Selling flak jackets in the cyberwars

SAN FRANCISCO (Reuters) – When the Israeli army and Hamas trade virtual blows in cyberspace, or when hacker groups like Anonymous rise from the digital ether, or when WikiLeaks dumps a trove of classified documents, some see a lawless Internet.

But Matthew Prince, chief executive at CloudFlare, a little-known Internet start-up that serves some of the Web’s most controversial characters, sees a business opportunity.

Founded in 2010, CloudFlare markets itself as an Internet intermediary that shields websites from distributed denial-of-service, or DDoS, attacks, the crude but effective weapon that hackers use to bludgeon websites until they go dark. The 40-person company claims to route up to 5 percent of all Internet traffic through its global network.

Prince calls his company the “Switzerland” of cyberspace – assiduously neutral and open to all comers. But just as companies like Twitter, YouTube and Facebook have faced profound questions about the balance between free speech and openness on the Internet and national security and law enforcement concerns, CloudFlare‘s business has posed another thorny question: what kinds of services, if any, should an American company be allowed to offer designated terrorists and cyber criminals?

CloudFlare’s unusual position at the heart of this debate came to the fore last month, when the Israel Defense Forces sought help from CloudFlare after its website was struck by attackers based in Gaza. The IDF was turning to the same company that provides those services to Hamas and the al-Quds Brigades, according to publicly searchable domain information. Both Hamas and al-Quds, the military wing of the Palestinian Islamic Jihad, are designated by the United States as terrorist groups.

Under the USA Patriot Act, U.S. firms are forbidden from providing “material support” to groups deemed foreign terrorist organizations. But what constitutes material support – like many other facets of the law itself – has been subject to intense debate.

CloudFlare’s dealings have attracted heated criticism in the blogosphere from both Israelis and Palestinians, but Prince defended his company as a champion of free speech.

“Both sides have an absolute right to tell their story,” said Prince, a 38-year old former lawyer. “We’re not providing material support for anybody. We’re not sending money, or helping people arm themselves.”

Prince noted that his company only provides defensive capabilities that enable websites to stay online.

“We can’t be sitting in a role where we decide what is good or what is bad based on our own personal biases,” he said. “That’s a huge slippery slope.”

Many U.S. agencies are customers, but so is WikiLeaks, the whistle-blowing organization. CloudFlare has consulted for many Wall Street institutions, yet also protects Anonymous, the “hacktivist” group associated with the Occupy movement.

Prince‘s stance could be tested at a time when some lawmakers in the United States and Europe, armed with evidence that militant groups rely on the Web for critical operations and recruitment purposes, have pressured Internet companies to censor content or cut off customers.

Last month, conservative political lobbies, as well as seven lawmakers led by Ted Poe, a Republican from Texas, urged the FBI to shut down the Hamas Twitter account. The account remains active; Twitter declined to comment.

MATERIAL SUPPORT

Although it has never prosecuted an Internet company under the Patriot Act, the government’s use of the material support argument has steadily risen since 2006. Since September 11, 2001, more than 260 cases have been charged under the provision, according to Fordham Law School’s Terrorism Trends database.

Catherine Lotrionte, the director of Georgetown University’s Institute for Law, Science and Global Security and a former Central Intelligence Agency lawyer, argued that Internet companies should be more closely regulated.

“Material support includes web services,” Lotrionte said. “Denying them services makes it more costly for the terrorists. You’re cornering them.”

But others have warned that an aggressive government approach would have a chilling effect on free speech.

“We’re resurrecting the kind of broad-brush approaches we used in the McCarthy era,” said David Cole, who represented the Humanitarian Law Project, a non-profit organization that was charged by the Justice Department for teaching law to the Kurdistan Workers’ Party, which is designated by the United States as a terrorist group. The group took its case to the Supreme Court but lost in 2010.

The material support law is vague and ill-crafted, to the point where basic telecom providers, for instance, could be found guilty by association if a terrorist logs onto the Web to plot an attack, Cole said.

In that case, he asked, “Do we really think that AT&T or Google should be held accountable?”

CloudFlare said it has not been contacted about its services by the U.S. government. Spokespeople for Hamas and the Palestinian Islamic Jihad, told Reuters they contracted a cyber-security company in Gaza that out-sources work to foreign companies, but declined to comment further. The IDF confirmed it had hired CloudFlare, but declined to discuss “internal security” matters.

CloudFlare offers many of its services for free, but the company says websites seeking advanced protection and features can see their bill rise to more than $ 3,000 a month. Prince declined to discuss the business arrangements with specific customers.

While not yet profitable, CloudFlare has more than doubled its revenue in the past four months, according to Prince, and is picking up 3,000 new customers a month. The company has raked in more than $ 22 million from venture capital firms including New Enterprise Associates, Venrock and Pelion Venture Partners.

Prince, a Midwestern native with mussed brown hair who holds a law degree from the University of Chicago, said he has a track record of working on the right side of the law.

A decade ago, Prince provided free legal aid to Spamhaus, an international group that tracked email spammers and identity thieves. He went on to create Project Honey Pot, an open source spam-tracking endeavor that turned over findings to police.

Prince’s latest company, CloudFlare, has been hailed by groups such as the Committee to Protect Journalists for protecting speech. Another client, the World Economic Forum, named CloudFlare among its 2012 “technology pioneers” for its work. But it also owes its profile to its most controversial customers.

CloudFlare has hosted 4Chan, the online messaging community that spawned Anonymous. LulzSec, the hacker group best known for targeting Sony Corp, is another customer. And since last May, the company has propped up WikiLeaks after a vigilante hacker group crashed the document repository.

Last year, members of the hacker collective UgNazi, whose exploits include pilfering user account information from eBay and crashing the CIA.gov website, broke into Prince’s cell phone and email accounts.

“It was a personal affront,” Prince said. “But we never kicked them off either.”

Prince said CloudFlare would comply with a valid court order to remove a customer, but that the Federal Bureau of Investigation has never requested a takedown. The company has agreed to turn over information to authorities on “exceedingly rare” occasions, he acknowledged, declining to elaborate.

“Any company that doesn’t do that won’t be in business long,” Prince said. But in an email, he added: “We have a deep and abiding respect for our users’ privacy, disclose to our users whenever possible if we are ordered to turn over information and would fight an order that we believed was not proper.”

Juliannne Sohn, an FBI spokeswoman, declined to comment.

Michael Sussmann, a former Justice Department lawyer who prosecuted computer crimes, said U.S. law enforcement agencies may in fact prefer that the Web’s most wanted are parked behind CloudFlare rather than a foreign service over which they have no jurisdiction.

Federal investigators “want to gather information from as many sources as they can, and they’re happy to get it,” Sussmann said.

In an era of rampant cyber warfare, Prince acknowledged he is something of a war profiteer, but with a wrinkle.

“We’re not selling bullets,” he said. “We’re selling flak jackets.”

(Reporting By Gerry Shih in San Francisco and Nidal al-Mughrabi in Gaza; editing by Jonathan Weber and Claudia Parsons)

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“Lincoln” leads Golden Globe movie nominations

LOS ANGELES (Reuters) – “Lincoln,” the tale of U.S. President Abraham Lincoln‘s battle to end slavery, ruled at the Golden Globe nominations on Thursday, while a very different movie take on slavery – “Django Unchained” – got a big boost in Hollywood’s crowded awards season.

Steven Spielberg’s portrayal of one of America’s most revered presidents won a leading seven nominations, including best drama, best director, best screenplay and best actor for Daniel Day-Lewis in the title role.

But “Lincoln” faces stiff competition at the Golden Globes from Ben Affleck’s Iran hostage drama “Argo” and Quentin Tarantino‘s dark and quirky slavery-era Western, “Django Unchained.”

The best drama nominees were rounded out by thriller “Zero Dark Thirty” about the hunt for Osama bin Laden, with four mentions, and the shipwreck tale, “Life of Pi,” with three.

The Golden Globe Awards, which will be given out by about 80 members of the Hollywood Foreign Press Association (HFPA) on January 13, are among the most widely watched honors programs leading up to the Oscars in February, although their ultimate choices for best movie rarely coincide.

‘LINCOLN’ SEEN AS OSCAR FRONTRUNNER

“Lincoln” is already regarded as an Oscar frontrunner after picking up multiple accolades from U.S. critics’ groups and the Screen Actors Guild (SAG).

Producer Kathleen Kennedy said the film’s portrayal of Lincoln’s battles in Congress to get slavery abolished had struck a chord with Americans at a time of political gridlock in Washington.

“People have become frustrated with the political process, and the movie takes you on a journey that shows the democratic process is difficult but the end result is a very satisfying process…I think that’s what people are excited about after watching ‘Lincoln,’” Kennedy told Reuters on Thursday.

Tarantino’s violent and sometimes comic “Django Unchained,” starring Jamie Foxx, has fared less well – until now.

“This was a huge boost. ‘Django Unchained‘ was very much SAG snubbed. But now they are really back in the game,” Thelma Adams, contributing editor at Yahoo! Movies, told Reuters.

“It’s very gratifying to get this many nominations from the HFPA for a film I worked so hard on and am so passionate about,” Tarantino said in a statement.

Unlike the Academy Awards, the HFPA has separate categories for film dramas and comedies.

“Les Miserables,” the movie version of the worldwide hit stage musical, earned four Golden Globe nominations in the comedy/musical category, as did “Silver Linings Playbook,” about an unlikely romance between a man suffering from bipolar disorder and a young widow.

The stars of both films – Hugh Jackman and Anne Hathaway for “Les Miserables,” and Jennifer Lawrence and Bradley Cooper for “Silver Linings Playbook,” – will be among those competing for acting awards.

FROM STAGE TO SCREEN

“Les Mis” director, Tom Hooper, who failed to get a nomination for his work on the movie, acknowledged the challenge of translating the beloved musical to the big screen.

“Millions of people hold this musical so close to their heart. I had to make a film that honors that experience…and I needed to find a way to work, which is why I chose to do all live singing,” Hooper told Reuters.

The HFPA also opened the door to smaller, sometimes overlooked movies and performances, while largely snubbing high profile contenders such as the James Bond film “Skyfall,” which got just one mention, for Adele’s best original song.

Wes Anderson’s “Moonrise Kingdom” and admired British senior ensemble film, “The Best Exotic Marigold Hotel,” were both nominated in the best musical or comedy category.

“They are precious little films that now have to be taken seriously,” said Tom O’Neil of awards website Goldderby.com.

In the acting race, Jessica Chastain’s CIA agent in “Zero Dark Thirty” will square off against Helen Mirren in “Hitchcock,” British actress Rachel Weisz in period drama, “The Deep Blue Sea,” France’s Marion Cotillard for “Rust and Bone,” and Naomi Watts in tsunami survival tale “The Impossible.”

Chastain said that aside from being a true-life thriller, “Zero Dark Thirty” also aimed at asking questions about society.

“To be involved in a movie that does that – the 9/11 hunt for Osama bin Laden pretty much defined this decade for us – and to be playing the woman who sacrificed so much to find him is such an honor,” the actress told Reuters.

Day-Lewis’s performance as Lincoln will compete against Denzel Washington’s alcoholic airline pilot in “Flight,” Richard Gere’s role as a corrupt financial executive in “Arbitrage,” John Hawkes as a severely disabled man in “The Sessions,” and Joaquin Phoenix’s drifter in the cult tale, “The Master.”

The Golden Globes also honor the year’s best TV shows. “Game Change,” the HBO film about Sarah Palin’s 2008 bid to become U.S. vice-president, led the nominations with five, followed by post-9/11 psychological thriller, “Homeland,” with four.

(Additional reporting by Piya Sinha-Roy and Eric Kelsey; Editing by Paul Simao and David Brunnstrom)

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In challenge to personalized cancer care, DNA isn’t all-powerful

NEW YORK (Reuters) – The cancer cells were not behaving the way the textbooks say they should. Some of the cells in colonies that were started with colorectal tumor cells were propagating like mad; others were hardly multiplying. Some were dropping dead from chemotherapy and others were no more slowed by the drug than is a tsunami by a tissue. Yet the cells in each “clone” all had identical genomes, supposedly the all-powerful determinant of how cancer cells behave.

That finding, published online Thursday in Science, could explain why almost none of the new generation of “personalized” cancer drugs is a true cure, and suggests that drugs based on genetics alone will never achieve that holy grail.

Scientists not involved in the study praised it for correcting what Dr. Charis Eng, an oncologist and geneticist who leads the Genomic Medicine Institute at the Cleveland Clinic, called “the simple-minded” idea that tumor genomes alone explain cancer.

Calling the study “very exciting,” she said the finding underlines that a tumor’s behavior and, most important, its Achilles heel depend on something other than its DNA. Her own work, for instance, has shown that patients with identical mutations can have different cancers.

The core premise of the leading model of cancer therapy is that cells become malignant when they develop mutations that make them proliferate uncontrolled. Find a molecule that targets the “driver” mutation, and a pharmaceutical company will have a winner and patients will be cancer-free.

That’s the basis for “molecularly targeted” drugs such as Pfizer’s Xalkori for some lung cancers and Novartis’s Gleevec for chronic myeloid leukemia. When those drugs stop working, the dogma says, it is because cells have developed new cancer-causing mutations that the drugs don’t target.

In the new study, however, scientists found that despite having identical genetic mutations, colorectal cancer cells behaved as differently as if they were genetic strangers. The findings challenge the prevailing view that genes determine how individual cells in a solid tumor behave, including how they respond to chemotherapy and how actively they propagate.

If DNA is not the sole driver of tumors’ behavior, said molecular geneticist John Dick of the Princess Margaret Cancer Centre in Toronto, who led the study, it suggests that, to vanquish a cancer entirely, drugs will have to target their non-genetic traits too, something few drug-discovery teams are doing.

Genomes are what cutting-edge clinics test for when they try to match a patient’s tumor to the therapy most likely to squelch it.

For their study, Antonija Kreso, Catherine O’Brien and other scientists under Dick’s direction took colorectal cancer cells from 10 patients and transplanted them into mice. They infected the cells with a special virus that let them track each cell, even after it divided and multiplied and was transplanted into another mouse, then another and another, through as many as five such “passages.”

Only one in 10,000 tumor cells was responsible for keeping the cancer growing, the scientists found – in some cases for 500 days of repeated transplantation from one mouse to the next. Genetically-identical tumor cells stopped dividing within 100 days even without treatment.

Tumor cells that were not killed by chemotherapy – the scientists used oxaliplatin, a colon-cancer drug sold by Sanofi as Eloxatin – had the same mutations as cells that were. The survivors tended to be dormant, non-proliferating ones that suddenly became activated, causing the tumor to grow again. Yet the cells – dormant or active, invulnerable to chemo or susceptible – had identical genomes.

“I thought we’d be able to look at the genetics that let some cells propagate, or not be susceptible to chemotherapy, but lo and behold there was no genetic difference,” said Dick. “That goes against a main dogma of the cancer enterprise: that if a tumor comes back after treatment it’s because some cells acquired mutations that made them resistant.”

That’s true in some cases, he said, “but what our data are saying is, there are other biological properties that matter. Gene sequencing of tumors is definitely not the whole story when it comes to identifying which therapies will work.”

The results were surprising enough, Dick said, that experts reviewing the paper for Science asked him to run additional tests to make sure the cells that behaved so differently were in fact genetic twins. He did, they were, and Science accepted the paper.

Other experts also praised the work, saying it supported the growing suspicion in the field that personalized cancer therapy is oversimplistic, at least in how it’s sold to the public.

“It’s not as simple as just sequencing mutations to tailor therapies to each tumor,” said surgical oncologist Dr. Steven Libutti of the Montefiore Einstein Center for Cancer Care in New York City. “In my mind, the findings are not unexpected. Other things besides genes matter: the environment in which a tumor is growing, for instance, plays an important role in whether therapy will be effective.”

Rather than targeting DNA alone, the Toronto scientists suspect, effective therapies would also take aim at what phase of its cycle a cell is in (dormant, growing or dividing, for example), which of its genes are activated, whether it sits in a region of the tumor that is starved of oxygen, and other non-genetic properties.

Nudging tumor cells out of their dormant phase and into their growth cycles, for instance, could make them more susceptible to chemotherapy, which generally targets rapidly dividing cells.

“Our findings raise questions about the resources put into sequence, sequence, sequence,” said Dick. “That has led to one kind of therapeutic” – molecularly-targeted drugs – “but not the cures the public is being promised.”

(Reporting by Sharon Begley; editing by Claudia Parsons)

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Aides: Chavez in tough fight, may miss swearing-in

CARACAS, Venezuela (AP) — Somber confidants of President Hugo Chavez say he is going through a difficult recovery after cancer surgery in Cuba, and one close ally is warning Venezuelans that their leader may not make it back for his swearing-in next month.

Information Minister Ernesto Villegas said Wednesday night that Chavez was in “stable condition” and was with close relatives in Havana. Reading a statement, he said the government invites people to “accompany President Chavez in this new test with their prayers.”

Villegas expressed hope about the president returning home for his Jan. 10 swearing-in for a new six-year term, but said in a written message on a government website that if Chavez doesn’t make it, “our people should be prepared to understand it.”

Villegas said it would be irresponsible to hide news about the “delicateness of the current moment and the days to come.” He asked Venezuelans to see Chavez’s condition as “when we have a sick father, in a delicate situation after four surgeries in a year and a half.”

Moving to prepare the public for the possibility of more bad news, Vice President Nicolas Maduro looked grim when he acknowledged that Chavez faced a “complex and hard” process after his latest surgery.

At the same time, officials sought to show a united front amid the growing worries about Chavez’s health and Venezuela’s future. Key leaders of Chavez’s party and military officers appeared together on television as Maduro gave updates on Chavez’s condition.

“We’re more united than ever,” said Maduro, who was flanked by National Assembly President Diosdado Cabello and Oil Minister Rafael Ramirez, both key members of Chavez’s inner circle. “We’re united in loyalty to Chavez.”

Analysts say Maduro could eventually face challenges in trying to hold together the president’s diverse “Chavismo” movement, which includes groups from radical leftists to moderates, as well as military factions.

Tapped by the 58-year-old president over the weekend as his chosen political heir, Maduro is considered to be a member of radical left wing of Chavez’s movement that is closely aligned with Cuba’s communist government.

Cabello, a former military officer who also wields power within Chavez’s movement, shared the spotlight with Maduro by speaking at a Mass for Chavez’s health at a military base.

Just returned from being with Chavez for the operation, Cabello called the president “invincible” but said “that man who is in Havana … is fighting a battle for his life.”

After Chavez’s six-hour operation Tuesday, Venezuelan television broadcast religious services where people prayed for Chavez, interspersed with campaign rallies for upcoming gubernatorial elections.

On the streets of Caracas, people on both sides of the country’s deep political divide voiced concerns about Chavez’s condition and what might happen if he died.

At campaign rallies ahead of Sunday’s gubernatorial elections, Chavez’s candidates urged Venezuelans to vote for pro-government candidates while they also called for the president to get well.

“Onward, Commander!” gubernatorial candidate Elias Jaua shouted to a crowd of supporters at a rally Wednesday. Many observers said it was likely Chavez’s candidates could get a boost from their supporters’ outpouring of sympathy for Chavez.

Opposition leader Henrique Capriles, who lost to Chavez in the October presidential election and is running against Jaua, complained Wednesday that Chavez’s allies are taking advantage of the president’s health problems to try to rally support. He took issue with Jaua’s statement to supporters that “we have to vote so that the president recovers.”

Maduro looked sad as he spoke on television, his voice hoarse and cracked at times after meeting in the pre-dawn hours with Cabello and Ramirez. The pair returned to Venezuela about 3 a.m. after accompanying Chavez to Cuba for his surgery.

“It was a complex, difficult, delicate operation,” Maduro said. “The post-operative process is also going to be a complex and hard process.”

Without giving details, Maduro reiterated Chavez’s recent remarks that the surgery presented risks and that people should be prepared for any “difficult scenarios.”

The constitution says presidents should be sworn in before the National Assembly, and if that’s not possible then before the Supreme Court.

Former Supreme Court magistrate Roman Duque Corredor said a president cannot delegate the swearing-in to anyone else and cannot take the oath of office outside Venezuela. A president could still be sworn in even if temporarily incapacitated, but would need to be conscious and in Venezuela, Duque told The Associated Press.

If a president-elect is declared incapacitated by lawmakers and is unable to be sworn in, the National Assembly president would temporarily take charge of the government and a new presidential vote must be held within 30 days, Duque said.

Chavez said Saturday that if an election had to be held, Maduro should be elected president.

The dramatic events of this week, with Chavez suddenly taking a turn for the worse, had some Venezuelans wondering whether they were being told the truth because just a few months ago the president was running for his fourth presidential term and had said he was free of cancer.

Lawyer Maria Alicia Altuve, who was out in bustling crowds in a shopping district of downtown Caracas, said it seemed odd how Maduro wept at a political rally while talking about Chavez.

“He cries on television to set up a drama, so that people go vote for poor Chavez,” Altuve said. “So we don’t know if this illness is for that, or if it’s that this man is truly sick.”

Some Chavez supporters said they found it hard to think about losing the president and worried about the future. His admirers held prayer vigils in Caracas and other cities this week, holding pictures and singing hymns.

Chavez has undergone four cancer-related surgeries since June 2011. He has also undergone months of chemotherapy and radiation treatments. Throughout his treatments, Chavez has kept secret some details of his illness, including the exact location and type of the tumors.

Ecuadorean President Rafael Correa wished his close ally the best, while also acknowledging the possibility that cancer might end his presidency. “Chavez is very important for Latin America, but if he can’t continue at the head of Venezuela, the processes of change have to continue,” Correa said at a news conference in Quito.

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Associated Press writer Christopher Toothaker contributed to this report.

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Most Googled in 2012: Whitney, PSY, Sandy

LOS ANGELES (AP) — The world’s attention wavered between the tragic and the silly in 2012, and along the way, millions of people searched the Web to find out about a royal princess, the latest iPad, and a record-breaking skydiver.

Whitney Houston was the “top trending” search of the year, according to Google Inc.’s year-end “zeitgeist” report. Google‘s 12th annual roundup is “an in-depth look at the spirit of the times as seen through the billions of searches on Google over the past year,” the company said in a blog post Wednesday.

People around the globe searched en masse for news about Houston‘s accidental drowning in a bathtub just before she was to perform at a pre-Grammy Awards party in February.

Google defines topics as “trending” when they garner a high amount of traffic over a sustained period of time.

Korean rapper PSY’s “Gangnam Style” music video trotted into second spot, a testament to his self-deprecating giddy-up dance move. The video is approaching a billion views on YouTube.

Superstorm Sandy, the damaging storm that knocked out power and flooded parts of the East Coast in the midst of a U.S. presidential campaign, was third.

The next biggest trending searches globally were a pair of threes: the iPad 3 tablet from Apple Inc. and Diablo 3, a popular video game.

Rounding out the Top 10 were Kate Middleton, who made news with scandalous photos and a royal pregnancy; the 2012 Olympics in London; Amanda Todd, a Canadian teen who was found dead of an apparent suicide in October after being bullied online; Michael Clarke Duncan, the “Green Mile” actor who died of a heart attack in September at age 54; and “BBB12,” the 12th edition of “Big Brother Brasil,” a reality show featuring scantily clad men and women living together.

Some trending people, according to Google, were:

— Felix Baumgartner, an Austrian skydiver who became the first to break the sound barrier without a vehicle with a 24-mile plummet from Earth’s stratosphere;

— Jeremy Lin, the undrafted NBA star who exploded off the New York Knicks bench and sparked a wave of “Linsanity”;

— Morgan Freeman, the actor whose untimely death turned out not to be true.

The Internet also continued its rise as a popular tool for spreading addictive ideas and phrases known as “memes.” Remember LOL? If you don’t know what it means by now, someone may “Laugh Out Loud” at you.

This year, Facebook said its top memes included “TBH (To Be Honest),” ”YOLO (You Only Live Once),” ”SMH (Shake My Head).” Thanks to an endlessly fascinating U.S. presidential campaign, “Big Bird” made the list after Republican candidate Mitt Romney said he might consider cutting some funds for public broadcasting.

Yahoo said its own top-searched memes for the year included “Kony 2012,” a reference to the short film and campaign against Ugandan militia leader Joseph Kony; “stingray photobomb” for an unusual vacation snapshot that went viral; and “binders full of women,” another nod to Romney for his awkward description of his search for women cabinet members as Massachusetts’ governor.

And people were happy to pass on popular Twitter posts by retweeting them. According to Twitter, the year’s most popular retweets were President Barack Obama‘s “Four more years,” and Justin Bieber’s farewell to six-year-old fan Avalanna Routh, who died of a rare form of brain cancer: “RIP Avalanna. i love you”.

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Why Netflix’s future is in “House of Cards,” “Arrested Development” – not Disney

LOS ANGELES/NEW YORK (TheWrap.com) – Netflix hailed as a “game-changer” its landmark deal last week to bring Disney movies to the streaming service. But while that deal may be significant, it pales in importance next to another looming development – the February debut of its original series “House of Cards.”

The economic benefits of the Disney deal, which gives the company streaming rights to much of Disney‘s catalog and straight-to-DVD movies as well as the exclusive rights to the studio’s new movies from 2016 to 2018, won’t be felt for years.

But the rollout of new, made-for-Netflix shows, which moves the company into a game owned by broadcast and cable – and follows a model set by everyone from HBO to AMC – will be a near-term bellwether of the company’s future success, analysts and observers say.

“You don’t identify a movie you watch on TV with a channel, but you definitely identify an original series with a channel,” Michael Pachter, an analyst with Wedbush Securities, told TheWrap. “What Netflix is doing with its original series is getting something exclusive that makes you have to go to Netflix if you want to see it. It’s branding.”

They include the long-awaited rebirth of cult favorite “Arrested Development” and original pieces like Eli Roth’s “Hemlock Grove,” Jenji Kohan’s “Orange Is the New Black” and “House of Cards,” from director David Fincher and starring Kevin Spacey.

Like “Lilyhammer,” all episodes of the shows’ first seasons will be released at once, allowing for binge viewing by Netflix subscribers.

The Disney deal is momentous in that it marks the first time a digital pay-TV distributor has earned exclusive rights to a major studio’s new releases. Both analysts and studio executives say Netflix will pay more than $ 300 million a year for those rights, a startling sum for a company that has minimized the importance of films. Netflix has declined to discuss any figures.

Some analysts argue the Disney deal is a positive development, but one that will not move the needle when it comes to attracting new members.

“Netflix customers will like it when Disney movies show up, but not many people will want to sign up for Netflix because they have 15 new movies a year I want to see,” Pachter said.

That’s why Netflix bankrolled “Arrested Development,” a show canceled by Fox in 2006 that still has a small but loyal audience, one that will assuredly watch the new season on Netflix. That’s also why it has invested in so many new shows from established artists like Kohan, who created “Weeds,” and Roth, a successful horror filmmaker.

While the company’s first foray into original programming – Steven Van Zandt’s “Lilyhammer” – didn’t make much of a splash, the new shows debuting next year look far more promising.

It also has committed a reported $ 100 million for two seasons of “House of Cards,” as well as offering complete creative freedom to Fincher and his team.

The money the streaming service spends on its own shows is a pittance compared to what it shells out in licensing deals, but that original content will distinguish Netflix from competitors in broadcast, like HBO, and in digital, like Amazon.

“Everybody is trying to get their brand to the top of people’s minds, and sometimes that requires a substantial expenditure and doing something different, like original production,” Bill Carroll, vice president and director of programming at Katz Television Group, told TheWrap.

More than any of its competitors in the streaming-video market, Netflix is attempting to transform itself into a digitized form of HBO, which began by airing studio movies.

HBO later added lower-cost programming, such as stand-up comedy shows, and eventually original series and films. Showtime, Starz and others soon followed.

Because it is not locked into a schedule, Netflix can host an unlimited amount of programming and owns a wealth of information about its subscribers to tailor its offerings to specific viewers and track their success.

Figuring out just what constitutes a “hit,” however, will be difficult. As it has with previous original shows like “Lilyhammer,” Netflix will not release viewing numbers for its upcoming shows. The company stresses that immediate viewing is less important than developing a loyal following over time.

As for the Disney deal, Netflix already had rights to films from that studio and Sony under an agreement with Starz, which in September 2011 opted not to renew its deal.

“They got something they used to have and had to pay a lot more money for it,” Seth Willenson, a library-valuation expert, producer and former studio executive told TheWrap.

So what changed? Exclusivity.

Disney’s new releases will appear on Netflix during the same window when they would have been showing on an HBO or another pay channel. It also means that new rivals, such as Amazon and Hulu Plus, won’t be getting the latest “Avengers” sequel at the same time – or the upcoming series of new “Star Wars” films.

“The argument is that what they are getting now from Disney will only be on Netflix,” Vasily Karasyov, an analyst with Susquehanna told TheWrap. “What they were getting before was only on Starz. It’s more exclusive. They are trying to do what Starz did in the ’90s and buy up rights and put it on the map.”

At the UBS conference last week in New York, Chief Creative Officer Ted Sarandos teased the possibility of pursuing exclusive deals with more studios as well.

This new attraction to movies represents a change of tune for the Los Altos, Calif.-based company. After all, Netflix has been publicly dismissive in recent months of film’s importance to its service, stressing its viewers’ penchant for binge-watching television shows, like AMC’s “Breaking Bad” and “Mad Men.”

About 60 percent of Netflix viewing time is spent on TV, a number that has only grown in recent years. Exclusivity increasingly motivates its decision-making on the TV side as well, which is one reason it allowed its deal with A&E Networks to expire in September, taking shows like “Storage Wars” and “Hoarders” off Netflix.

And nothing is more exclusive than content you fund yourself.

“It wants content unique to its platform,” Karasyov said. “No one says, ‘Come to my website because we have the same stuff everyone else does.’”

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“Dancing with the Stars” Brooke Burke says she is cancer free

LOS ANGELES (Reuters) – “Dancing with the Stars” co-host Brooke Burke said on Wednesday that medical tests indicate she is free of thyroid cancer.

“I just got the results back from all of my tests and great news – the thyroid cancer has been removed from my body and all my lymph nodes are clear,” Burke, 41, said in her blog on the website Modernmom.com.

“So I’m hoping that this is the end of the story. Woohoo!!! And thank GOD!” the former model added.

Burke, a former winner of ABC’s popular celebrity ballroom dancing competition, underwent surgery just over a week after the season finale of “Dancing with the Stars” on November 27.

The mother of four posted a picture of herself in Wednesday’s blog entry with a small bandage on her throat. She said the surgery will leave her with a large scar across her neck.

The thyroid is a gland in the neck that produces hormones that regulate vital body functions, such as heart rate and blood pressure.

(Reporting by Eric Kelsey; Editing by Jill Serjeant and Nick Zieminski)

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Fed sends clearer signal on keeping rates low

WASHINGTON (AP) — The Federal Reserve sent its clearest signal to date Wednesday that it will keep interest rates super-low to boost the U.S. economy even after the job market has improved significantly.

The Fed says it plans to keep its key short-term rate near zero at least until the unemployment rate drops below 6.5 percent — as long as expected inflation remains no more than 2.5 percent. Unemployment is now 7.7 percent. Annual inflation is about 2 percent.

That plan adds detail to what the Fed had said before: that it expects to keep the rate low until at least mid-2015.

In a statement Wednesday after its final policy meeting of the year, the Fed also said it will keep spending $ 85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth.

The Fed will spend $ 45 billion a month on long-term Treasury purchases to replace a previous bond-purchase program of an equal size. And it will keep buying $ 40 billion a month in mortgage bonds.

“The Fed has become more explicit and more transparent,” said Steven Wood, chief economist at Insight Economics. “This should provide the markets with much more clarity around monetary policy action in the upcoming year.”

With its new purchases of long-term Treasurys, the Fed’s investment portfolio, which is nearly $ 3 trillion, would swell to nearly $ 4 trillion by the end of 2013 if its bond purchase programs remain in place.

The policies are intended to help an economy that the Fed says is growing only modestly.

Stocks and bond yields rose after the Fed’s statement was released. The Dow Jones industrial average was little changed just before the Fed news crossed at 12:30 p.m. Eastern time and jumped 69 points shortly after.

The yield on the benchmark 10-year Treasury note rose to 1.69 percent from 1.65 percent as investors sold ultra-safe investments and moved money into stocks.

The Fed’s plan to keep stimulating the economy at least until unemployment has reached 6.5 percent is intended to reassure consumers, companies and investors, said Joseph Gagnon, a former Fed official who is a senior fellow at the Peterson Institute for International Economics.

Having only a target date of mid-2015 for any increase in interest rates “sounded gloomy,” as if the economy would remain weak until then, Gagnon said. Specifying an unemployment rate — close to a normal rate of 6 percent or less — makes clear that the Fed will keep stimulating the economy even after the job market has strengthened.

“This is trying to get away from that sense of ‘Oh, my God, this is all about gloom and doom,’ ” Gagnon said.

The Fed’s new plan to link any rate increase to specific levels of unemployment and inflation mirrors a proposal pushed by Charles Evans, president of the Federal Reserve Bank of Chicago.

Updated forecasts that the Fed released Wednesday illustrate why it thinks it should continue stimulating the economy. It expects unemployment to remain at least 7.4 percent next year and 6.8 percent by the end of 2014. The earliest it sees unemployment dropping below 6.5 percent is the end of 2015.

It expects the economy to grow no more than 3 percent next year before picking up to 3.5 percent in 2014 and 3.7 percent in 2015.

The Fed said it can pursue the aggressive stimulus programs because inflation remains below its target. Its statement was approved on an 11-1 vote. Jeffrey Lacker, president of Federal Reserve Bank of Richmond, objected for the eighth time this year.

The meeting was held against the backdrop of the looming “fiscal cliff,” the sharp tax increases and spending cuts that will hit the economy in January if Congress and President Barack Obama are unable to reach an agreement this month to avert them.

Bernanke has said that the Fed’s efforts will not be able to rescue the economy if the budget negotiations fail and the country does go over the fiscal cliff.

Fears of the cliff have led some U.S. companies to delay expanding, investing and hiring. Manufacturing has slumped. Consumers have cut back on spending. Unemployment remains elevated. If higher taxes and government spending cuts were to last for much of 2013, most experts say the economy would sink into another recession.

The latest bond-buying program would replace an expiring program called Operation Twist. With Twist, the Fed sold $ 45 billion a month in short-term Treasurys and used the proceeds to buy the same amount in longer-term Treasurys.

Twist didn’t expand the Fed’s investment portfolio, it just reshuffled the holdings. But the Fed has run out of short-term securities to sell. So to maintain its pace of long-term Treasury purchases and to keep long-term rates low, it must spend more and increase its portfolio.

The Fed’s portfolio totals nearly $ 2.9 trillion — more than three times its size before the 2008 financial crisis.

The Fed has launched three rounds of bond purchases since the financial crisis hit. In announcing a third program in September, the Fed said it would keep buying mortgage bonds until the job market improved substantially.

Skeptics note that rates on mortgages and many other loans are already at or near all-time lows. So any further declines in rates engineered by the Fed might offer little economic benefit.

Inside and outside the Fed, a debate has raged over whether the Fed’s actions have helped support the economy over the past four years, whether they will ignite inflation later and whether they should be extended.

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North Korea’s new leader burnishes credentials with rocket

SEOUL/TOKYO (Reuters) – North Korea successfully launched a rocket on Wednesday, boosting the credentials of its new leader and stepping up the threat the isolated and impoverished state poses to its opponents.

The rocket, which North Korea says put a weather satellite into orbit, has been labeled by the United States, South Korea and Japan as a test of technology that could one day deliver a nuclear warhead capable of hitting targets as far as the continental United States.

“The satellite has entered the planned orbit,” a North Korean television news-reader clad in traditional Korean garb triumphantly announced, after which the station played patriotic songs with the lyrics “Chosun (Korea) does what it says”.

The rocket was launched just before 10 a.m. Korea time (9 p.m. ET on Tuesday), according to defense officials in South Korea and Japan, and easily surpassed a failed April launch that flew for less than two minutes.

The North American Aerospace Defense Command (NORAD) said that it “deployed an object that appeared to achieve orbit”, the first time an independent body has verified North Korean claims.

North Korea followed what it said was a similar successful launch in 2009 with a nuclear test that prompted the United Nations Security Council to stiffen sanctions that it originally imposed in 2006 after the North’s first nuclear test.

The state is banned from developing nuclear and missile-related technology under U.N. resolutions, although Kim Jong-un, the youthful head of state who took power a year ago, is believed to have continued the state’s “military first” programs put into place by his deceased father Kim Jong-il.

North Korea lauded Wednesday’s launch as celebrating the prowess of all three Kims to rule since it was founded in 1948.

“At a time when great yearnings and reverence for Kim Jong-il pervade the whole country, its scientists and technicians brilliantly carried out his behests to launch a scientific and technological satellite in 2012, the year marking the 100th birth anniversary of President Kim Il Sung,” its KCNA news agency said.

Washington condemned Wednesday’s launch as a “provocative action” and breach of U.N. rules, while Japan’s U.N. envoy called for a Security Council meeting. However, diplomats say further tough sanctions are unlikely to be agreed at the body as China, the North’s only major ally, will oppose them.

“The international community must work in a concerted fashion to send North Korea a clear message that its violations of United Nations Security Council resolutions have consequences,” the White House said in a statement.

Japan’s likely next prime minister, Shinzo Abe, who is leading in opinion polls ahead of an election on December 16 and who is known as a North Korea hawk, called on the United Nations to adopt a resolution “strongly criticizing” Pyongyang.

BEIJING BLOCK

China had expressed “deep concern” prior to the launch which was announced a day after a top politburo member, representing new Chinese leader Xi Xinping, met Kim Jong-un in Pyongyang.

On Wednesday its tone was measured, regretting the launch but calling for restraint on possible counter-measures, in line with previous policy when it has effectively vetoed tougher sanctions.

“China believes the Security Council’s response should be cautious and moderate, protect the overall peaceful and stable situation on the Korean peninsula, and avoid an escalation of the situation,” Chinese Foreign Ministry spokesman Hong Lei told journalists.

Bruce Klingner, a Korea expert at the Heritage Foundation, told a conference call: “China has been the stumbling block to firmer U.N. action and we’ll have to see if the new leadership is any different than its predecessors.”

A senior adviser to South Korea’s president said last week it was unlikely there would be action from the U.N. and that Seoul would expect its allies to tighten sanctions unilaterally.

Kim Jong-un, believed to be 29 years old, took power when his father died on December 17 last year and experts believe the launch was intended to commemorate the first anniversary of the death.

The April launch was timed for the centennial of the birth of Kim Il Sung, the grandfather of its current ruler.

Wednesday’s success puts the North ahead of the South which has not managed to get a rocket off the ground.

“This is a considerable boost in establishing the rule of Kim Jong-un,” said Cho Min, an expert at the Korea Institute of National Unification.

There have been few indications the secretive and impoverished state, where the United Nations estimates a third of the population is malnourished, has made any advances in opening up economically over the past year.

North Korea remains reliant on minerals exports to China and remittances from tens of thousands of its people working on labor projects overseas.

The 22 million population often needs handouts from defectors who have escaped to South Korea in order to afford basic medicines.

Given the puny size of its economy – per capita income is less than $ 2,000 a year – one of the few ways the North can attract world attention is by emphasizing its military threat.

Pyongyang wants the United States to resume aid and to recognize it diplomatically, although the April launch scuppered a planned food deal.

It is believed to be some years away from developing a functioning nuclear warhead although it may have enough plutonium for around half a dozen nuclear bombs, according to nuclear experts.

The North has also been enriching uranium, which would give it a second path to nuclear weapons as it sits on vast natural uranium reserves.

“A successful launch puts North Korea closer to the capability to deploy a weaponized missile,” said Denny Roy, a senior fellow at the East-West Center in Hawaii.

“But this would still require fitting a weapon to the missile and ensuring a reasonable degree of accuracy. The North Koreans probably do not yet have a nuclear weapon small enough for a missile to carry.”

Pyongyang says that its development is part of a civil nuclear program, but has also boasted of it being a “nuclear weapons power”.

(Additional reporting by Jumin Park and Yoo Choonsik in SEOUL; David Alexander, Matt Spetalnick and Paul Eckert in WASHINGTON; Linda Sieg in TOKYO; Sui-Lee Wee in BEIJING; Rosmarie Francisco in MANILA; Writing by David Chance; Editing by Raju Gopalakrishnan)

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Web host Go Daddy appoints former Yahoo executive as CEO

(Reuters) – Go Daddy, one of the world’s biggest Internet hosting firms, appointed Yahoo Inc‘s former Chief Product Officer Blake Irving as chief executive.

He will take over from interim CEO Scott Wagner on January 7. Irving left Yahoo, where he headed a centralized products group that straddled several client types, on April 27.

“Blake Irving’s deep technology experience and his history of developing new cutting-edge products and leading large global teams make him a … compelling choice to drive Go Daddy to the next level of its … growth,” said Bob Parsons, Go Daddy’s executive chairman and founder.

Irving also served in various positions at Microsoft Corp from 1992 to 2007.

Go Daddy, which describes itself as the top provider of domain names, filed to go public in 2006 but withdrew its IPO due to poor market conditions.

(Reporting by Neha Alawadhi in Bangalore; Editing by Joyjeet Das, Maju Samuel)

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