• Privately held

• Developing a Digital Content Distribution Marketplace

• Globally positioned

• Incorporated in Delaware

About Node Science Corporation

Physical media is becoming obsolete.

• Any piece of creative expression can be represented digitally

• In many cases the digital representation will be more useful than a physical one.

Early Observations

• A digital object has no mass.

• Digital data can always be copied perfectly. Nyquist Theorem.

• Once injected into a network the potential value of digital content is not limited. Metcalf’s Law.

Science of Digital Data

The behavior of digital content andphysical content is not the same.

• Access and sharing of creative expression is much greater.

• P2P platforms augment efficiency even further.

Digital Content Distribution is Inherently Efficient

• Copyright owners identify revenue losses.

• Barriers to entry of new content increase. Higher risks.

• Creators of content are faced with a dilemma.

Efficiency is not Effectiveness

In Q2 2000 The RIAA Shutdown Napster

• Proactive approach required

• Embrace and extend

• Any technical solution must work for both sides

• Find ways to harness the distribution for copyright holders benefit

[Source: Gracenote presentation at Copyright Protection Working Group Meeting March 2004]

Lessons from Napster

Napster missed the boat… it thought it was in the music business. The web today is

simply an intermediary. Someone is going to make a killing by figuring

out how to exploit peer-to-peer networking… When they do,

you should pay attention.

[extract from Tod Maffin, Top Technology Trends for 2002 http://todmaffin.com/future_ file_winter_01.pdf]

Lessons from Napster:Potential Commercial Strengths

In 2000 Node Science Began Studying The Digital Content Problem

Copyright owners are losing revenue. The digital content marketplace is facing significant deterioration in

content diversity and quality.

The Problem

It is always possible to create perfect unprotected copies

of protected digital content objects.

Root Cause

Copyright owners are attempting to solve the problem by using data protection

technologies and/or by taking legal action against individuals who

distribute digital content in an unauthorized manner.

Addressing The Problem:Current Attempts

Consumers follow content, not technology.

Viral distribution - i.e. - guerilla warfare

Increasing control increases resistance

Rapidly losing war of public opinion

DRM Arms Race

“Don't worry about DRM and lock-down computing, says Jim Griffin. Historically

they're doomed to fail. (Griffin is former director of Geffen’s technology group).”

[By Andrew Orlowski in San Francisco Published Wednesday 11th February 2004 17:25 GMT]

DRM Arms Race

Digital content cannot be protectedwithout the cooperation of consumers.

MaximizeAccess

ProtectAccess

THE GOAL:ProfitableContent

SatisfyConsumer

ValueContent

Conflict

Wrong Assumption!Content value does NOT increase

when access is limited

The Copyright Owner Paradox

Question

Is there a way to maximize both the access to AND value of content?

Answer

This IS possible by creating value and incentive for

online consumers.

BenefitFriends

Don’tShare

THE GOAL:Benefit to You

and Friends

ShareObjects

BenefitYourself

Conflict

Wrong Assumption?Is there a way to benefit the online consumer for sharing?

The Online Consumer Paradox

Question

Is sharing the content you enjoy really bad for copyright owners?

Answer

Only if they copyright owner does not

benefit.

Every time a digital content object is distributed, a transaction must occur.

• Equally benefit the suppliers and consumers of goods

• Provide incentive for accurate reporting on the goods

• Encourage competition among suppliers of and consumers of the goods

Finding Sustainable Markets

CBOE

iTunesTM

Markets for Intangible Goods

PatentLicenses

Speed of Transaction

Marke

t Mech

an

isms

eBayTM

• Balanced fair use rights and copy rights.

• Copyright owners get paid each time a digital object is consumed.

• Those that use copyrighted digital content must pay to do so.

• Those that distribute copyrighted content must also be paid.

Principles for a Sustainable Digital Content Marketplace

Atul Deshmane, COONode Science Corporation

Telephone: +1 360 398 8392Email: atul.deshmane@

nodescience.com

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