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Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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June 28, 2005

What Wall Street Tells Us About Grokster

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Mavericks owner/entrepreneur Mark Cuban, who helped fund the Grokster defense, writes about how Wall Street reacted to the decision -- or rather, didn't:


Kaboom!

That was the sound heard throughout wall street as entertainment stocks blast off into the stratosphere upon the mid day news that MGM got the best of the Grokster decision. Wall Street traders and investors recognizing that the decision would lead to certain demise for illegal P2P filesharing sites and result in an explosion of music sales over the coming months and years, pushed stocks such as Warner Media Group to all time highs on record volume.

Except that didn't happen.

In the business world, one way to evaluate the financial importance of news is by watching to see how Wall Street responds to it. If there is the slightest glimmer of hope in a news announcement, at least one person is going to think it will have some level of impact and make a bet on the stock and/or industry impacted.

There wasn't a Kaboom, there wasn't a whisper in the market. Not one buyer or seller of stocks gave a damn. Warner Music Group, probably the only public company that is a pure play proxy for the music business, traded almost exactly the same number of shares as it does every day. The stock was down a nickel.

In other words, no one cared. No one on Wall Street thought that this decision would impact the music business at all.

Of course, that's because it won't.

THe MGM Grokster decision wont help the content business make more money. It won't help artists make more money. This deal gave something to both sides, but it gave the most to lawyers and lobbyists.

Comments (3) + TrackBacks (0) | Category: Big Thoughts


COMMENTS

1. Chuck on June 28, 2005 3:56 PM writes...


I'm not sure that you can look at Wall street to get a reasonable reaction. It will take time for the music industry to build legitamte on-line services (even if P2P goes away) and it is questionable whether they can make money at it.

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2. Glenn on June 29, 2005 10:21 AM writes...

Whatever helps Cuban sleep at night.

Record labels aren't the most immediate beneficiaries of the ruling. Digital music is too small a percentage of total sales, and the impacts of P2P on CD sales is too uncertain, to be able to say how much the Grokster ruling will impact the bottom line.

Labels will indeed benefit, but Grokster's impact will begin to hit income statements too far into the future for Wall Street to make much of a judgement right now.

It's the online stores and services that will get Wall Street's attention initially. Cuban didn't mention this BusinessWeek Online article that says "the Grokster case is positive for providers of legitimate online media services such as Apple Computer, Audible, Napster, and RealNetworks." CNET said the same thing.

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3. Jeff O's Retro Music on June 29, 2005 11:54 AM writes...

Just wait a few months until all the Grokster appeals are expunged. Then wait a little while for the copyright infringement lawsuits to hit the fan on the p2p file sharing sites. Be patient, you'll get your Ka-boom on Wall Street.

Jeff O's Retro Music
50's Songs You Never Heard!

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