• Was Megaupload Targeted Because Of Its Upcoming Megabox Digital Jukebox Service?

    Last Thursday the US Justice Department came down hard on Megaupload and its mega founder, Kim Dotcom. In the days since, there has been a shake-up of sorts in the digital storage realm. Several smaller sites have drastically changed their business models. Others, like MediaFire, reached out to me after I published this post attempting to distance themselves from Megaupload.

    However, yesterday, a new theory surfaced that indicates Megaupload’s demise had less to do with piracy than previously thought. This theory stems from a 2011 article detailing Megaupload’s upcoming Megabox music store and DIY artist distribution service that would have completely disrupted the music industry.

    TorrentFreak first reported about the service in early December 2011. Megabox was just in beta at that time with listed partners of 7digital, Gracenote, Rovi, and Amazon. Megaupload was in a heated marketing battle with the RIAA and MPAA who featured Kim Dotcom in an anti-piracy movie (5:10 mark). The site had just sued Universal Music Group for wrongly blocking Megaupload’s recent star-studded YouTube campaign. Things were getting vicious in December but the quiet launch of Megabox might have been the straw that broke the millionaire’s back.

    Dotcom described Megabox as Megaupload’s iTunes competitor, which would even eventually offer free premium movies via Megamovie, a site set to launch in 2012. This service would take Megaupload from being just a digital locker site to a full-fledged player in the digital content game.

    The kicker was Megabox would cater to unsigned artists and allow anyone to sell their creations while allowing the artist to retain 90% of the earnings. Or, artists could even giveaway their songs and would be paid through a service called Megakey. “Yes that’s right, we will pay artists even for free downloads. The Megakey business model has been tested with over a million users and it works,” Kim Dotcom told TorrentFreak in December. Megabox was planning on bypassing the labels, RIAA, and the entire music establishment.

    Megaupload was likely large enough to actually find success. Other services have tried what Megabox was set to do, but Megaupload was massive. Prior to its closure last week, the site was estimated to be the 13th most visited site on the Internet, accounting for 4% of all worldwide Internet traffic. It boasted 180 million registered users with over 50 million visiting the site daily. Megaupload was already a seemingly trusted service for artists to distribute their work. Megabox would have a monetized that popularity by passing on the bulk of the earnings back to the artists.

    “You can expect several Megabox announcements next year including exclusive deals with artists who are eager to depart from outdated business models,” said Dotcom late last year. But that’s probably not going to happen. Kim Dotcom and several other Megaupload executives are now awaiting trial on various charges including racketeering, money laundering, and various counts of piracy. It seems they flew too close to the sun. High on success and a half a world away in New Zealand and Hong Kong, they attempted to take on the music industry head-on. Now they’re in jail.
    Comments 7 Comments
    1. megabyteme's Avatar
      megabyteme -
      This rings as true. First I've heard of it, but I can see how the Industries would sink low enough to do such a thing. That is what the SOPA bill is all about, anyway- protecting the Industries' hold on media.
    1. taniquetil's Avatar
      taniquetil -
      Considering that the found of Megaupload has a history of racketeering, identity theft, credit card fraud, embezzlement, and insider trading, I think there is definitely more to this story than just piracy.

      Anyways, I think Amazon could very well have a similar service in the works like they do for self-published authors. If I'm not mistaken they allow people to self-publish books on Amazon, and the author gets like 60% of the price they set.
    1. mr. nails's Avatar
      mr. nails -
      so many great missed opportunities.
    1. mjmacky's Avatar
      mjmacky -
      Especially since they're aware that piracy doesn't really hurt major businesses. Competition, that may hurt a business in the short run but it's great for the consumer and all businesses in the long run. So in the end, just another demonstration of shortsightedness by these fucking morons.
    1. iratetechie's Avatar
      iratetechie -
      Ok maybe I am missing the point here or I am just too much of a newbe. What I can not understand is how the United States can force their laws outside their boarders. That just amazes me that they could do that. Again I have said this before I would like to have someone in Iran or Pakistan open this up with servers there and see what the USA will do. Would they try to enforce the SOPA law there? Just take Megaupload and relocated it to Iran.. Good luck trying to shut that down.
    1. oldspider's Avatar
      oldspider -
      I believe its because their servers were in Virginia but I read somewhere that they were arrested by NZ police and are facing extradition to the US. I think it all depends on the treaties between the countries.
    1. TheFoX's Avatar
      TheFoX -
      It also depends on how good the lawyers are at convincing judge and jury that a crime has been committed.

      Always remember that the bulk of law is made to protect the wealthy from the masses, and that many laws are unjust. It is also unjust that the winner of a conflict in law is often the one with the most money to throw at the case, often resulting in the innocent party being unable to defend themselves.

      Law in most countries is now a farse, because it is not about right or wrong, but about who can splash the most cash. People have been bankrupted trying to prove their innocence, while others get the result they want by buying the best legal advise money can buy.

      For law to be fair, there needs to be a level playing field, but this will probably never happen. The BIG associations have the money and the clout to bring about changes in law that protect themselves while laying open others to abuse.

      There is no other way to put this. Many laws are now legalised racketeering and protection for associations representing industrial giants. How many times have small competitors been put out of business because an idea they had conflicted with that of a giant?