Music industry stops sueing, starts buying? Exit for investors?
One year after landmark Grokster decision, file-sharing continues to grow, By John Boudreau
A year after the Supreme Court’s landmark Grokster decision — which set out to curb online theft of music and movies — illegal-file sharing is as popular as ever even as Silicon Valley technologists and Hollywood moguls continue their awkward embrace. The court’s unanimous decision that Internet file-sharing services can be sued if they encourage people to use their sophisticated software to steal copyrighted material was hailed as a victory by the entertainment world. But the ruling, which also detailed protections for technology companies, hasn’t stopped the lawsuits and acrimony between the two sides. The Recording Industry Association of America (RIAA) continues to file lawsuits against tech companies. And in just the last year, the association has filed some 6,000 suits against individuals it says are stealing material.
But changes are occurring, if for no other reason than the entertainment world needs the new distribution channels Silicon Valley can provide, while technology companies depend on content from rock stars and Hollywood to attract audiences.
“There are some people inside of record labels who admit that they are not doing the right thing in certain cases. There is some resistance” to the digital era, said Ali Aydar, the first employee of Napster, the pioneering peer-to-peer music sharing network that eventually went bankrupt after battling the record industry. (A different incarnation of the formerly Redwood City-based Napster was launched in 2003 as a music subscription service.)
Aydar now works with Napster’s co-founder Shawn Fanning at Snocap, a San Francisco company that has developed a technology to make file-sharing legal.
“But if you are able to show them how you can make them money, increase their exposure and respect their copyrights, then it’s really a no brainer,” he added.
Steve Jobs helped lead the way in showing a successful model of selling digital music through Apple Computer’s popular iTunes online store, then sealing deals with entertainment companies to offer up TV shows. Hollywood has started to offer video through its own online sites. And the industry has even found a common cause with file-sharing technology: In the spring, Warner Bros. agreed to offer video through BitTorrent, the San Francisco-based peer-to-peer technology company whose software code has been used by pirates to illegally trade movies and music. “It was never BitTorrent’s intent to circumvent copyrights,” said Ashwin Navin, president of BitTorrent. “That made us a partner, rather than an enemy.”
These early deals with Internet companies do not mean the entertainment industry has abandoned using its courtroom muscle as a weapon. Other file-sharing services have shut down since the Supreme Court’s MGM vs. Grokster ruling. And the recording industry recently filed a lawsuit against XM Satellite Radio over its new device that allows people to store music. Peer-to-peer file-sharing companies are not “consuming all the digital oxygen in the marketplace,” said Mitch Bainwol, chief executive of the RIAA, whose members saw CD sales plummet 30 percent after Napster’s 1999 launch. “The legal marketplace is getting some traction, and that is a basis for our hope in the future.”
Technologists, though, don’t see dragging file-sharing companies into court as the answer.“Shutting down peer-two-peer networks was like taking a half-course of antibiotics every six months,” said Tom McInerney, co-founder of Guba.com, a video site that just announced an agreement with Warner Bros. to distribute TV shows and movies. “It just led to the evolution of more decentralized networks that are more efficient and more difficult to shut down.”
Meanwhile, file-sharing, most of which is illegal, continues to grow. Nearly 10 million users worldwide simultaneously clicked into peer-to-peer technology last month — 12 percent more than May, 2005, according to BigChampagne, a Los Angeles research firm that monitors file-sharing. “The social networking aspect of the Internet is continuing to blossom and no landmark court decision or watershed event changes that,” BigChampagne Chief Executive Eric Garland said.
Michael Weiss, chief executive of StreamCast, which makes Morpheus software and was a Grokster co-defendant, believes the two worlds can work together and create business models. Weiss pointed to a 2005 survey by U.K. research company, the Leading Question, which found people who illegally download music are voracious consumers of digital media — so much so they are apt to spend more than four times more on legal downloads than those who never engage in piracy. After years of legal skirmishes, StreamCast and the entertainment industry will be back in court next week, though Weiss said he is “cautiously optimistic” the two sides will eventually find common ground. “Everyone in the peer-to-peer space and in the entertainment industry would like to find that magic solution,” Weiss said. He added, “It’s a shame we have to go through all this pain and suffering to get there.”
http://www.mercurynews.com/mld/mercurynews/news/14908474.htm