For this week’s Engadget Interview, veteran journalist J.D. Lasica spoke with Orb Networks CEO Jim Behrens about the growing importance of personal media, catching television on the road on nearly any device, and our networked, always-on, access-your-stuff-from-anywhere future.

Tell us about the background of Orb Networks. How did Orb get started?

We actually got started as a company called Bravo Brava! in 2000, primarily centered around technology-based education products. We began using interactive television as a solution, and we took a different approach than others were taking. We wanted to allow people to use any device that connects with the Internet to be the interactive portion of the experience. The content creators could continue to give you a unidirectional signal, but anything they wanted to add that was interactive you could do on your laptop or PDA or cellphone with a browser. We built the first generation of that technology and it worked great, but we saw a much, much larger opportunity than just doing interactive education.

We spun Orb out of Bravo Brava!, and basically everybody moved over to Orb because they found the opportunity so interesting and large. So after three years, we’re now on the third generation of the architecture and things are looking very interesting in terms of the minefields we’ve had to navigate with the entertainment companies, as you point out in your book Darknet.
You’re based in Emeryville, Calif. How many employees do you have?

Thirty-three.

And how many customers?

About 30,000 so far.

Is Orb mostly about streaming television, or are you mostly about giving people access to the content on their hard drives?

It’s a hybrid of those and more. It’s about you getting to any of the content you already own on any device anywhere you connect to the Internet, but also being able to format the bit rate for other content that may not be accessible on that device from other places. By that I mean, you want to see the Research channel, which has a streaming Net video at 1.5 megabits but you’re on a 40Kb cellphone connection, you can’t do that today. But with Orb, you can, because that’s one of the channels you decided you want to watch and it shows up as a favorite on your cellphone and we’ll take it into your house and reformat it for your screen and bit rate and player format and send it back to you. We’re trying to take the complexity out of it for all the things both outside and inside your house — photos and videos and music, etc.

A user just needs to go to your site, download a free application and install it on a PC, and they’re off?

Any device that has a Web browser in it, that’s right. We’ll connect it to their home PC and show them a display of all the media they have available. They can see their favorites or playlists or most recently recorded videos or whatever.

You originally began by charging folks $10 a month for this service, and you dropped that in March. Why?

We launched with a service fee, and the primary reason was that we had to determine quickly how complicated the product was for end users to install and use, how much of a support burden there would be, so we wanted to initially limit the number of people who’d sign on until we were sure that the cost per user would scale. Once we launched, we realized that it was easy, our support calls were very low, and our scaling costs per user in a free model told us that we could afford to go free, get to millions of users and not go out of business.

In some ways this is similar to TiVo’s space shifting.

It’s similar to that, but in some ways TiVo is more complicated to use, because you have to make a copy on your TiVo, transfer it over to your PC, transfer it to another device or send it to someone and then play it. And, it’s only TV and playable on only a limited number of devices that are tethered.

With Orb, the idea is that spontaneous access is really important. Most people don’t know when they’ll have a delay pop up in the middle of their day. With Orb, you can say, what do I want to do know. I can listen to the songs on my music playlist, I can watch live CNN, or the movie I recorded last night. With a TiVo, it’s only TV and you have to have planned ahead to get it down to your device. With Orb, you can just go get it, whether you’re stuck in traffic with your cellphone or you’re at your office with your PC or at the airport waiting for your flight.

To get the platform basics out of the way, we’re talking about using a Windows XP PC but not Linux or Macs, correct?

Not today, but you’ll see those coming shortly.

To watch TV, your PC needs a TV tuner that’s hooked up to a cable TV feed.

Yep. It’s the same way you’d use a Microsoft Media Center, with a TV tuner card and a cable output.

You started out with Microsoft Media Center at the center of this.

Right. That was so we didn’t have to deal with the vagaries of supporting 23 different tuner cards from consumer electronics vendors. We wanted to use those that were already certified by Microsoft in their Media Center. Today we have eight tuner cards that we’ve tested and as long as it’s a hardware MPEG-2 tuner card, it probably works with Orb.

What’s the consumer experience like for watching video over the Internet with Orb?

Well, I can send you a list of testimonials if you’d like. It’s actually very good. It depends on your expectations. If you expect that you’ll get HD quality over the Web, you’ll have to have a very good uplink broadband from your house to do that. Most people don’t. In my neighborhood, the only broadband available is a Comcast shared-cable modem. Download is 3 megabits but upload is limited to about 450 Kb. In typical TV, with standard compression, about 300 Kb gives you the resolution of a standard TV set today. What I can watch on my cellphone or PDA anywhere else in the world is equivalent to watching a standard television broadcast. On my laptop, with a 1024 x 760 display, I can get a quarter of that screen and see a reasonable picture.

In terms of audio, though, 128kb is basically CD quality. So, slide shows, photos, music are all no different than you’d get right in your own house.

I imagine this service would work even better in countries like South Korea or Japan, where the broadband Internet is much more robust.

You can get 6 megabits per second for $19 in Japan, so you bet. We’re just setting up our distributorships and relationships in both Europe and Japan. We’ll announce some partnerships in the next two months.

Why is Orb entirely streaming rather than having an optional download component?

For the reasons you point out in Darknet. We felt that we needed to take a different approach to DRM. We believe philosophically that the two pillars of what we had to satisfy to be successful were: (1) we had to give the user an interesting value proposition so they’d come back and use the service quite frequently, and (2) we had to make sure we were, at worst, in the gray area of how we were handling content. Because we don’t facilitate or enable any copies to be made, what happens is you have to have legal access to whatever services you subscribe to or buy in order to stream them through Orb. When you log onto Orb from whatever device and you see your content and you want to play it, if there’s no DRM on it, we’ll stream it to you.

If it’s got DRM, then we’ll check to make sure you have the rights to play that content on your PC. If you have songs from Napster or Virgin Digital, we’ll check and make sure your keys work to play it on that machine. Then we’ll stream it to you. So we’re in different space from the services that put copies of songs onto tethered devices.

If you record a TV show, we record it in basically the same format as Microsoft Media Center does, and if you send that TV show to somebody else, they won’t be able to play it. But if you want to stream it to yourself in your living room or out on a college campus or at the airport, we’ll let you do that. But you can’t send a copy to anybody else.

But you can probably capture that video stream with some software and save it to your hard drive.

There’s lots of stuff available out on the Net. But what we’re trying to say is, with the vanilla Orb, if there’s no DRM you can get it streamed to you. If there is DRM, we’ll see if you have the rights to play it on your PC and if you do, we’ll send it to you. If you want to make copies, you’ll have to figure that out on your PC — we’re not trying to police you. We’re just trying to make sure our service gives you access and also protects copyright owners.

I understand you’ve had some dealings with the FCC already. Why?

We decided to be proactive right from the start, so we went to Michael Powell and some of his lieutenants at the FCC as well as directly to the RIAA and MPAA and we were candid about what we were doing. We made proposals to the RIAA and MPAA around our early tests with beta users, which showed us that if you give users more access to sample content on different devices in different environments, the net result is they buy more content. We went to them and said let’s do a three- or six-month study, because Orb has the unique ability, if the user gives us permission, to track everything they do: all the shows they watch and record, what devices they use, what music they listen to, how often they add new music, how many digital photos they access, how many movies they rent.

And what did our friends at the RIAA and MPAA say?

They both looked at what we had and said, This isn’t a top priority for us right now. We’ll get back to you in the future. So neither one has taken us up on our offer to collect the data in a way that shows whether it’s creative or destructive. So we’re doing it on our own.

What’s your business model?

We achieve revenues in several ways. First, much like Yahoo, we have users who look through our interface to get to their content, so we have an opportunity for targeted promotions. If they buy a ticket or song or album, we’ll get a percentage of the purchase price. Over the next few months we’ll announce several alliances in the music streaming and video on demand areas, with a premium fee per month. We also private label our service. Sprint Broadband has a private label version of Orb, and we have a revenue relationship with them.

You don’t have partnerships with the Hollywood studios yet for video on demand?

Not with the Hollywood studios, but with content aggregators that license their content from them. So you’ll see video on demand services much like you see from Comcast.

Will video on demand or streaming music be bigger for you?

I can’t really tell you today. One big piece will be a streaming music service through Orb that will be different from anything else out there. You’ll be able to open up your cellphone and access a million and a half songs and playlists through your phone because Orb will take care of the format and the transcoding and the bit rate that has to be delivered. We’ve done some user focus groups and asked how many of them would be willing to do the tethered download kind of model, and basically for every 15 seconds and every step you require users to go through, you lose 10 percent of the audience. If you have to subscribe to something, transfer your songs, tether them to a particular device, without it ever being spontaneous — that’s not appealing. With Orb, you can access those 1.5 million songs on your playlist spontaneously from your cellphone, from the airport, wherever.

We think streaming music will probably be the most interesting premium service. What we do that nobody else does is we give you access to all the music you already own on your home PC, plus your premium subscription service. You can mix and match and play those at any time.

Do you have a partner for a music subscription service yet?

We’ll announce a partner in July.

The second thing that will be a key driver is TV, both live and recorded network. You can set up Orb passes to record every day David Letterman, The Simpsons, South Park, whatever, and watch it at your leisure. If somebody recommends a show or you hear about something, you can just open up your cellphone, see your TV guide, search for the show, and set it to record.

The third driver is, in the Orb world you have a unique approach to video and photo sharing that you don’t have by any of the current video or photo services out there. With Orb, you have all the photos that you have available on your PC accessible to you anywhere, and if your wife adds another photo at home, it’s immediately available to you on your cellphone, your laptop, on the device of your choice. You can share folders of photos with anyone you want in groups, and they dynamically have a link to see your photos, and the photos are resized to the size of your screen — say, a 177 x 220 screen on your cellphone with a small jpeg even though the original was 4 megapixels.

So Grandma can see my photos anytime she wants even though they never leave my computer. She just goes to the same web link and sees the photos that I chose to share with her. So, you never have to upload photos in order to share them, it’s all dynamic in that they’re added automatically — it changes the labor and the spontaneity of sharing your photos. Pretty quickly, your personal videos will be exactly the same. If Grandma wants to see the video of your daughter’s birthday, you transfer it from your Sony camcorder to your PC, and your PC does the real-time transcoding into whatever format on whatever device Grandma is using.

And Grandma doesn’t have to download an app to do that?

Right. All the transcoding happens on your PC, so Grandma just needs to open up a web browser and use Windows Media or QuickTime or Real. All the devices you can access Orb on are zero-footprint clients. There’s no Orb software on any of them. You can walk up to a PC in an Amsterdam café, log in to My Orb, and you can see all of your content without ever having to download an application.

But strangers can’t access your files.

You need a log-in and a password to get to them.

You can set up your folders however you’d like?

You can organize them in an interesting way. For example, I have 160 Comcast channels on my TV, but I watch only about eight of them, so I took those eight channels and put them at the top of my TV guide, and when I go from my cellphone to my TV guide, two clicks in, I see those eight channels up at the top of my screen so I don’t have to scroll down through scores of channels. You can do the same with your music playlists and your photos and you can identify your favorites.

What’s the advantage of choosing Orb over Napster or Rhapsody to listen to your music?

First, you have to have a PC and broadband connection to use the streaming subscription service of Napster or Rhapsody, or you have to download the songs ahead of time and take them with you. I think there are only 13 devices out there that support Windows Media 10 and tethering.

In Orb, anywhere that I am I can get to everything I have in my home. The average Orb user has 40 gigabytes of music today. You can almost fit that on some of the biggest portable music players today, but you still wouldn’t be able to get to the 1.5 million songs you have on your streaming service. If Coldplay has a new album out, I can search for that and if it’s on my service I can play it on my cellphone or another device at a moment’s notice. The spontaneity and simplicity of that is appealing.

Do you think a lot of people will use cellphones and PDAs to play music rather than a dedicated music player?

I think there will be a market for both. Today the predominance is the specialized portable media device. But I use my cellphone when I’m working out, riding my bike, driving in the car, I use it all the time now as my MP3 player. It’s not quite the same quality as I get from my iPod, depending on what city I’m in and listening over Sprint, Verizon or Cingular. But sometimes it’s full CD quality and it’s getting better. When you’re riding your bike or driving in the car, though, often you can’t tell the difference.

Do you see this as being the truest approximation to date of a celestial jukebox?

I think it is. It is all of the media you already own — you pay for it only once, and then it’s accessible to you wherever you go. It mixes commercially available premium services and all of the content I already own, and I get to it on any device. The user wants to make only two decisions: right where I am right now, what do I want to see or hear of all the stuff I have rights to? And, what’s the best device in my environment to see or hear that? It may be my cellphone or laptop or plasma screen in my house.

Today, the only limitation is that you’re still not connected with great bandwidth everywhere you go. I go off camping in the mountains, sometimes I have cell service, even in the Jackson Reservoir in the Tetons, and sometimes I don’t. But there are very few times in the developed world where you don’t have access to a cellphone network anymore.

Have you considered making dedicated Orb devices?

We have designed several devices — Orb servers that were set-top boxes or dedicated PCs, as well as receivers or small devices you could stick on top of your television or stereo. You’ll see those coming in the future from hardware vendors that decided to build Orb players. But we don’t see ourselves now building any players ourselves. We’ve attempted to be agnostic to the connection you have for broadband, we’re agnostic to the cellphone data service you subscribe to, we’re agnostic to the device you receive it on, and we’re agnostic to the format of the media you have. We don’t want to depend on having to pick the horse in any of those games.

We see this as very similar to the early days of the Internet when Mosaic and Netscape came along and took the complexity out of building or viewing a Web page. That’s basically how we think of Orb. We want to take the complexity of formats and connection speeds, etc. and make it invisible to the user. They just want to take their media and enjoy it and not have to make a technology decision.

Some competitors like Sling Media are beginning to enter this space as well.

They have a box that will take your television signal and send it to your laptop. It’s only a Windows device, it only works with a laptop, and you have to buy a piece of hardware.

Who are some of your content partners right now? Audible, Beatport …

And Ticketmaster, and distribution partners with Creative and Netgear. The bulk of our content partners will be announced over the next couple of months, and they’ll include premium music, video on demand and other types of content.

Any predictions of where this space is heading over the next five to 10 years?

Well, I think you’ll see Orb inside set-top boxes. You’ll see manufacturers trying to build a full-function, TiVo-like box, but they all want to go beyond just television. Having a television-only recording and playback device will go away rather quickly. Users see digital media as digital media. It’s no longer music is separate from TV is separate from Internet videos. As my daughters and I have discovered, the content on the Internet is so much more compelling than what’s being sent linearly by the networks to you that I think if you give people access in an easy way, they’ll begin to sample that content and they’ll be more selective about what they watch and when. So the set-top boxes have to evolve to become full-fledged PCs inside to encompass photos and music.

Legal Affairs Feature  May|June 2005

Why is a trafficker in pirated movies sailing to Hollywood’s rescue?

TWO WEEKS BEFORE THE HULK OPENED AT MOVIE THEATERS in June 2003, the $150 million motion picture made an unauthorized debut in cyberspace. Universal Pictures had sent a videotape of the unfinished film to a New York advertising agency, where an employee lent the tape to a friend, a 24-year-old insurance underwriter, who digitized the tape and put it on an Internet movie-trading channel.

The work print lacked special effects and much of the movie’s soundtrack. After it was viewed online, negative word of mouth spread quickly, helping to doom the film at the box office despite a strong opening weekend.

The friend’s act of Internet piracy also ended badly. A security tag embedded in the movie identified its origins and gave him away. After the FBI arrested him, he pleaded guilty to one count of copyright infringement and was sentenced to six months of home confinement and three years of probation.

“His fingerprints were all over it,” said Bruce Forest, a prominent veteran of the Scene, the name insiders use for the movie-trading underground on the Internet. “It was like robbing a bank and giving your driver’s license to the teller.”

Sometimes called the Darknet as well, the Scene is no place for amateurs. It is the cyberspace equivalent of the Barbary Coast, an untamed frontier that offers free movies and thrills for the tech-savvy but the prospect of prosecution for everyone else. And from the movie industry’s point of view, it is a financial threat that must be stopped.

Despite anecdotes like the one about the Hulk fiasco, no one has proven that trafficking in movies online reduces revenue at the box office or the video counter. But as Internet connections become faster, computer hard drives larger, and compression technologies more efficient, movies are rivaling recorded music as a target for electronic file sharing. The film industry estimates that one in five teenagers have illegally downloaded a feature film. Between 400,000 and 600,000 movies are illegally traded online every day, studio executives said in recent Congressional testimony. About 17 million pirated copies of movies are floating around the Internet, according to the research firm BigChampagne.

Dan Glickman, chief of the Motion Picture Association of America, announced last November that Hollywood studios would file lawsuits alleging copyright violations against individuals who trade movie files on a large scale. “We haven’t suffered the damage that the music industry has,” he said, “but we needed some form of preemptive activity.”

Though file trading may cost studios income, it is not a commercial enterprise. Like computer hackers, Scene members say they don’t distribute movies for the money, but for the excitement of breaking rules and beating competitors in getting movies online first. Among the masters of the file-trading underground is Forest. He is a member of six movie piracy groups. He presides as a channel operator over 40 piracy channels on Internet Relay Chat, or IRC, a virtual meeting place on the Internet. Anyone with the password to his private website can access thousands of movie files but also songs, music videos, television shows, computer games, and software programs. His online hideout includes every song on the Billboard Top 100 over the last 40 years and, before they were showing in theaters, films such as The Aviator, Finding Neverland, and Ray.

Forest is the kind of copyright-flouting renegade who keeps many Hollywood titans and record company executives awake at night. But others sleep better as a result of his Darknet pursuits—because he is being paid to be a pirate by one of the largest entertainment conglomerates in the world.

FOREST OPERATES FROM THE BASEMENT of his suburban Connecticut home, a ranch house on a five-acre tract 40-odd miles northeast of Manhattan. None of Forest’s neighbors suspects that this bucolic town is home to the Prince of Darknet.

He begins each day at mid-morning, espresso in hand. The only sounds in his subterranean lair are the hum of small desk fans that cool his banks of 13 PCs, Macintoshes, and Linux computers. He typically remains in this high-tech command center until 5 a.m. Four cable modem lines connect him to the outside world. On an adjoining workstation, three monitors keep track of his private army of bots—automated programs that prowl the file-trading underworld. He scoots from machine to machine, checking e-mail and monitoring file-trading activity while occasionally scolding Cookie, his high-strung pit bull puppy.

As a precautionary measure, Forest always uses a “bounce” to disguise his computer’s location and Internet address. Rather than directly log on to piracy channels, he connects to a shell account through a computer in the Caribbean. If anyone tried to trace his whereabouts, the bounce would suggest that he was sipping mojitos somewhere south of St. Barts.

Before Forest ascended to Darknet prominence, he pursued a successful career in the music business. During a six-year stretch that began in the late 1980s, he produced more than 1,000 tracks and 24 platinum albums for Madonna, Whitney Houston, Bruce Springsteen, and other musicians, and the records combined sold more than 40 million copies. When he married his British-born wife, Mitzi, in London in 1991, their first dance was to a recording made for them by Elton John, who played the piano while Boy George sang. Forest eventually burned out on his job, stopped producing records, and began working with entertainment companies to create a strategy for distributing digital media online.

In 1997 Forest joined his first movie release group, a cluster of individuals who worked secretly and illegally to distribute digital goods in the Darknet. He started out as a “server,” a low-level position he compares to a Mafia hit man, though no one died as a result of Forest’s actions. A server is at great risk of criminal prosecution because he distributes illegal movie files on an open Internet address. But such yeoman’s work offers advancement in the Scene.

“It has taken me years to build up the trust and respect of my peers,” said Forest, who is in his mid-40s and has unkempt brown hair and a diamond stud in his left earlobe. “You can’t just show up on a channel and say, ‘Hi, I’m new here and I want some of your movies.’ They will laugh at you, and then they’ll ban you.”

ALTHOUGH RELEASE GROUPS FIRST APPEARED AROUND 1997, the Scene got a kick-start in October 1999 when a 15-year-old from Norway wrote a few lines of computer code that made it easy to pluck a Hollywood movie from a copy-protected DVD. A typical release group, bearing a name like Flair, Esoteric, or Opium, consists of anywhere from a handful to as many as 30 individuals, with an average membership of 15. Today there are an estimated 140 underground movie groups worldwide, up from 32 in 2002. When copies of Million Dollar Baby, or other major motion pictures, appear on the Internet days or weeks before their theatrical release, it’s almost certain that a movie release group was responsible.

Releasing a movie requires several steps that begin with getting a copy of it, preferably a good one, from a supplier. The preferred suppliers are editors, special-effects experts, and other post-production workers who can make copies of a master print, the sharpest version of a movie. Also well-placed are Academy of Arts and Sciences members—the people who vote for Academy Awards—and other viewers who receive “screeners” released on DVD before a film opens in theaters. Other suppliers include purveyors of compromised copies—employees of DVD pressing plants, who can get flawed discs discarded months before a DVD’s release, and movie theater employers, who set up a camcorder on a tripod and videotape films from a projection room.

The most common suppliers are people who sneak a camcorder into a theater and aim it at the screen. Though “screen cams” can produce images with jerky movements and shots of the back of patrons’ heads, excellent sound quality can be obtained by plugging into seat jacks designed for the hearing impaired. Movie studios have lately tried to thwart screen cams by arming movie theater attendants with metal detectors and night-vision goggles and engaging them as anti-Scene mercenaries.

The supplier passes the unreleased film to a contact in a release group or puts it on a drop site, a hidden server on the Internet. The movie is then sent to a ripper by overnight mail if it is on DVD or, if it is on a drop site, by telling the ripper to grab the file through a secure computer line called a virtual private network connection or VPN. The ripper (sometimes called a cracker) copies the movie’s raw video and audio files, and he or an encoder edits out the identifying marks that studios insert to track copies. The ripper also compresses the video file into formats suitable for downloading and viewing on a computer or television screen.

Next, a distributor places a file on one of 30 or so topsites—secure digital locations that can be entered only with a password. From there, couriers transfer the file to high-speed distribution servers, computers configured to share files. Finally, the channel operators announce the movie’s availability on individual IRC channels, setting off a feeding frenzy. Forest estimates that 1,500 IRC channels are devoted exclusively to movie piracy. The entire process usually takes two to three days—with handoffs often crossing international borders.

Much of this activity involves individuals working alone in bedrooms, college dorms, and offices. Few movie-group members have met each other in person. They are coordinated by administrators who buy hardware, network bandwidth, or shell accounts on the computers that distribute the movie; group leaders who set up the group; and donators who give groups equipment, bandwidth, facilities, or money in exchange for membership, community respect, and access to the group’s digital spoils at a “leech site.” Forest is a donator, having supplied computers and other equipment to various release groups on his dime. For tax purposes, Forest deducts all such donations from the income of his consulting business.

Once released, a title filters into Usenet news groups and web-based file-sharing services. The movie-piracy network is like a pyramid, with a few thousand members of the elite release groups at the top; 50,000 to 200,000 users who operate servers that store the digital goods; another 3.5 million tech-savvy users who swap files on IRC channels, news groups, and other sites; and, finally, hundreds of millions of people worldwide who use peer-to-peer file-trading networks such as Kazaa, eDonkey, and iMesh. The members of the release groups at the top of the piracy pyramid are young men (it is, says Forest, an overwhelmingly male enterprise) who generally share a conviction that everything should be up on the Internet. “Most release group members are guys in their late teens to early 20s,” said Forest. “But I know one guy in his 60s who does this, and I know a 13-year-old in junior high school who’s one of the best coders I’ve ever seen.”

THE PIRATES OF THE DARKNET are costing the motion picture industry untold billions of dollars, according to John G. Malcolm, the industry’s head of worldwide antipiracy operations. Whether the movie groups realize it or not, he said, commercial pirates in Asia take the stolen films off the Internet, burn them onto discs, and sell bootleg copies throughout the world. This hard-goods piracy alone costs Hollywood $3.5 billion a year in lost sales of DVDs and video compact discs, according to Malcolm. The motion picture industry seized more than 52 million pirated DVDs and VHS tapes worldwide during 2004. “I understand the encoding groups say they’re in it for the challenge and not the money,” he said. “But they’re very naïve to think they don’t damage our industry substantially.”

At Sony Pictures Plaza in Los Angeles, the executives who run Columbia TriStar Home Entertainment call Internet piracy the most pressing issue facing the home video industry. The company’s president, Benjamin S. Feingold, pointed out that the studios have already moved up the date of home video releases partly in response to piracy. Consumers can rent or buy a video four months after a movie’s theatrical release, while not long ago it took six months for a video rental to appear and a full year for a movie to be available for purchase. The studios also load DVDs with lots of extras—interviews, outtakes, discarded scenes, alternate endings—that are supposed to make Hollywood products more attractive than the pirated versions. The studios, he said, want to make the next generation of DVDs “an even more compelling proposition” while warning consumers that “downloading movies over the Internet is an illegal activity.”

Traditional antipiracy measures have had limited success. The FBI has busted release groups only to see them revive after brief periods of inactivity. The movie industry has filed lawsuits against file traders, created technology that makes DVDs difficult to copy, and persuaded the FCC to help curb piracy by, for example, requiring that televisions and similar devices recognize anti-copying signals embedded in digital programming. Still, piracy thrives, and growing frustration has forced some movie companies to seek help from people like Forest.

Forest came to the attention of industry executives in the mid-1990s, when he began to work with Hollywood studios and Internet portals that wanted to put digital music and movies online.

Today, he works both sides of the fence. While freely swapping movie and music files and keeping tabs on the illegal trading networks, he spies on the underground groups for his corporate client, a well known entertainment conglomerate that Forest declines to name for fear of losing his job.

“I guess you can call me a true double agent,” he said. “I lead a very comfortable double life.” Forest declined to say how much his client pays him.

When he negotiated his contract, Forest insisted on a hold-harmless provision that shields him from being held liable for downloading pirated movies belonging to the major movie studios. He also made clear to his client that he would not fink on anyone in the Scene.

Every two weeks, Forest writes a 200-page report for the entertainment corporation. He summarizes the activity on particular file trading services, identifies the movies that have been downloaded most frequently, and suggests strategies to protect the company’s intellectual property. He travels about once a week to Manhattan to discuss his findings with company executives.

His job is not to reduce Internet piracy but to keep track of it. Still, he says he has steered his client from antipiracy schemes that would have merely angered customers by, for example, preventing them from playing movies on portable devices. He has also stressed to his client that it must find ways to make money on the digital delivery of entertainment.

So far, though, his client and the rest of the industry have come up with few new ideas. “It’s an arms race,” he said, “and the other side is winning.”

FOREST CRADLED HIS KEYBOARD IN HIS LAP, navigated to an underground site, and located a pirated version of Kill Bill 2. “Want to see how easy this is?” he asked. In less than 10 minutes, he downloaded the bootleg movie to his hard drive and burned it to a DVD. He trekked upstairs to the multimedia room in his house, where an array of gizmos—TiVo, DVD player, VCR, network hub, broadband router, networked Xbox, and Playstation 2 module—sat atop a 55-inch Toshiba television. “Here is what Hollywood is up against,” he said. He plunked the DVD into the player. Moments later, a screen cam version of the Quentin Tarantino revenge flick barreled into action, with the FBI warning excised.

Forest’s message is this: Piracy is past being the province solely of geeky college students watching on computer monitors. Untold thousands of mainstream Americans download pirated movies to a hard drive, burn them onto DVDs, and watch them on television.

“The studios are providing no legal way for us to see new movies in our home, other than to wait several months and then watch it on pay-per-view or drive to Blockbuster,” he said. “It’s not good to steal movies, but file sharing is a symptom of people who want their music and movies digitally.”

To profit from the growing demand for digital entertainment, Forest and three partners have created the Jun Group. Their business strategy is to persuade musicians, independent film producers, and others in the entertainment business to use file-trading networks such as Kazaa to promote and distribute their works to tens of millions of people.

The Jun Group is starting with musicians. The firm matches bands with corporate sponsors, which cover recording costs, and uses its connections in the file-trading underground to put the band’s songs on Internet channels. Last year, the firm matched its first client, a Los Angeles-based rock group called Kevin Martin and the Hiwatts, with a corporate sponsor—Cadbury Schweppes’s Snapple Beverage Group—which paid to record the group’s single in exchange for an advertisement that ran whenever the song was downloaded from the Internet. The Jun Group got three million people to download the band’s song in a few weeks.

Forest believes that a similar approach—getting corporate sponsors to pay production costs in exchange for advertising seen by millions of file traders—will work with motion pictures, particularly independent films that don’t get much support from major distributors. If nothing else, he said, the approach will get people thinking about profitable alternatives to the movie industry’s failed policies against online piracy. The industry, said Forest, is under the sway of “people who want a legal or technological solution, when the only lasting solution is cultural. Right now the culture is telling my 10-year-old daughter that music and movies are free. That’s wrong.”

But change does not come easily, even in the Forest household. Bliss, Forest’s daughter, prizes the little black folder that holds the two dozen pirated movies her father gave her. Does she see anything wrong with watching pirated movies before any of her friends can watch the legal versions?

“Nooo,” she said.

But doesn’t the great American piracy conversation begin at home?

Forest considered this. As Bliss skipped off, he said, “I’ve discussed it with her. I know it sounds hypocritical, but I get copies of those movies for my work, so why shouldn’t she watch them? She’s a bright kid; she understands what I do for a living.” He paused. “She’s much more into clothes and dressing up than she’s into computers or collecting songs. She’s just a normal all-American kid.”