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December 6, 2006

Arbinet buys UK-based DRM firm

Arbinet Inc has acquired UK-based digital rights management firm Flowphonics Ltd to extend the scope of its communications trading marketplace services and create an electronic marketplace that will bring efficiency and scalability to global IP rights licensing.

By CBR Staff Writer

The financial terms of the deal have not been disclosed.

Glasgow-based Flowphonics specializes in the development of contract and license rights management platform for digital music and video content. The company’s patented RightsRouter system is best described as an electronic marketplace where rights holders and online digital content retailers can meet to negotiate over rights agreements, distribute content and report on and bill for licensing transactions.

The system is already being used by leading online digital content retailers including iTunes, Rhapsody, Napster and Beatport.

Arbinet (which is short for Arbinet-thexchange) said that Flowphonics’ software would help it to both broaden and simplify its own transaction management platform and managed services for existing customers and business partners.

Around 700 fixed, mobile and VoiP voice and data providers, including the world’s 10 largest international telco providers, currently use Arbinet’s internet-based marketplace to buy, sell and settle transactions. The company said it managed around $500m worth of transactions last year. These providers will now be able to use Flowphonics’ technology to economically integrate music and video into their suite of offerings and compete with online retailers

Arbinet sees an opportunity to address what is sees as another fragmented industry.

Like telecommunications, content licensing exhibits the same high degree of fragmentation, lack of transparency and time consuming manual negotiation process, said Curt Hockemeier, CEO of New Jersey-based Arbinet.

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[Our system] simplifies the way rights are discovered, licensed, digitally distributed, with rights owners getting paid in a timely manner, he explained.

Research by management consultancy firm PricewaterhouseCoopers estimates that the value of licensed, digitally distributed content will nearly grow at a 50% annual clip from $653m last year to $4.9bn by 2010.

The market for digitally distributed recorded music is also predicted to rise from a 5% share of industry revenues in 2005, to 33% of recorded music spend by 2010.

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