The Truth About Megaupload & The Record Industry

If Megaupload founder Kim Dotcom were really smart, this is where he would be today: a beach somewhere with no extradition treaty. Who keeps their clothes on at the beach anyway?

Yesterday Digital Music News ran a post titled “What Really Killed MegaUpload? MegaBox, That’s What…” promulgating a conspiracy theory essentially claiming that Kim Dotcom’s new music platform so intimidated the record industry that they conspired with the government to shut down a foreign entity, Megaupload, in order to save its own ass. The post stated that Megabox was “being positioned as a major stab at major labels, particularly MegaUpload nemesis Universal Music Group.  ‘They don’t understand that the rip-off days are over,’ Kim Dotcom told Torrentfreak.  ‘Artists are more educated than ever about how they are getting ripped off and how the big labels only look after themselves’.”

The truth, according to a highly placed source who asked to remain anonymous, is that Megabox was most likely not even a dream when this investigation began. Anyone who took the time to actually read the indictment would see that the government clearly states “On or about June 24, 2010, members of the Mega Conspiracy were informed, pursuant to a criminal search warrant from the U.S. District Court for the Eastern District of Virginia, that thirty-nine infringing copies of copyrighted motion pictures were present on their leased servers at Carpathia Hosting, a hosting company headquartered in the Eastern District of Virginia.  A member of the Mega Conspiracy informed several of his co-conspirators at that time that he located the named files using internal searches of their systems.  As of November 18, 2011, more than a year later, thirty-six of the thirty-nine infringing motion pictures were still being stored on the servers controlled by the Mega Conspiracy.”

There it is in black and white. The investigation was about movies and began years ago. So it stands to reason that former senator and current MPAA head Chris Dodd must have been in the Justice Department’s grill about initiating the investigation in the first place, except that Dodd didn’t start at the MPAA until March of 2011. The government subpoena was served nearly nine months prior to Dodd’s appointment and it becomes clear that the investigation had gone on for at least a year prior to the issuing of the subpoena. In light of the government’s investigation, this Megabox “conspiracy theory”  is starting to look more like Paul is dead or the moon landing was faked. Besides, DMN makes the leap of logic that the record industry is smart enough to conspire about anything! They couldn’t agree on where to have lunch let alone figure out how pull off a bust of this magnitude. Come on…we’re talking about record guys here!

Additionally, according to one of my sources, the recording industry knew nothing because “the Justice Department is extremely tight-lipped about its investigations. There’s no way they would discuss it with us. Are you kidding me?”

So how was the US government able to shut down a foreign registered company? Because these idiots kept infringing files on servers in the US, the domain is registered with a US registrar, they used Paypal to transmit monetary rewards to users in the US who uploaded the most popular movies, music, games, books and software, and they were in clear violation of Grokster while doing it!

To further negate this conspiracy theory, the indictment provides excerpts from email communications amongst the Megaupload Conspiracy that reveals various strategies on dealing with the investigation, including moving the company and going legit. “On or about November 1, 2010, (note—this is five months after the criminal search warrant served on Dotcom as noted above) ECHTERNACH forwarded an e-mail from a Universal Music Group (“UMG”) executive to DOTCOM and ORTMANN, which discussed requirements that UMG would require of Megaupload before they could discuss licensing for MegaBox. Included in the list of requirements was “proactive fingerprint filtering to ensure that there is no infringing music content hosted on its service; proactive text filtering for pre-release titles that may not appear in fingerprint databases at an early stage; terminate the accounts of users that repeatedly infringe copyright; limit the number of possible downloads from each file; process right holder take down notices faster and more efficiently”, the indictment reads. In other words, Dotcom’s archenemy Universal Music was willing to talk terms with Megaupload, and speaking from experience, I think UMG was being pretty damned decent. Had I been in Dotcom’s shoes, I would have jumped on that offer. Clearly UMG’s goal is to convert bad actors into legitimate players. More evidence that UMG digital chief  Rob Wells is the most progressive label guy in the business. (note to Lucian Grainge: don’t be a schmuck.Give this guy whatever he wants!)

One has to wonder why Dotcom and company didn’t just pick up their marbles and split once they learned they were under investigation. I sure would have. After all, they had taken in around $175 million in cash, according to the indictment, and could have easily shut down and moved to a nice beach somewhere with no extradition treaty with the US and lived like kings. But Dotcom decided to double-down instead. He just figured that he could tell the US government to fuck off, and anybody who has ever had to deal with the IRS knows that doesn’t work.

To me this is simply a case of a guy having too much money to think straight.



Wayne provides biting, hard edged, entertaining, humorous, sometime satiric but always provocative commentary on current events and trends in the music industry.

Discussion6 Comments

  1. I just wanted to say how much I enjoyed reading The Truth About Megaupload & The Record Industry | THE MUSiC VOiD I will certainly come back to read future posts.

  2. “The truth, according to a highly placed source who asked to remain anonymous”

    I’m guessing the source has an “R”, an “I”, and two “A’s” in it’s name.
    That’s the wonderful thing about anonymous sources, their only verifiability is the level of credulousness in the journalist.

  3. Jakomi, he was probably looking at Thomas and Tenenbaum and saying “oh, looks like the US judicial apparatus has no interest in actually enforcing copyright laws against file-sharers, guess I’m in the clear”.

    Or maybe, like you say, the money made him stupid.

  4. All I can say is what a tosser Kim DotCom was…The fact he thought he could keep illegal content on his company’s servers in the US even after being served with take down notices in 2010 (or before) and then in 2012 still having them there? His company’s made $175 million according to the affidavit – how can someone so stupid make so much money??? This world is a crazy place…I hope he enjoys his new husband behind bars. Hopefully he will learn something from his experience, but then again if you make that much money and are so dumb to still be caught then you deserve everything that comes your way…

  5. I love reading these articles, usually for the collection of uninformed commensts at the end about a mythical ancient age when jolly musicians wandered the land, supported by the grateful generosity of the populace they entertained an lo, there was no need for copyright. I’m glad this article doesn’t dissappoint! @Paulo – you’re still allowed to do those things (even now!), don’t worry. Before getting hot under the collar and flustered that a poor Monk will be arrested and dragged off into guatanamo by ‘the copyright feds’ for scribing what he shouldn’ta, why not have a read around the issue, beyond Torrentfreak? Just a thought. : )

  6. In the past centuries painters copied paintings of other artists as study. Monks copied books to preserve the knowledge. Today we created copyright to destroy the real culture: buy or die!

    This will end one day, and everyone will laugh from our times.

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