The Digital Media Winners 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 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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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 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 it.

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 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. 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.

Other MP3 stories:
The Digital Media Losers of 2006
The Digital Media Winners of 2005
The Digital Media Losers of 2005

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