Meet the Mega man.
MegaPorn, MegaVideo, MegaLive, MegaPix, and Megaupload are all Kim Schmitz: entrepreneur, father, former hacker, former street racer, and former outlaw.
Depending on who you ask, all of these sites and brands created by Schmitz--a well-known hacker in Germany who is said to have officially changed his name to Kim Dotcom--are either part of the simple and successful Internet file-storage business he founded in 2005, or they're an extension of a vast online piracy empire that includes some of the most visited video sites on the Web--right there along with YouTube and Hulu. According to legal documents, where Schmitz, 37, is engaged in a copyright battle, he rents cyberlockers to the masses, and nobody disputes that many millions of people from across the globe use Megaupload to store or access unauthorized copies of TV shows, feature films, songs, porn, and software.
For years now, executives at the major film studios and television networks haveis making a fortune off of their work by selling subscriptions to his locker services without paying them a dime. Megaupload denies the accusations, but in Hollywood many fear that the service is a far bigger threat to their business than the popular and controversial file-sharing service, The Pirate Bay.
Streaming sites only require a couple key clicks before a user is able to store or stream pirated video over to their PC. The concern at some of the film studios and TV networks is that because cyberlockers are easier to use than BitTorrent and other peer-to-peer software, they could find their way to less tech-savvy audiences and cost the industry lost video sales.
Relatively unknown in the United States, Schmitz is notorious around the world among those hired to protect films and TV shows from online piracy. Because of his German accent, prodigious girth (he's said to weigh more than 300 pounds), and his record of convictions for computer hacking and insider trading, some in Hollywood jokingly refer to him as Dr. No or Dr. Evil, fictional villains from the James Bond and Austin Powers films, respectively.
That image of Schmitz as a powerful piracy overlord seems to have been partially created by Schmitz himself.
Schmitz can be seen in YouTube videos driving a Mercedes-Benz at more than 200 mph on public roads while competing in a street race known as the Gumball 3000. On one of his cars is a license plate that reads "God." In other clips, Schmitz bathes in grand marble tubs, suns himself on yachts, and cavorts with bikini-clad women. It's no joke to antipirates, who believe Schmitz is paying for his lifestyle with money that rightfully belongs to filmmakers. Yet, the major Hollywood movie studios have inexplicably done little to try and stop Megaupload or the other large and allegedly illegal cyberlocker services, such as Rapidshare. According to film industry sources, that will change soon.
Decision makers at the Motion Picture Association of America (MPAA), the trade group representing the six largest Hollywood film studios, will pay close attention to a copyright complaint filed in January against Megaupload. Perfect 10, an adult-entertainment company with a reputation for a hair-trigger on copyright litigation, accuses Megaupload of encouraging users to upload pirated content to the company's cyberlockers. Last week, a U.S. District Judge in Los Angeles denied Megaupload's motion to throw out Perfect 10's suit and ruled there was ample evidence to bring a copyright case against Schmitz and the company.
Some in Hollywood have said in off-the-record conversations that they were surprised Megaupload responded to the complaint. Why? Mystery, it seems, was its best defense. Megaupload was believed to be based in Hong Kong and rumored to operate servers in obscure corners of the world. The company ignored past requests to remove pirated material from its service and seemed satisfied to thumb its nose at copyright laws as it operated in the shadows. Even Schmitz' role at Megaupload, despite his personal flamboyance, was unclear.
End of the world as Hollywood knows it
In a 2009 Forbes article, Megaupload spokesperson Bonnie Lam denied any connection existed between the company and Schmitz. But in response to an inquiry from CNET about the Perfect 10 case, Lam confirmed on Tuesday that Schmitz is part of the company's leadership.
"Perfect 10 is on a mission to intimidate legitimate Internet businesses into paying Perfect 10 for settlements," wrote Lam, who said she was writing from Megaworld headquarters. "Perfect 10 has picked the wrong target with Mega and we will fight for the rights of our users...One of the tactics of Perfect 10 involves one of our founders, Kim Schmitz, who recently changed his name to Kim Dotcom. He was convicted for hacking and insider trading in Germany almost a decade ago. Perfect 10 wants the court to believe that Kim's prior convictions are an indicator for criminal conduct regarding Mega.
"But Perfect 10 is wrong," Lam continued. "Since his convictions Kim has a clean record and under (Germany's) Clean-Slate legislation his prior convictions have been wiped. Today Kim is married and the father of three young children. He has matured, learned from his past mistakes and is a successful businessman...Kim is one of many shareholders at Mega and not involved in most day-to-day business decisions."
Don't believe it, argues Perfect 10's lawyers. In the porn studio's complaint, they wrote that Schmitz is all there is behind Megaupload. "Each of the entity defendants herein is the alter ego of Schmitz," Perfect 10 said in a court filing. "Schmitz formed Megaupload for the specific purpose of engaging in the business of illegally storing, displaying, and distributing the intellectual property of others. On information and belief, Schmitz alone profits from the revenues derived from these entities."
Perfect 10 also alleges that Schmitz owns and controls a U.S. hosting service. According to numerous reports, a company called Carpathia Hosting, based in Ashburn, Va., manages Megaupload and many of the other mega sites. Carpathia executives did not respond to repeated interview requests.
One might have reason to question assertions made about Schmitz given his record. He first made a name for himself as a computer hacker who was convicted of credit card fraud. In 2001, Schmitz was accused of securities fraud for buying up shares of an ailing company and announcing he would dedicate 50 million Euros into revamping the business. As a result, the company's stock price soared and he quickly sold his shares for a profit. Only trouble was he never had the 50 million Euros.
What copyright owners plan to do about Megaupload is unclear. The U.S. Senate is considering legislation that would give the government power to block access to overseas sites accused of trafficking in pirated or counterfeit materials. Comcast and Verizon are some of the major Internet service providers that have recently agreed to step up antipiracy efforts but for the time being those agreements only affect material downloaded via peer-to-peer services and has nothing to do with streaming services like Megaupload.
As for Schmitz himself, news reports from New Zealand indicate he is living in a $30 million mansion near Auckland. Megaupload's Lam said he's been granted permanent residency there. The Kiwis have reportedly taken to Schmitz after he paid for a huge fireworks display over Auckland Harbor last New Year's eve.
In one of his YouTube clips, Schmitz is videotaped driving at high speeds until he's stopped at a checkpoint. Slowly he rolls back into traffic undetected and then speeds off. He chortles and says, "Dr. Evil always gets away with it."