Two days before the raid on Dotcom mansion, two Universal Music Group staff showed serious interest in Dotcom's ad-replacement technology, which remains an interesting concept.
Shortly before the January 2012 raid on his mansion, two Universal Music Group staff showed serious interest in a new music and ad replacement service developed by Kim Dotcom.
The giant German has posted an audio clip of his 32-minute phone conversation with “Rob” and “Simon” from Universal Music Group (UMG) to SoundCloud.
“They offered to reduce my status from ‘evil’ to ‘neutral’ if I partnered with them. This call was two days before the raid. UMG was excited about Megabox and especially my Megakey innovation. It clearly shows that I was trying to help artists to create more income from the internet,” Mr Dotcom wrote in an email to NBR.
Megabox – in beta at the time of his arrest – was Kim Dotocm’s proposed iTunes competitor. Its key difference was that users would download a Megakey app that would replace ads on a site a user visited. So for, example, if a Megakey user visited the NBR or Google or Metservice.com, they would see not ads served up by the site but ads served from Megakey. The more Megakey ads you watched, the more songs you could download from Megabox for free.
Universal Music NZ boss Adam Holt could not say if the conversation was genuine. He forwarded NBR’s request for verification to UMG in the US. Kim Dotcom did not reply to NBR’s query asking him to identify the men in the recording.
Assuming the recording is genuine, then Mr Dotcom is correct: the UMG staff he talked to were intrigued by the Megakey concept.
They even went as far as making tentative arrangements to meet Mr Dotcom in the second week of March, 2013 when he was to fly to Hong Kong as one of them was also to be flying to Tokyo around that time.
They got down to brass tacks.
Mr Dotcom said in a Megabox/Megakey beta trial, the average user goes to 140 web pages per day, 94 contain ads of which contain ads – three on average, so they see a total of 282 ads.
If Megakey substitutes its own ads for 10% of those, then it will serve 28 ads per day or 10,200 a year at what Mr Dotcom calls a “shot-gun” rate of $2.50 a per 1000 – which in turn would allow the user to download 75 songs “free.”
Mr Dotcom mused that, with 100 million users and 10% ad replacement, Megakey would be bringing in $2.5 billion per year.
He said the “low” 10% rate was chosen in anticipation over a backlash at being seen as “parasitic” and simply the logistical challenge of selling $2.5 billion worth of ad inventory.
The Universal execs suggested he turn his model inside out and allow some sites to opt in to Megakey; they also thought out loud (often prefixing their questions with the phrase “if we did a deal”), musing that Megakey could be switched on only for sites connected to UMG artists.
One of the UMG staff says at one point, “The business has unfortunately been controlled by lawyers for a period of time. But that's changing.”
He acknowledges things might not go smoothly once UMG’s legal team gets involved. “I’ll try to keep them at bay as long as possible but, when we come to paper the deal, I'll have to bring in the lawyers but I've got a lawyer I trust.”
They bonded over Google conspiracy theories. It all got pretty chummy. Mr Dotcom raised the fact UMG lawyers were hassling Megaupload and asked if that could be "defused" if the label did a Megakey deal.
He was told by one of the men, "In the short term I can downgrade your status from evil to bad and, as the process goes on, it could be from bad to good, then exceptional, partner. I just need a bit of time, once we start engaging ... Evil to neutral is exactly where we'll go in the next three or four months."
Only 48 hours later, of course, it all turned to custard for Mr Dotcom. He was arrested and charged with racketeering, money laundering and copyright infringement; record labels including UMG later weighed in with a civil suit.
Nonetheless, Megakey remains an interesting technology, if it works as advertised. Ad blockers are the issue of the day for publishers (thanks to a single Adobe/PageFair survey that has been quoted everywhere from the New York Times down, with barely a mention of PageFair’s self-interest). Megakey can intercept ads at the protocol level but, unlike an ad blocker, it can substitute its own ads rather than serve up a blank.
If he hadn’t put the entertainment world and FBI offside with Megaupload, Mr Dotcom could have been on to something.
