Megaupload’s business model is to make as much money as possible as the ‘go to’ site for free and illegal music, movies and more. By many accounts, the company’s chief has made a lot of money on this illegal enterprise and not one cent of it has gone to songwriters, artists or labels for the downloading of their music, which serves as the primary draw of Megaupload’s business model. Megaupload deserves its reputation as one of the most egregious online hubs of copyright theft. If any more proof is needed, consider these facts:
Background. In the past several years, a new generation of file sharing services has emerged. These infringement machines allow users to upload copyrighted content which the services then make available to the public worldwide. This category includes many notorious services known for infringing copyrighted content including Megaupload, RapidShare, Hotfile, and 4Shared. These services sometimes call themselves “cyberlockers,” but that is a misnomer as a true locker is private and secure (it is locked). None of these services purport to be just lockers where someone can store their own content in the cloud. To the contrary, they exist to facilitate the distribution of files on a massive scale.
Notoriety. In January 2012 the Department of Justice charged the leaders of Megaupload with widespread online copyright infringement for “running an international organized criminal enterprise allegedly responsible for massive worldwide online piracy of numerous types of copyrighted works, through Megaupload.com and other related sites, generating more than $175 million in criminal proceeds and causing more than half a billion dollars in harm to copyright owners.”
The Obama Administration’s U.S. Trade Representative (USTR) in December 2011 named Megaupload a “notorious market” in an official government report that lists sites where copyright theft is open, pervasive and undermines the respect for the rule of law. According to USTR, Megaupload, “reportedly based in the Netherlands and Hong Kong, allows for the unauthorized distribution of protected content through subscriptions and reward schemes to popular uploaders.” Megaupload joins sites such as Sweden’s The Pirate Bay on the government’s list.
The U.S. government’s listing of Megaupload as a “notorious market” is well deserved. In one recent example, following an investigation by the FBI, Bronx, NY resident Gilberto Sanchez was sentenced to one year in federal prison in December after pleading guilty to uploading a workprint copy of the film "X-Men Origins: Wolverine" to the Internet one month before the film's theatrical release. The service he used? Megaupload.
Popularity. In its heyday, prior to the U.S. government’s seizure of its web domain, Megaupload was the 75th most visited site on the web, according to Alexa. By contrast, the massively popular and licensed Internet radio service Pandora ranks 361. According to the Department of Justice’s news release and indictment, Megaupload.com is advertised as having more than one billion visits to the site, more than 150 million registered users, 50 million daily visitors, and accounted for four percent of the total traffic on the Internet. Megaupload’s popularity has nothing to do with the ease of storing files and everything to do with the ease of obtaining copyrighted files from others without paying for them.
(Many more in expanded indictment of Megaupload here)