing and pay up. Sure, there will always be piracy, but the technology will always be one step ahead of regulation. Some of the proposals floated over the year to combat piracy, from web filtering at a national level to the infringement fines regime that for a period operated here, were all heavy-handed and oppressive.

Publishers of music, movies, TV shows and games continue to invest massively in policing the web for copyright infringement. But the world is now awash in content. The issue has lost its edge.

I’ll happily wave Dotcom goodbye if he indeed has to board a flight for Los Angeles in the company of FBI officers. Sure, the police botched the handling of his case. But Dotcom is no freedom fighter, no warrior for net neutrality and the open internet.

He was driven by greed and his massive ego and we’ve spent way too much time and money on this larger-than-life German.