Scour Play

Before there was Napster, there was Scour.

Scour.net was founded as a media website in 1997, when Napster co-founder and poster boy Sean Fanning was still in high school. This past spring, it launched a media file-sharing platform that went beyond just music, gaining about 5 million users

Many of them college students, these users swapped songs in MP3 format, television episodes, full-length movies and other forms of entertainment.

However, faced with a lawsuit that drained its financial resources and scared away potential investors, Scour was recently forced to file for bankruptcy, striking a blow to peer-to-peer enthusiasts and the future of video on the Internet.

But while students bemoan the loss of the Scour Exchange platform, at least two companies are now bidding for Scour's assets, hoping to revive the company's software and tap into the revenue potential they say still exists in the online digital media sphere.

Rags to Riches to Rags

Scour.com was founded in 1997 by five students at the University of California at Los Angeles. Within a year, the company attempted to tap into the growing popularity of the MP3 music format by developing a multimedia search engine.

Using the Scour Media Agent, users could gain access to a wide range of media hosted by other servers and websites. The program, however, was less reliable than those based on the peer-to-peer paradigm--such as Napster--which allow users to download files directly from other clients who were also logged into to the service.

In the summer of 1999, Scour gained the backing of Michael Ovitz, former Disney president and Hollywood agent--a development that industry analysts thought might help it gain the support of the movie industry.

Then, in the spring of 2000, after Napster rocked the music industry with its MusicShare software, Scour released its own peer-to-peer program, the Scour Exchange. With the tagline, "Mine! Mine! It's all mine! Music. Movies. Pictures.," Scour Exchange gained an estimated user base of 5 million.

According to David A. Fries '01, one of the main reasons Scour appealed to him was the availability of video files in addition to music.

"Of course, I used Napster too, but you couldn't get video there," Fries says. "When I'd log into Scour Exchange, there were sometimes up to 40 terabytes of files on there, and a lot more variety [than other programs]."

Scour also gained in popularity at schools, such as Yale, that had restricted traffic to and from Napster's servers on their network.

But by allowing its users to swap full-length movies, television shows, music videos and songs, the company became an easy target for lawsuits from the recording and movie industries.

In July, the Motion Picture Association of America (MPAA) sued Scour, claiming that the company's software facilitated massive copyright violations and was therefore illegal. The Recording Industry Association of American (RIAA) joined the MPAA's lawsuit soon after.

Before the lawsuit was tried, however, it proved enough of a financial drain and a deterrent to potential investors that the company was forced to lay off more than 80 percent of its employees in September.

"The pending litigation has made it very hard for our company to raise the financing that we needed to continue bringing you our exciting services," the company recently wrote in a statement on its website.

On Oct. 13, the company--with over $100 million in debt and between $1 and $10 million in assets--announced that it had filed for Chapter 11 bankruptcy protection.

And on Nov. 16, Scour voluntarily shut down the Scour Exchange.

"We did everything we could to...show the world how new technologies could make entertainment as we know it even better," the company wrote on its website two days before the shutdown. "Obviously, things didn't work out as we hoped."

Toussaint G. Losier '04 says he found Scour Exchange convenient and fun to use, and was disappointed that it was forced to shut down.

"It was a cool way to share information and although I wasn't a regular user, I'm sorry to see it go," Losier writes in an e-mail message.

New beginnings

While Scour the company may be on its last legs, its technology--and dream--will likely live on. So far, two companies, Listen.com and Centerspan Communications, have bid on Scour's assets in the hopes of incorporating the company's peer-to-peer offering into their existing businesses.

According to Centerspan Corporate Marketing Manager Keith Halasy, Scour's already-developed technology, huge user base and valuable brand name make it enticing to a company like Centerspan, which is developing its own peer-to-peer product.

Tentatively named C-star, the program will allow users to swap music, video and other entertainment files and chat with each other. Unlike Scour Exchange, however, the company says it will provide a variety of copyright management schemes and fee structures that content producers can choose for the material they make available through C-star.

"To address the needs of content owners and facilitate proper remuneration to copyright holders, our system will have tracking and accountability built in," Halasy says.

Listen.com, a company that syndicates web content for use on portal sites, claims as its main product an online directory of more than 150,000 musical artists, with reviews, links to downloadable versions of their music, and other information.

Sean Garrett, a Listen.com spokesperson, says it is too early discuss how his company would leverage Scour's assets. He indicated, however, that the peer-to-peer software would be used in some form.

"We want to offer all the elements that create the complete music experience," Garrett says.

Companies may place bids for Scour's assets until Dec. 5. On Dec. 12, companies whose bids have been approved by the Los Angeles bankruptcy court will be able to take part in a competitive auction.

Both Listen.com and Centerspan have bid about $5 million, along with large blocks of shares in their company, to gain Scour's assets.

Because of the high price tag, both companies say they will take great precautions to avoid the type of lawsuit that have plagued Scour and Napster.

The five largest record labels all have small investments in Listen.com, relationships the firm hopes will allow it to build support within the music industry.

In a conference call yesterday afternoon to discuss their bid, Centerspan CFO Mark Conan said his company had been approached by two of the major labels to discuss content distribution deals.

Conan also said that he and CEO Frank Hausmann had met with lawyers of the RIAA to present their plans for C-star, and would continue to do so as development proceeds.

Both companies also promise major changes to Scour Exchange before it is re-released in any form.

"If we...get Scour," said Garrett, "It's not gonna exist in that form anymore."

Lawsuit Redux

Despite these promised changes, experts stress that lawsuit against Scour may not be over.

"Chapter 11 just means they're trying to take a breather while they reorganize their assets and liabilities--which can still be affected by the lawsuit," writes Jonathan Zittrain, executive director of Harvard's Berkman Center on Law and Technology, in an e-mail message.

The MPAA may ask for damages of about $150,000 for every movie illegally traded on the Scour Exchange--which would amount to a total of over $200 billion.

"The lawsuit still stands as filed; nothing has happened just because Scour has filed for bankruptcy," says Emily Kutner, MPAA director of public affairs for worldwide anti-piracy. "[We'll] wait and see. Centerspan can say they'll put this technology to legal use, but Scour also claimed that its software was non-infringing."

Zittrain points out, though, that the courts never decided against Scour, which still might have won its case on the grounds that its software has substantial uses that do not involve copyright infringement.

Scour had been working on deals with movie studios and music websites to develop non-infringing uses for its search engine and exchange. For example, it recently launched a promotion with Dimension Films to offer a downloadable trailer for Scary Movie.

"Napster has, in my view, about a 40 percent chance of prevailing on this issue in the appeal currently pending before the 9th Circuit," writes Harvard Professor of Law William W. Fisher in an e-mail message. "Scour believed that it could point to an even more extensive list of legitimate uses of its technology."

Video Killed the Radio Star

While Centerspan and Listen.com are optimistic about the long-term potential for distributing video files online, they admit that online and offline obstacles may make it a more difficult model to sell than music file exchange.

The prohibitive size of video files is just one barrier facing companies hoping to enter the sector.

For example, while a song in MP3 format can be downloaded in less than a minute on Napster on a high-speed network, a full-length movie would take hours to download on Scour Exchange, even with an network as fast as Harvard's. For users with lower network bandwidth, the download times are slower.

"In that video files are much larger than music, bandwidth will be a major constraint," says Centerspan's Halasy. "However, we do feel that eventually, video will be exchanged as audio is currently."

The software that converts DVD-quality movies into easily-transferrable files is also difficult to find. Under the Digital Media Copyright Act, it is illegal to distribute DeCSS, the program used to decrypt DVD movies and copy them onto disk. The MPAA has routinely threatened those who post the program on their websites or servers with legal action.

Still, there is speculation that Napster may ultimately allow video to be traded on its servers. Fanning, however, has said his company is currently focusing all of its development efforts on creating a fee structure, in alliance with record label Bertelsmann AG.

But when firms like Napster or Centerspan begin to charge for use of their file-swapping services, it is unclear whether the users will follow--especially with free, though potentially illegal, options still out there.

"Free peer-to-peer systems (e.g. Gnutella and Freenet) are multiplying and becoming more user-friendly," writes Fisher, who is also a member of the Berkman Center. "If a chastened Scour began charging for its services (as Napster/Bertlemann suggests it will), then many of its 7 million users would likely flee to free alternatives."