The Digital Media Winners and Losers of 2006

By Richard Menta 12/23/06

We thought that 2005 was the key year for digital media, because of the MGM v Grokster ruling. We thought, but are still not sure as the content industry's victory in that case did not achieve its primary goal, to stop file sharing. Not only does online trading continue to increase, but other technologies have since made their impact clear. Below are this year's success stories and not so successful stories in a continually turbulent online environment.

The judges are still out on several candidates, who we may see in next year's winners (or loser's) list. They include the DRM protestors, Patti Santangelo, Zune, HD Radio and others.

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2006 Winners

1. YouTube

Google purchased them for $1.65 billion. For a company less than two years old, not much more needs to be said. CBS has already credited YouTube for improved ratings on the Letterman show and the site brings US visibility to excellent overseas television programs. That's nice, but they still haven't figured out the best way to make money on all of this success. The site has to develop a stronger business model and do it under continued legal threats from some content holders. That's why the Google acquisition is important as it has the dollars to insulate the company from litigation until it can evolve into a high revenue generator.

2. Apple

Still controlling a hefty percentage of the player and paid download market. SanDisk is making inroads in the portable player arena, but Apple is selling more iPods than ever. iTunes market share is dominant too, though analysts have concerns about the short-term growth of paid music and movie downloads. The big question is where does Apple go from here? As there is early evidence to suggest SanDisk is selling strong among digital savvy consumers, the company will need something more than a minor refresh of the iPod line for 2007. We'll see in the spring what iTV, the present name of Apple's wireless set top box, will offer. Apple's recent deal with the airlines, which will cement the iPod dock (literally and figuratively) into the seats of commercial aircraft, will mean Apple's proprietary standards will dominate in jets for years. Disney arguable deserves to be on this list too. As the only studio that sells movies on iTunes it now dominates the tiny, but burgeoning, movie download market. Disney and Apple expect to generate $40 million in movie sales by year end.

3. MySpace

It is a top five site on the Net and probably the most influential destination for new music. Might it be the most influential for all music?

4. BitTorrent and Azureus

Several million dollars in seed investment followed by preliminary adoption by the movie industry has made Bram Cohen's vision a legitimate member of the content industry clique. For the most utilized protocol on the Net, this means large revenues and no lawsuits for its creator (at least in the immediate future). By cutting a deal with Hollywood Bram Cohen reduced the risk of litigation. This one fact is drawing significant VC activity into the technology. Not only did BitTorrent grab $20 million in latter round funding for itself, torrent client Azureus landed $12 million of its own. Even uTorrent made out as Cohen used some of his new found investment cash to acquire its technology. eDonkey and Morpheus had a commercial dream once. BitTorrent is achieving that dream.

5. Pirate Bay

Started by Swedish anti-copyright organization Piratbyrån, Pirate Bay grew into the world's largest BitTorrent tracker. This drew the content industry's ire and on May 31 they orchestrated a raid on the site with the help Swedish law enforcement. The raid confiscated all of Pirate Bay's servers and the press releases flew, heralding the Pirate Bay's elimination. It turned out the celebration was premature. Three days later Pirate Bay was back and, thanks to the press generated by the closure, became more popular than ever. The Pirate Party did not do so well in Swedish elections later in the year, but it has been influential. That influence carried over here to the states where Brent Allison and Alex English are launching a US Chapter with eyes on the 2008 election.

6. Brittany Chan

Brittany and he mother beat the RIAA in their file sharing lawsuits. That's the good news and enough to place her on this list. The bad news is the family had to endure the misery and expense of this trial in the first place. Didn't hear about the Chan victory? That's because while the original suit made front page news, the decision was mostly ignored by the mainstream press.

7. Creative

Took Apple for $100 million in its patent dispute and will now make iPod peripherals, where the company will probably make more money. Their own players are selling better this holiday season, so over all thing have improved for a company that has showed losses on the balance sheet recently. Will future Creative players adopt the iPod dock connector? Silly rabbit.....

8. DJ Danger Mouse

DJ Danger Mouse (Brian Burton) became the scourge of the industry back in 2004 when he released the Grey Album, a limited edition remix of Jay-Z's Black Album and The Beatles' White Album. EMI attempted to stop its release resulting in Grey Day, one of the most successful Internet protests. That got DJ Danger Mouse on our 2004 winners list. This year Mouse is here as one half of the duo Gnarls Barkley, whose first single 'Crazy' is the first song to top the UK charts on download sales alone. It reached number 2 on the US chart. To date, Danger Mouse the most successful artist to ever to leverage the Internet to promote their career. It helped that Crazy was a great song.

9. SanDisk

Released a 6GB player in the spring that sold well. Then at the end of the summer, before Apple could answer with a like capacity iPod, Sandisk released an 8GB version. NPD Group is reporting that SanDisk is drawing 18.4% of Christmas DAP sales. Meanwhile, early MP3 Newswire player data suggests that percentage is even higher among the digital savvy shoppers

10. EMusic

Emusic is the official number two paid download service (the real number two may be the very unofficial and the service has sold 100 million downloads since new management took the company over in 2003. Furthermore, it sold those tracks on the musical virtues of independent artists, not major label artists like Napster and Rhapsody pay for. But there real reason EMusic is here's here. Launched as Goodnoise in early 1998, the service is a survivor of the dot com era.


Tivo won a big patent settlement against EchoStar. There were concerns the company wouldn't make it. Now it has some stability in the market.

Honorable Mention: Sling Media

Deals with mobile providers has this company and its technology on the upswing. Hollywood is rattling its sabres as usual, but its more because it wants to steal the "place shifting" TV market for itself. If Sling Media continues to grow it may become an acquisition target, possibly from one of the telcos like AT&T or Verizon who are investing heavily in IPTV.

2006 Losers

1. StreamCast

The last holdout from the MGM v Grokster case, that case created the new test of "Active Infringement". The Supreme Court sent the case back to the lower court to define and apply the new test, which the folks at Streamcast were confident they never violated. The lower court ruled they clearly did.

2. EchoStar Communications

Parent company of the Dish Network lost a huge $90 million patent lawsuit to Tivo.

3. Sharman Networks

Crushed in Australian court. Has settled with the record industry for $100 million, but to date no commercial P2P app that has come to an agreement with the music industry is showing any ability to gain traction in the pay-per-song market. The fact that KaZaa has not been updated since its acquisition by Sharman proves the glory days are long gone.


In September the major credit card companies blacklisted the Russian paid download service. Then became a pawn in US/Russian trade negotiations where it was used as a barganing chip in discussions over Russia's entry into the World Trade Organization. The Russians aggreed to shut down illegal sites, but is still online - with site traffic up according to Alexa. The RIAA has now announced it will sue for damages and its domain. Odd why such a suit is necessary if that site is supposed to disappear soon? Maybe, just maybe, there is more here. We originally wrote off, but now wonder if it could become... the comeback kid of 2007?

5. Captain Copyright

And his sidekick Lieutenant Lame...

6. OLGA - Online Guitar Tablature Archive

Shut down again. As far as the music publisers are concerned, if you can figure out the chord progressions of your favorite song - of which 95% of rock songs consist of nothing more than three common chords - you must pay them. If you put them online to save others the trouble you are a thief.

7. BLU-Ray and HD-DVD

Mass consumer adoption will not occur until the dust clears - which may take years. Beta and VHS all over again.

8. Amazon Unbox

Troubled functionality and dubious terms created a backlash in the press. Overall, many questioned the value it offered to consumers.

9. Sony BMG

Shelled out $1.4 million in settlement to the states of Texas and California for last winter's rootkit scandal. A few days before Christmas it spent several more million dollars to settle with 39 additional states. Worse for the company is that these lawsuits kept the scandal in the press for over a year, a scandal that taught users to fear the CD format.

10. Digital Rights Management

DRM is not going away soon, but to date it has not succeeded at doing what it was designed to do - stop file sharing. It has succeeded in annoying the consumer, though. Whether that might lead to mass consumer rejection is unclear at this point.

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Other MP3 stories:
The Digital Media Winners of 2005
The Digital Media Losers of 2005

The Digital Media Winners of 2004
The Digital Media Losers of 2004


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