Mega CEO Vikram Kumar on Why New Site is ‘Completely Different From Megaupload'

Kim Dotcom (left) founder of storage site Mega and the now-shuttered Megaupload site with Mega CEO Vikram Kumar in a photo Tweeted by Dotcom on Feb. 7, 2013 upon announcing Kumar's appointment.

Mega, Kim Dotcom’s new cloud storage service, has been under a watchful public eye since it launched in January – especially in wake of last year's dramatic Megaupload shuttering and Dotcom's jailing on copyright-infringement charges. Mega's legality has been an ongoing question for years, and the company’s plans to go public within 18 months didn't do much to assure the public of its legitimacy.

The service, similar to Google Drive and Dropbox, aims to host only legal content, according to CEO Vikram Kumar. It separates itself from the competition, he says, because of its speed, end-to-end encryption and a business model revolving around privacy and control.

In a virtual conference last month at SXSW via Skype, Kim Dotcom said that MegaBox, a new online music service described as “very similar to iTunes” that he is setting up separately from Mega, could launch in the next six months.
 
Billboard spoke with Kumar, formerly the CEO of InternetNZ – a non-profit organization that works to protect and promote an open Internet in New Zealand – about Mega's legitimacy, copyright issues and new business models for the music industry.

 
Billboard.biz: What is Mega’s relation to its predecessor, the file-sharing site MegaUpload?
Vikram Kumar: Mega is completely new and built from the ground up. The business model for Mega is completely different from MegaUpload. MegaUpload was much more of a file storage service, whereas Mega‘s focus is on cloud collaboration. There will be chat, video, word processing and spreadsheets — a whole stack of services built on privacy — coming along.
 
The primary issue with MegaUpload was the huge quantity of copyright infringing material on the site, how will you combat this on Mega?
Our intentions are very clear that we don't want Mega to be used for any infringing service. The reality on the internet -- whether it's Mega or YouTube or Dropbox -- is that there are people who will misuse the service. Mega will very strictly follow the legal "safe harbor" provisions. When we are notified that there is an infringement on Mega, then Mega needs to comply just like any other online service.

What is Mega’s business model?
We’ve got five or six people working on the business. Most of them are shareholders and not taking a salary. Most of the funding so far comes from [New Zealand-based domain name firm] Instra Group Holdings Ltd., owned by Antonio Lentino. At the moment, the only way it’s making money is by people choosing to take membership, which has more storage and bandwidth. [Memberships cost, 10-30 euros a month]. Other business models will come along in the future. We may look at advertising. The Mega API is going to be available for people to build their own services using Mega as a back-end storage platform, which provides us with revenue opportunities.
 
How will Mega help or hurt content creators?
Content creators can use Mega for securely storing the music that they've produced or the videos they've created. MegaBox and MegaVideo [will] provide a platform for content creators to go straight to people and bypass the traditional distribution chain, but those are services which are being promoted by Kim and other companies. We’re really interested in the content creators going direct to people. This is quite distinct from the recording industry or the film industry, which tend to represent the distributors. Those people are still very much using outdated business models.

How is the recording and film industry using ‘outdated business models?’
New Zealand, for example, has a fairly stringent, three strikes copyright infringement law. After debates over the last two or three years, nearly everyone in New Zealand agrees some copyright infringement problems are because the availability of material isn’t there – that New Zealand simply doesn’t have the legal content available. So even when people are willing to pay, there’s no one who they can pay.

The very nature of copyright was based on controlling the creation of copies, which worked in a physical world where it was expensive and hard to publish or print a book or create records. The internet allows for the creation of digital copies at almost no cost. These are the legacy business models of physical distribution which haven't adapted to digital internet distribution.
 
Do you think Mega can open new distribution opportunities for music and other media?
There are new possibilities. For example, if someone wants to stream music to mobile devices, then Mega can provide a very good back-end platform for secure storage and distribution. In terms of customer-facing interaction with artists, that’s MegaBox and MegaVideo. But, as a start-up, we first need to focus on making sure our product is good and acceptable.
 
What are your thoughts on the future of copyright and piracy, and how will Mega be involved in this discussion?
This is portrayed to be a battle between Hollywood and Silicon Valley, between content and the internet. That battle is coming because the copyright owners are trying to extend the control that they’ve traditionally had on distribution channels [to] the internet. It’s unfortunate that content owners think that they want to control the internet and create this collision. When content owners start looking at the internet as an important way to make money, then we’ll see this conflict reduce quite a bit -- technology, openness and innovation are critical.
 
Then the question is how to monetize the content that they’re creating.
It’s the music industry that shows us some models. There’s now a move away from buying CDs to buying single tracks, from buying physical to buying digital. When people want to buy, they want instant access, they want to pay now, [and for it to be] available on every device that they own. People are going away from owning music and to streaming or getting it demand. It’s this basic adaptation of expectations of people. Treat people as customers rather than potential buyers. Take their money and give them quality material instantly. That’s what we think is the right way forward.