Kazaa's owner breaks silence

Sharman Networks has so far remained quiet about the controversy surrounding Kazaa's file-swapping software, but ZDNet Australia spoke to its CEO to find out more

With 2.3 million downloads last week alone, and up to 1.82 million users online at any one time, the ongoing secrecy surrounding Kazaa's antipodean owners, Sharman Networks, doesn't appear to have affected the software's popularity.

After months of speculation Sharman Networks' elusive chief executive Nikki Hemming has released details of her plans for Kazaa, and the operations of little known umbrella company LEF Interactive.

Sharman Networks came from nowhere in early March to purchase the popular file swapping technology Kazaa from its Dutch creators, then immediately disappeared into an tide of speculation, as Hemming went to ground to organise a full launch of the company.

Backed by a series of individual investors, including Hemming, Sharman Networks has listed its operations on the Pacific Island of Vanuatu in order to capitalise on "tax efficiencies": however, it will run its business from offices in Sydney and London. Hemming registered LEF Interactive in late February just prior to the purchase of the Kazaa technology, in order to cover Sharman Networks' Australian operations.

"LEF Interactive represents Sharman Networks in Australia, in what is a fairly standard business practice," Hemming said, revealing LEF whimsically represents the core tenants of the French revolution liberté, egalité, fraternité.

Having continued to re-release the Kazaa software despite the media shutdown, Hemming said she is keen to maintain a bi-quarterly release rate. To date this has been achieved via a virtual office, but Hemming has confirmed plans to open an office in the Sydney suburb of Cremorne.

"We set up the development team from scratch and they are entirely based in Sydney," Hemming said, also referring to plans to expand the company headcount from seven to nine with the appointment of a brand manager and assistant. "Australia is really a fantastic place to test emerging technologies, and we will continue to focus our development here."

In keeping with the promise of bi-quarterly new releases, Hemming foreshadowed the imminent release of a multilingual version of the software.

Hemming confirmed plans to continue the relationship with Brilliant Digital, and announced a new deal with Double Click that will see DART technology rolled into Kazaa downloads.

"We produce a piece of software that is available for free, and provides advertisers with access to a large and rich user channel," Hemming explained, pointing out that at this stage she wasn't making major changes to the company's business model.

"The investors backing Sharman Networks are not vanity investors -- they are interested in driving the business forward in terms of profitability," Hemming said. "And they are already seeing good results."

Hemming went on to explain that the company received a mixture of advertising revenue, and a shared percentage of the revenue from sales generated by online ads.

While quashing speculation of Telco participation in the Kazaa investment, Hemming described P2P technology as the long sought-after "killer app" which could drive broadband uptake, signalling her interest in telco partnerships.

"We are already in discussions with a major service provider in France, who wants to use our advertising to emphasise the benefits of broadband," Hemming said.

Hemming also addressed the issue of privacy and downloads which caused a furore earlier this month when it was revealed that the Brilliant Digital downloads included in the Kazaa downloads could potentially link Kazaa users into network nodes in a massive attempt to create a distributive computing network.

"We released a privacy policy along with the 1.6 version of the software, based entirely on full disclosure," Hemming said. "We make sure we are telling the users exactly what they are downloading and provide opt-in, opt-out functions if possible."

In keeping with the privacy bent, Hemming said the policy would apply to any new advertising partners and would be retrospectively written into pre-existing contracts. Apart from assuring full disclosure at the download point, the policy also vetos auto update functions and the collection of any information from end users without explicit permission.

With respect to intellectual property and copyright protection, Hemming said she was not aware of any attempt made by the Australian Record Industry Association to contact Sharman Networks. Operating as it does under LEF Interactive in Australia, the company would be subject to Australian legislation, however Hemming believes a Dutch court's ruling in favour of Kazaa in late March would bode well for the company's continued survival.

"It hasn't been tested in Australia, but the precedent has been established which demonstrated that Kazaa itself does not infringe on copyright at all," Hemming said.

Nonetheless, Hemming concedes the fortunes of P2P software will be largely determined in the US, and to this end has hired a Washington-based lobbyist to promote the notion of an "IP user fee" to US legislators.

"We are looking at a monetising solution to the question of IP, and trying to find ways that everyone in the value chain can be reimbursed from the success of their creation," she said.

However, Hemming also said she expected to gain significant support from the independent music sector, and content creators interested in P2P based delivery.

"This is not the early adopter phase of P2P technology, advertisers understand that, and its time the music and film industry started to pay some serious attention to the benefits of the technology," Hemming said emphatically. "Collusion is better than attrition."

Somewhat ironically, Kazaa is plagued by a ripped version of its P2P software which goes by the name of Kazaa Lite. Hemming confirmed she had approached the product's distributors with a cease and desist request drafted by her legal team at Sydney-based lawyers Phillips Fox.

"Luckily we have a good relationship with some of the search engines who agreed to remove the highlighted links to Kazaa Lite because they were misleading," Hemming said.

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