Whiskers from his scraggly beard. He spoke quietly and havemingly dramatically punctuatedlways wo sentences. T peop he was overwhelminglyle kind. And the skepticism of the engineer. Udio [inaudible] he began and he divided the incoming sound into fractional slivers of a second and then he further sorted the audio and different frequencies. He worked on sound the same way that a prison works on light. Mr the result was a grid of time and frequency consisting of microscopic sound sorted inton f narrow bands. The audio version of pixels. He told the computer how to simplify the pixels using for for trickse human ea including studying the weaknesses. Human hearing was best at a certain range of pitch frequency corresponding to the total range of the human voice that registers beyond thatat meant particularly as he went higher on the scale. That meant that he could assign fewer bits to the extreme end of the spectrum and second tones that were close in pitch tendedn to cancel eaches other out and n particular they overrode highert ones. And this includes following aica loud click. So if you are digitizing this,eb you could assign fewer bits to the first few milliseconds. Fourth, this is where it gets weird, they had shown that the auditory system canceled out noise prior outo this. This meant and is because it took a few more seconds for it to process what was hearing in this process can be disrupted bi a sudden onrush of noise. Be disu so going back to this crash you could see that it was the few milliseconds before. That includes lying upon research, he told the bits where to the go. Did he actually write the software that did this . Or did he have developers that he worked with . By the middle of 1986 he had written rudimentary computer and coders that can make this work and it sounded pretty bad. He eventually deputize five other people to work with him. They had some success by thein mid90s and it was morevo like 20 people. Velopmen development of this product wasnt complete until 1994. A lot of ththose people also hed patents and made a lot of money. Junaudible]lets lets just jump right intoobd it. She worked at the compaq manufacturing plant. Universal was aware that this stuff is valuable. So how is he going to do it . Inst at the end of each shift protocol and struck it thats toe whoever bring this, well, they were destroyed. The grinder was a simple devicen with a device painted blue leading to a metal cylinder. The cylinder crush them in for years he had stood and watched as thousands of discs were destroyed and over time seem toc realize that he was staring intt aim black hole in the security regime. The grinder was efficient but far too simple. The machine had generated noidel records. If you it existed outside of the process. Cked if you instructed this disc ando only 23 actually made it, no one could ever know. Whil so what he could do is take offh aol surgical glove holding thisn his way to the Conveyor Belt to the grinder and then in one motion he could wrap it around the desk and tie it off. Pal and then he could open up the, control panel with the fuse box following a quick look around to make sure he was alone, he could secrete this into a cranny of the machine and tried Everything Else and at the end of the shift he could grab it from this spot. I should mention that they had a bit of a way station. As you enter you swipe your employee key card and one out of every five would turn red and you had to be taken to the sidep and they picked up the thin aluminum core. And he didnt dare play the odds although he assured that the screenings were random. They were especially likely tote be targeted. They have been selected for random screenings hundredshu ofm times. But he had been watching them as inte well. When they almost by accident he learned something interesting. He typically wore stickers were put on this day he was wearing steel toed work boots and he was tapped for screening and the guard scanned his feet and the wand let off a wine. The guard asked him if the bootr insp had steel toes and he ceconfirmd that they did and then without further inspection he waved them akrough. Adnt ma him t they did not pat patterned on coking the difficult questions,o he had set off the wand and there were no consequences. He realized there was a securite pantomime intended to intimidate wouldbe thieves rather than catch smugglers. The security guards who ran the showings were just as bored as everyone else. But they could fit this distantc boots, but they wouldnt fit. But these were just a little to big. The still, the seed of the idea was planted and he patiently waited in lineda each day to leave the plant at the end of the shift. Acce they were the signature Fashion Accessories of smalltown north carolina. Everyone at the plant more than. They wore big oval medallions and embroidered with fake diamonds. The hispanic guys wore cowboy buckles with ornate gold trim and even the women wore them. They always set off the lawn but the guards never asked them to take it off. Love. Cut the disc inside the glovede. Hype the love inside it and took it into your waistband. Position your belt buckle just in front of the desk, cross your fingers as you shuffle and if you get flagged play very coolih new stuff belonged. He finally saw it and this is how the smuggling was done. So that is sort of how he got two dozen cds out of the plant. T and it wasnt just him, he had number of guys that he needed to meet at a gas station or someone else and pay them. So he got promoted in some way for all the fantastic material n at was coming through thrieoti plant. It really got started about 2001 and the big hits were eminem and others. And so once he got them home he would rip them to mp3 and then l upload them to a secretea cabalf they inf research. Il aost it was called rabbit neurosisry and it had been around since 1996. It infiltrated almost every aspect of the Music Industry supply chain. They had guys in the United Kingdom and journalists that had been getting this, we condemn. On they have a couple of italian guys who ran music promotionwhoi business and they were inside sony music and they had reguyscn japan that would go to retail ol in trd stores and they wouldld show up just a little bit earlier than they were in the u. S. And that advantage was dum being first. Delete 25,000 albums in the spoh the attention of the fbite might naturally. As you might expect. But really there was an economic motivation. And for most of the guys it wass not. Money. Hey we they were doing it almost for thrills, they were teenage boys who love them. But this man was an exception. He realized that by going into this scene that he was part of there were others that were doing the same thing, people ripping Television Shows and he r people cracking this months ahead and posting them online and he realized that this was invaluable. And the proof is that the leaks owre not to be sold but he didnt follow that. And he started building home dvd duplicators of thousands of it at once and then started tellinl that he was going to have a bootlegging operation and i will read you a little bit about that. The movie man was back. He branched out and he lost 300. The discs in a good week, 1500 casp with no taxes, the price of dvds was dropping in the supply of movies came for free. His margins were as fast as his pockets. Demand was intense and he was unable to meet it on his own. He he began to move through local barber shops and at the beginning of each week he would drop off 400 discs apiece to four trusted barbers and then he as his p would share the profits. Discs oi 450 for roughly 900 per week. Per shop. He made more than he did cutting hair. It came from a c varietamy of sources is the infiltration of e the music business was mirrored ma other forms of media. Into th many groups have pushed hard into the home dvd marketssc leaking from Video Rental Stores and other vendors tracking the dissemination to the academy and he managed to score this for the leading contenders long before their official release dates. Advancing technology was also revolutionizing the process andm bootlegging movies from within the theater with digital camcorders. And canadian authorities later arrested hem at a movie that he was attending with his daughter, they discovered a secret camcorder rig inside her diaper bag. And practically anything that aired was captured on dvr compressed to a manageable size, and a notorious example of theor entire Fourth Season made it to the pirate underground before any of the episodes ever aired. They had realized that they were being transmitted to a local station in los angeles for future air dates. They were sent at a bandwidth while outside of the spectrum. Episod they were able to upload it in a advance. After years of leaking, that edge gave him a translation inte profits on the street. Carefully trimming out this only after he had led his local drive. S and he sourced it not just from some other hidden cartel. And even once they took the cut, his Profit Margins were over 50 and there were other more lucrative things. It would cost you 60 refill and you would have to camp outside of the game stop while you waited for it to call and check him out. Now they would sell it to you right ph now for 10 00 oclock. A copyot of adobe photoshop wils cost you 400. But he would sell it for 20. A copy of the professional auto cad would run in 1500 retail. He would sell it to you for 40 his bestca customers came froma inside the plant and thet ev ons for trusted most he had a better deal. Ovie the 20 per month you couldhe st build an unlimited subscription and you didnt even need the discs. He had set up his own website off a home server. Once you got bought yourself a password you can download anything you wanted. You would n there you would find every movie that came out on dvd on the last years and the latest software i and more. You post a request within the 2w hour. But it was here and running itsu own private netflix out of hisnn that w house. And that was his motivation. Is fbi pr i found him to his through his fbi prosecution and theres a largee government database. There has probably been three to 400 just against pirates. When i finally found his i was y like okay. Because hegu really was by far e most musically gifted one ofate, alltime. Just because of the technical skills. Sour this created and turned it into the leading group as well o and they were able to recruit people from all over the world. And he pleaded guilty and agreed to testify against against his coconspirators. The feds are really interested in this guy that ran a screen name but they didnt have much to go on. Thought they talk to them on the cell phone once a week. He didnt know his name. But he thought he could identify the guy via his ip address and various interactions and hist te brother was preparing his defense and he agreed to testify th an agreemente for it leniency. And they beat the charge and wat exonerated and found not guilty. And he served three months in a federal prison total and he got out in 2010 on probation. Hes now off probation andat heg worked at the freightliner manufacturing facility in stalling the grill on the front of the truck. [inaudible question] sumac i found him in 2011 and im sent him a facebook message and i wasnt even sure it was the right guy. It turns out that there were three and a tracking down and kind of fit the correct age range and i thought i would send this guy a facebook message. The next day he called me on my cell phone and we probably had anage ra about four or five phone conversations. I came down here to interviewhoe and meet with con him and tour t facility of the plant where hent inrked which is empty and shutmh down. It shut down in 2009 and all of the machines were sold to latin america as part of this hollowing out of that Manufacturing Base down there. Six years later it is still fac. Empty. 3000 square foot manufacturingg. Facility. And i will just open up the floor to questions. [inaudible conversations]down i7 shut down in 2007, generated 2007 pairs of the guys who did this were addicted to doing this and i couldnt stop. [inaudible question] this was actually after napster. They actually meant in a chat channel trading room and parker was 18 when he wrote the program and parker was 19 and he they were just kids and they wrote this revolutionary technology. The exact same age that i am i going into these underground chat channels when they got to college. Is so it definitely tells a story that we should emphasize. Somehow he got worse and then he called him again. E got he had not been able to give upe either. Membe the leaks will continue and the in the new group will be downsized to only the most trusted members, you and me and a couple of europeans. The group will be so secret that it wont even have a name. Be sd he spent years building thenow. Network. We cannot give up now. He was skeptical. Not for the first time he wondered about what motivated him to do this. Beforeheec he could point to the social recognition of his onlinr peers and that was something that he had never mighpersonallw but he understood how it might add value to a certain kind of person. Only from a mysterious sense of personal satisfaction. Both had tried to quit this twoe different times but found themselves unable. Ried to qu heit could not find the words td tell them what could keep them going at this point. Perhaps he wanted to make some kind of a mark or matter. Explaining that there was one hv last thing that they had to twoth have, both of which weree day. Scheduled to come out on thecena same day. It was and rivalry, 50 cent and. Kanye west had the same numb release date. Of course he knows all bs. Pa he knew that both of them were promoting by the same corporate parent. He wanted them to know it. Leaking every release that theye had put out including the ones that they didnt know existed. The group could be shut down but going after the second matted of tradition, graduation and they said that they would keep an eye ab out for them. 2,01 the day0. After the release e had a double shift starting at 6 00 p. M. An evening, working six hours regular pay for six hours overtime, finishing at six in the morning as he was preparing to leave the coworker alled him aside. And they areang there is someone out there, he said, someone i had never seen before. And they are hanging around her truck. Walk and in the tedoilet before dawne walked through the parking lot t his tr and he saw three men, strangers who did seemed to be staking oue his truck and pulled the keys out of his pocket and then he pressed the remote and the truct chirped and the men drew their guns and told them to put their hands in the air. From the Cleveland CountySheriffs Office and theyair. Tm informed him that they werehis o currently searchingus his house and they were sent to retrievete him. He was Still Holding the key bob in his hand and he asked if he t waso under arrest. O his they said he was not but that they were going to question him on the drive back to his house. Twenty long minutes followed and in the f arriving homero he found an ugli scene in his front yard were a halfdozen fbi agents wearing. Hi bulletproof vests accompanied by a s. W. A. T. Team. His neighbor didnt like the police were yelling at them. [inaudible] on her face was a look of the spec realia belittlement. Long lon i have been looking for you forl a long time, here said, more thn five years. We showed it to them, he read it closely hoping that the terms woul didnt get tod that. Nye wests and they were finding what they were probably looking for. The leaked copy of kanye wests graduation. So thank you so much for showing up. [inaudible question] the plant has been shut down yes. What you feel is the impact of piracy on this . Declining somewhat. But people can listen. If you it doesnt pay very much. So if you want to make these plays you make a thousand dollars which is not a lot of money. And younger people dont do it. The ones that i know of. Agine i can imagine and im sure id that there are major artists. But what about an emerging artist, do you think that they will have a larger impact enact. Its great. He is an r b singer from toronto and four years ago he was just sort of leasing music, producing an and recording from a laptop andr last year he had lined in new york city to a crowd of 35,000 people. So that is not possible without the internet and he owes his career to that. Clsicall [inaudible]go and they havet future loyalty ro with what they said are good. And that was not a very good model. Billy the public should decide what is good and in some ways ie is better now than it was in the label base. Ord that is when they made the1f best music. It was insane, it was Britney Spears and stuff. Rap was a little bit better but pop was just unbearable. And now we have a much more now we interesting age even thoughe. Te theres less m money involved. R so its not clear that large concerns actually spur greekike culture. At. A guy like that to reach that point, does he start being able to sell this stuff or make moneg from touring . Yes, from that end thed the v licensing asent well. I dont know, maybe but i mae dont understand how you make it money. I can listen to it and most ofel us just listen for free. Oppo its rarert when someone has the opportunity to buy it. So how do you make money in a. Some of them sometimes. H you can skip the ads, but thats where the money comes from. Lets say that i go home and they take a zeppelin cd and i post it on youtube, immediatelyi youtube knows. They have a robot inside the database and finding anything that has Copyright Infringement on it. Once they find it they informed the rights holder with two or three options, they can pull it, they can leave it in certainunna markets or what most of them dor is start to run them for profit. In some ways the up leaders i pr extend beyond the music. Mys if i post a cover of myself playing a radiohead song, the robotro will know that they had the Publishing Rights on this phone. Nowi so im essentially licensing it t make a without even knowing it. But its not a profitable model. And spotify launched in 2006. Their mission was to get people to pay for music again. I subscribe to it, its the most convenient way to get music and0 the cost 10 per month. s that means im giving the music. Recording industry on the year. E of about 120 per that is a lot and it makes me a really good customer. The average itunes accounteans m makes about one 10th of that aoa year. And so if you can get a bunch of people to sign up, that is going to save the future of the Music Industry where everyone is pushing you to go. It just debuted on monday and they are going to debut the music which comes with subscriptions and autumn musicuo videos that they aret on. As spwell as many