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Facing the wrath of Hollywood

Kim Dotcom divides opinion. According to some, he is a “self-interested privateer” and a criminal, who has built his own fortune into the hundreds of millions of dollars by facilitating internet piracy on a massive scale, costing the arts and entertainment industry $500 million of legitimate revenue in the process.

But to others, he is an innovator, a champion of personal freedoms and privacy in an age when heavy-handed and sometimes nefarious government activity is the biggest threat to the liberty of normal citizens.

What is beyond doubt, however, is that the 6ft 7ins, 20-stone German-Finn faces an extradition hearing, scheduled for July, in his adopted home of New Zealand, where he was granted permanent residency in 2009 and now lives with his wife and five children on a £16-million (NZ$30-million), 60-acre estate. If the American Department of Justice has its way, he will be extradited to the United States to face charges relating to racketeering, copyright infringement and money laundering in what has been described as “the biggest copyright case in history”.

The charges concern the activity of, the file-sharing site that gave financial rewards to uploaders in accordance with how many other users accessed their material. It has now been closed down, but at its peak, Megaupload accounted for 4 per cent of all internet traffic and ranked as the thirteenth most popular website in the world. It was also a hotbed of pirated music, films and television programmes.

Dotcom, who changed his surname from Schmitz in 2005 while living Hong Kong, doesn’t deny this. Instead, he claims many of Megaupload’s users stored and shared only legitimate files, and says, besides, he can’t be held responsible for the activities of others.

Furthermore, in Dotcom’s view, so long as Megaupload acted in good faith when pirated material was found, he and his company are protected in law by the “safe harbour” considerations afforded under the US Digital Millennium Copyright Act.

There is no distinction, he argues, between the activities of his company and those of internet service providers, search engines, such as Google, and media-hosting sites, such as YouTube.

The same amount of piracy, if not more, is happening everywhere

“We were all under the impression we were acting in a perfectly legal space with Megaupload and that, as service providers, would not face any actions like this,” he says. “The same amount of piracy, if not more, is happening everywhere.”

And there are prominent supporters who share his view. Steve Wozniak, co-founder of Apple, says Dotcom’s operation “was just a service like a post office”, adding: “Why do you shut down the post office thinking that’s where the problem is?”

Dotcom and his supporters advance the view that the behaviour of the US Department of Justice is not only an example of “prosecutorial over-reach”, but also a result of the excessive influence held by Hollywood lobbyists over the Obama administration.

Dotcom’s chief source of ire and a target of attacks in numerous interviews is Chris Dodd. Former US senator Mr Dodd, chairman of Hollywood’s principal lobbying group, the Motion Picture Association of America (MPAA), has been described as “one of my best friends in life” by US Vice President Joe Biden.

“Wall Street and Hollywood own Obama,” according to Dotcom. “He’s not acting in the best interest of the people. He’s acting in the interest of those corporations that paid for his re-election.”

To support his claim, Dotcom points to remarks made when the MPAA was seeking to encourage the Obama administration to take a tough stance on piracy in 2012. Mr Dodd said: “Those who count on quote ‘Hollywood’ for support need to understand that this industry is watching very carefully who’s going to stand up for them when their job is at stake.”

Whatever machinations lie behind attempts to prosecute Dotcom, the fact remains that the closed-down and its successor have eroded the incomes of movie studios, record labels, artists and anyone who would earn a living, even tangentially, from a creative pursuit whose product could be consumed digitally.

However, unlikely as it seems now, the entertainment industry might one day be thankful for Dotcom’s influence. For, despite everything else, he and his companies have served to crystalise a simple and instructive truth that, in this modern digital age, privacy and copyright are inextricably linked.

Mega, the second incarnation of Megaupload, works in a similar way to its predecessor, but the files hosted on its servers are all encrypted. Only the users who upload content and those they provide with an encryption key can access the information. Without the right encryption key, not even Mega’s staff can see what is held on their servers, even if a government or security agency asks them to.

In order to launch a new political party in New Zealand – the Internet Party – and concentrate on the legal work being done in preparation for his hearing, Dotcom has given up his position as a director of Mega. But he has already announced that the site will soon provide a Skype-like service and e-mail. These too would offer encryption and the ability to communicate confidentially.

Following Edward Snowden’s revelations about government spying and recent US National Security Agency claims that companies such as Google had knowledge of, and complied with, requests for private information – something they have previously denied – it’s easy to see why the idea would appeal to people who simply want to go about their business without being watched.

But, of course, it’s equally obvious how, in the wrong hands, the new service could be conducive to the distribution of pirated material. And, even though Dotcom has said the company will respond to takedown notices (as it must), any rights holder attempting to prevent material from being accessed illegally will still face a Sisyphean task as duplicate files can spring up at least as quickly as the ones that are removed.

In contrast with Daniel Ek of Spotify and Reed Hastings of Netflix, Dotcom isn’t content to merely disrupt the status quo by gently bringing round rights holders to his way of thinking. Instead, he views them as “dinosaurs” and insists the practical implications of the internet mean that their “backward, outdated licensing model” should be discarded.

To make this possible, Dotcom is working on Baboom, a new music platform that he describes as an “iTunes-Spotify hybrid competitor”. When the service launches properly later this year, artists will be able to “sell direct to their fan base and keep 90 per cent of sales”.

“On top of that,” he says, “we’ll be the first site that offers a solution for artists to make money even when we offer music for free. My idea is that artists should make their music available for free and fans should only pay for it if they really like it.”

Although details are still sketchy, Dotcom seems to plan to square the circle by enabling users to “earn money” by installing a “key” for their web browser that would allow adverts from Baboom to appear on other companies’ websites, in place of the ads that would otherwise be displayed. But, as with many of Dotcom’s ideas, this would present fresh controversy.

Baboom may never succeed and, even if it does, incarceration may prevent Dotcom from enjoying its success. He says he faces a total sentence of up to 80 years’ jail. But there is no question that the story behind the demise of Megaupload and the creation of Mega, as well as Dotcom’s own celebrity, has created a huge amount of momentum for his campaign for privacy and a bonfire of old-fashioned attitudes to copyright.

It could yet prove unstoppable, even without his considerable weight behind it.



1. Create great stuff

2. Make it easy to buy

3. Same-day worldwide release

4. Works on any device

5. Fair price