On Monday, we published part one of our interview with Kim Dotcom, the former proprietor of Megaupload. According to Wired, at its peak, the site was handling over 50 million hits a day, with people across the globe using it to illegally trade music, movies, software, and any other type content you can think of. But while the raid on Dotcom’s New Zealand mansion back in 2012 effectively ended the Megaupload era— wiping out the German-Finnish hacker’s estimated $175 million in the process— it also forced him to regroup. Last year, Dotcom launched Mega, a file-sharing site with encryption tools built in and a much smoother interface than Megaupload ever had. In fact, it’s like Megaupload on steroids, and its user base is growing at a rapid pace.
After we finished talking about Kim’s new album, Good Times, we got down to the meaty stuff. This is how the conversation went.
Interview by Paul Cantor (@PaulCantor)
In their case against you, the United States Department of Justice says you facilitated a service that contains some sort of piracy on it. But if I use Google Drive, I can do the same exact thing. In theory, isn’t Google guilty for the same thing you are being held to the fire over?
Just two weeks ago, the chairman of the RIAA, (Recording Industry Association of America) wrote an open letter to Google saying that they’ve now taken down over 100 million pirated links from Google. Why don’t we cooperate? Can we work this out? Can we work on a system that is more fair for the content creators? Hey, guys, you have made 100 million takedowns just for music. Don’t you think it's time for us to talk to come together and find in a dialogue some kind of solution? With us, they just destroyed everything and they took it all down. In the lifetime of our site, seven years, [we had] around 30 million takedowns and that was everything from music to software to movies. So, Google is by far twenty times larger when it comes to piracy takedowns. But those guys are still in business and making billions every year and we were completely destroyed.
There is much more piracy right now on YouTube. If you go there and you wanna find a full length movie, you will find it. If you go to Google and you want to download the latest Beyonce album, you need not to be a genius, you are an 8-year-old kid who knows what search term to put in and you download the Beyonce album a minute later. You know, this is the reality of the Internet and they are trying to make me the villain of all of that. Megaupload was no different to any of these providers.
Google doesn’t seem to work so well anymore. New York Times, BuzzFeed, all these sites are in bed now with Google and there is so much lobbying going on to make sure that Google sends back certain types of search results. The Internet is much less useful, no?
Google fought it for so many years. And giving into this industry pressure, it is going to be the breeding ground for a new Google. There will be a new search engine that is non-US based that is going to take a lot of market share from Google. Because all these manipulations and censorship are going to lead to users looking for something else.
The Internet is all about accessing entertainment. Realistically, 50 to 80 percent of all traffic is people downloading stuff for free. If you can turn that huge market share into something that you can monetize, even if it is just with ads, you will end up making more money than with all other revenue streams combined.
You said that your new music service, Baboom, will work alongside something called a Megakey, that will be installed on a person’s computer and earn them back money for all the ads that networks shove in their face. Don’t you think people will be concerned about their privacy?
Let's just assume you use iTunes, and you can download all the TV series and your movies from iTunes. If Apple would now tell you— if you install this little tool and it takes thirty seconds, it does not really do anything on your computer, we value your privacy, everything that the software knows about you happens in the form an algorithm without us telling us who you are or any details about, it's just kind of what your surfing behavior is in a very abstract kind of way so that we can tag it better, we would never have any detailed information about your surfing history of anything. If Apple would tell you [to] install this little snippet now on your computer and you can access all these movies and TV series for free, why would not you install that?
I would. But I feel like people have these things on their computer now and don’t even know it.
That’s also the cool thing. Once you have the Megakey installed, a week later, you might not even remember it and then you later just because you normally browse the Internet, all of a sudden you have like a $120 credit on Baboom and you can spend it on all this content. So, that’s really what Baboom is all about. Turning this whole advertising model of the Internet around and making it user-based. Allowing you to get rewarded for your eyeballs being penetrated with advertisements. I think that’s just brilliant and it’s a win-win for everybody because the artist get paid, the labels get paid, you get your stuff for free and you will not be labeled a pirate.
The whole system where these ad dollars are funded from are actually from the big players, who already benefit from piracy in a big way. When we talk about changing ads, it’s primarily going to happen on large search engines, on the top ten Internet sites of the world, [who] all make a killing with the piracy that is going on on their sites and are not really paying the artist a fair share. So, morally, it’s also ideal. It’s kind of a tax on these big Internet players that are now making a lot of money with stuff that is infringing.
Won’t Google be pissed? Like, Hey, you’re fucking up our ad network!
This is kind of a cat and mouse game, but they cannot win, ultimately. And legally they cannot really challenge it because it’s happening on your computer. What you install on your computer as a user is your choice and Google does not know if you run this thing or not. They cannot tell. They cannot stop it. So, yeah, they are going to be pissed. But on the other hand, let them be pissed because they will still make billions. They are going to send the lawyers after this, but we have done all our homework and our legal team is confident that as long as you as a user choose to install the software and you decide what you see on your computer, we are all in the clear.
I am working on something called Meganet, which is basically kind of like a fluid ocean of data...I am telling you where it is going to be, at what time, and you can go and access it then. The data is constantly moving. It’s not sitting on a single server anymore. You know, this is the kind of innovation that is going to change everything, and combine that with lightning-fast transfer speeds.
The Megakey idea isn’t new though, right?
After the raid happened, my lawyers told me we cannot use any of the intellectual property that has been developed prior to it, because the companies have been ceased. So, we had to develop everything from scratch. The good thing is that it got even better than it was before, because we went through the whole learning curve of developing it. [It’s the] same with Mega. The new Mega is so much better than Megaupload. This is state of the art technology. We are using HTML5. We have on-the-fly encryption that transfers so much faster, because we are multiplexing all the connections. It’s like time travel.
People seem to be sleeping on Mega.
It’s currently around 30,000 new user registrations every day, that’s a soccer stadium full of people everyday discovering Mega and signing up for an account. It’s a significant growth and success for a site that’s only a year old and we are doing all of that with full point-to-point encryption.
You say you want to work with entertainment industries now. What’s your vision for how to make the business model work?
First, you need a site where you can find everything. You search for something and boom, it’s right there. Instantly you have a choice to download it and select one of your payment methods, including [an option for] free [but] with advertising. Then, we need to be able to play on all devices. You cannot have these DRM restrictions where it will only work on certain computers or on certain mobile devices. There cannot be any geographic limitation. And of course, the pricing needs to be adjusted to the new reality. Movies should be available for no more than five bucks.
The Internet is all about accessing entertainment. Realistically, 50 to 80 percent of all traffic is people downloading stuff for free. If you can turn that huge market share into something that you can monetize, even if it is just with ads, you will end up making more money than with all other revenue streams combined. But they have not understood that yet. The people who are in charge and making these decisions, they don’t even use the fucking Internet. It’s people like Sumner Redstone, who owns CBS and is a copyright monster. It’s people who don’t even understand the Internet who make the decisions.
You’ve had some conversations with the labels, though, right?
Universal Music Group wanted to work with me on what is now Baboom. I explained to them the Megakey, [had] a really good telephone conference with two people at their offices. They basically said to me— This company is run by lawyers. They don’t have a clue, they don’t get a digital age. We would love to do things and move quickly, but when you are working in an industry that employs 30,000 lawyers they all kind of need a justification to exist; this whole copyright machine is their justification for their existence. It’s these young hot shot managers that are in charge of digital worldwide that are telling me, I would love to do this, but I cannot because we are run by the idiots from the past.
But these old business models are still making money. They’re trying to put off that disruption.
If you look at history and if you look at all these different things that have threatened the movie industry— from Betamax tape to DVDs to the Internet— in the end, it has always turned out right, because ultimately people want to see that stuff. All you have to do is adapt to the new reality and offer them a solution that really works for everybody.
What’s the biggest risk in not doing that?
The big word for the next five years on the Internet is going to be encryption. There will be sites shooting out of the ground like mushrooms that offer all kinds of different encryption solutions and there will be alternative Internets.
The biggest risk is that they do not adapt in time and that illegitimate services are taking over, and the bittorrent stuff is moving into a dark web or an underweb, and then it’s game over. There is no copyright takedowns anymore after that. A lot of people are working on alternative distribution systems, [away from] normal IP-based Internet. Once that takes off, they will have missed the train and it will really be painful, because then no takedown is going to work. They can send a takedown to Google [and it] will have no effect. They will not be able to control or stop these sites.
Part of the rise of the dark Internet has to do with the N.S.A., too, it seems. People don’t want to be spied on.
Everything is so integrated now— from the phone to the desktop, browser to the tablet— and there is definitely an undercurrent people who are fucking around with the dark Internet and exploring that. Because they don’t want to have their conversations tapped. They don’t want ads served up against them, and they would just like to exist in the sort of grey area where nobody can see what they are doing. The big word for the next five years on the Internet is going to be encryption. There will be sites shooting out of the ground like mushrooms that offer all kinds of different encryption solutions and there will be alternative Internets.
That seems crazy, but very possible.
There will be networks that are not IP-based. I am working on something called Meganet, which is basically kind of like a fluid ocean of data where whatever glass of water you dump into it you can never extract from it anymore, and you kind of just meet the water in the ocean somewhere. I am telling you where it is going to be, at what time, and you can go and access it then. The data is constantly moving. It’s not sitting on a single server anymore. You know, this is the kind of innovation that is going to change everything, and combine that with lightning-fast transfer speeds. They are now testing mobile transfers at a terabit. You would have mobile devices that can transfer a movie in a minute.