Making an example of MegaUpload

The Stop Online Piracy Act may have been defeated last week, but the legal war over control of digital copyrighted content and internet distribution rages on.

MegaUpload was raided and shut down earlier this month — and its principals charged — with numerous counts of copyright infringement, racketeering, and money laundering.

Founder Kim Dotcom was arrested in New Zealand in possession of forged travel documents and illegal weapons. He has since been classified as a significant flight risk and denied bail. The indictment alleges that MegaUpload made approximately $175 million last year providing access to copyrighted materials, and was visited by up to 50 million users each day.

MegaUpload did not provide copyrighted materials directly, but rather provided server space for users to upload files and then share a link with others, which would allow them to download the file.

The files were not hosted by users like torrents, which merely facilitate ports for getting in and out of the river of traffic. The site generated profit primarily from advertising and monthly fees for “premium” access, which allowed users space to store their files for sharing with others, as well as priority for downloading others’ files. Free users were given incentives to purchase a premium membership through various annoyances that accompanied every individual download.

MegaUpload executives claim that they did their absolute best to regulate user uploads in conjunction with the provisions of the Digital Millennium Copyright Act, but many of the site’s features revolved around user incentives that were clearly designed to encourage distribution of copyrighted content. A good example of this would be their uploader reward program, which encourages users to distribute links to copyrighted material to as many people as possible in exchange for account credits, which can eventually be redeemed for cash or other rewards.

It’s difficult to believe that Dotcom was unaware what the site was being used for and that its operations were likely illegal. He is no stranger to legal trouble. He has been arrested previously in the ‘90s for stealing calling card numbers and in 2002 for insider trading and embezzlement. Dotcom is a notoriously flamboyant character in the Internet security industry. He owns the most expensive home in New Zealand, as well more than 20 vehicles — including a Rolls Royce Phantom with the vanity plate reading “God.”

He has also occasionally participated in Europe’s Gumball 3000 rally. Dotcom knew exactly what the site was being used for, and he maintained the site because it was quite profitable. The music and film industries want US authorities to make an example out of Kim Dotcom.

A high profile arrest could “change the calculus,” according to MPAA production executive Kevin Suh. But the film and music industries are trying to change the wrong variable. Rather than cracking down on pirating, they should make mainstream purchase less objectionable — iTunes music service has been profitable and popular offering downloads for lower price than the physical disc, as has Amazon’s service.

Providing a cheap, legal alternative to piracy won’t eliminate it entirely, but it will bring over the consumers on the margin. Eventually the loss of those consumers will cause fewer entrepreneurs like Kim Dotcom to enter the market.

A positive incentive, like fixing the problems that led to the growth of piracy will be far more effective than cracking down on file-sharers.

Emily Brooks is an economics senior and may be reached at [email protected].


  • It makes sense to offer downloads at a lower price as the actual cost of uploading is extremely low so they're not really losing anything by encouraging illegal downloaders on the margin.

  • Stop calling it "pirating."

    And your article is slated. "Dotcom knew exactly what the site was being used for, and he maintained the site because it was quite profitable."

    Thanks, TDC.

    Thank you for this opportunity not only to see my work nullified in the face of explicit hostility from a government, which you conveniently know nothing about and won't report on, and, what's more, for endorsing the message of a student who has absolutely no genuine understanding of the problem at hand, and who, either through ignorance or malice, has misrepresented Kim Dotcom's views.

    "…many of the site’s features revolved around user incentives that were clearly designed to encourage distribution of copyrighted content."

    No. Websites are designed to encourage the distribution of information. All websites exist to do this. That is the point of the website. Do you honestly because you are competent enough about the concepts of web statistics and web design to claim "encourage distribution of copyrighted content"?


    You thought I did something to harm you? You nutty Daily Cougar ads folks? Listen, you know what a slated article is. Read this hubris again. It's _on_ your domain.

    Don't be stupid by making yourselves targets for hackers. Can you please not do that? I _really_ don't want people trying to hack _my_ code.

    Oh, "free press."

    Look, Fox and FBI are publishing "counterterrorism" literature that identifies people who use Comcast as "potential indicators of terrorist activity"?

    Can you please take off your bourgeois hats and start protecting not only the Internet but yourselves? The "free press" is a bourgeois luxury, mind you. Can you readjust your priority and focus on news that actually helps people, and when it is published, it doesn't misrepresent?

    MegaUpload was a general-purpose tool and service to millions of people who were not copyright infringers in the least. You could have AT LEAST mentioned their loss. You could have AT LEAST been THAT concerned and sympathetic.

    All you did was write a smear op ed. Bloody hell.

    And that is the WORST subheadline possible. It's on par with "Misinformation may be a dirty trick, but it works." (


  • And obviously no one cares about the integrity of the free press. Or whatever bullshit.

    Government/FBI just told people, "you 'connecting with people' online counts as a potential terrorist activity." Or rather, that's the kind of thing POLICE should be on the lookout for.

    Okay, so write an article that instructs people to join a Google+ Circle.

    Isn't it just amazing how one can share a Circle with 700 people in it? Isn't that amazing enough to write an article about it? Isn't that just rad-cool?

    Go ahead, write an article telling people to join a Circle on Google+.

  • Moreover, MegaUpload provided a *free service* to millions of people which provided quality of transfer and speeds that beat out most other cyberlockers. It did not force them to pay for it, so all of the bullshit about how much Dotcom profitted is red-herring and ad hominem. That's capitalism _working_ if you want to put it into crude terms.

    Why don't you rattle off the numbers of how much MIAA and RIAA profits from exploiting artists? How GMO companies profit from exploiting small-scale land and farm owners? How the pharm industry profits from secreting designing drugs and throttling the market by not funding projects and raising awareness about the design of novel drug designs? They offer you "free" crap through their shoddy iTunes, etc. services AFTER you sign up for subscription.

    What the hell is wrong with you? I seriously hope you stop writing immediately.

  • And I'm just not fucking sure what good this "opinion" distinction truly amounts to. Gosh.

    Can someone please talk about the capitalist's censorship that's about to be implemented July 12? I mean, seriously.

    People need to know that they're about to be indoctrinated against piracy (when they don't even understand what it is).


  • Oh man! He's ranting with himself! And using more curse words!

    He must be crazy! Censor! The Internet needs laws, like the ones of old:

    He must be deranged! Let's ignore the issues and put on our psychoanalysis hats! The fact that our civil liberties are being taken from us on a daily basis now, today, in our time, is less important than the motivation behind this poster!

    At best we must disregard his words, even worse than the assumption of falsity or decent! He's a nut!

    He uses language!

    Can you PLEASE remove my words from the disclaimer now, you fucking turtles?

  • The music industry initially responded to P2P file sharing as it has often responded to disruptive innovations in the past: it sent its lawyers after the innovators, hoping to smother the technology in its infancy. Beginning with the December 1999 lawsuit against Napster, the recording industry has sued major P2P technology companies one after the other: AudioGalaxy, Morpheus, Kazaa, LimeWire and Pirate Bay. In short, suing the technology has never worked.

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