[opendtv] News: A Supreme Court Showdown for File Sharing
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Mon, 28 Mar 2005 07:48:39 -0500
http://www.nytimes.com/2005/03/28/technology/28grokster.html?th=&emc=th&pagewanted=print&position=
March 28, 2005
A Supreme Court Showdown for File Sharing
By SAUL HANSELL and JEFF LEEDS
For someone whose business is under attack in the United States
Supreme Court, Mark Gorton was remarkably serene last week, sprawled
on a couch in his Manhattan office.
Mr. Gorton's company, the Lime Group, publishes LimeWire, one of the
most popular software programs used to trade music, video and other
files over the Internet.
Tomorrow, the Supreme Court will hear arguments in a case in which
the recording and film industries seek to hold makers of file-sharing
software liable for the illegal copying and distribution of
copyrighted material online. The case is against other file-sharing
services, Grokster and Morpheus, which won in lower courts, but Mr.
Gorton said that if those rulings were overturned, it could make
LimeWire vulnerable.
"If the Supreme Court says it is illegal to produce this software,
LimeWire the company will cease to exist," Mr. Gorton said. "But
LimeWire the software will continue to be on the Net no matter what
we do in this business."
The case, M.G.M. v. Grokster, is in many ways the culmination of
five years of escalating legal, technical and rhetorical attacks
against file-sharing systems and their users by the music industry.
It is being eagerly followed by a range of media and technology
companies because the court may use this case to redefine the reach
of copyright in the era of iPods and TiVo.
But no matter how the court rules, both music executives and
file-sharing advocates like Mr. Gorton agree that it will probably
always be possible for fans to find loads of free music with a few
clicks of a mouse.
Still, the case will determine whether file sharing can continue to
be promoted by companies like LimeWire and Sharman Networks, which
makes Kazaa, that operate in public and earn profits from advertising
and software sales, or whether the software will be written and
distributed by shadowy players on the fringes of the law.
"I think this court decision is a game changer. It will dramatically
affect behavior, and behavior will dramatically affect how music is
sold and distributed and consumed," said Andrew Lack, chairman of
Sony BMG Music Entertainment, which releases music by stars like
Usher and Bruce Springsteen. "It will clarify the law and establish
right from wrong."
If the music industry loses, it will likely redouble its efforts to
sue individuals trading files and intensify its technical efforts to
disrupt the networks. So far, those tactics have been modestly
effective at best, and a loss in the Supreme Court may well erode the
industry's control of copyrighted material further.
Yet, since the court can do little to alter the spread of technology
or the interests of copyright owners to protect their material, many
expect something resembling a permanent war.
"We are guerrillas fighting the despotic regime," said Alan Morris,
the executive vice president of Sharman Networks, the Australian
company behind Kazaa, once the leading file-sharing network and the
recording industry's leading target, which is being sued by the music
industry in both American and Australian courts. "They have some
quite heavy guns, but we can see where they are firing from, " Mr.
Morris said.
There are some who say that a court ruling, in any direction, may
also help define the terms of a cease-fire. The end of litigation
could rekindle the back-channel negotiations between some music
labels and some file-sharing services to create ways for users to
trade some files free while paying for others.
Some executives have discussed a plan in which users could download
free, low-quality tracks with an offer to buy higher-quality versions.
The two biggest music companies, Universal Music Group, a unit of
Vivendi Universal, and Sony BMG, for example, recently signed deals
to provide music through Snocap, a software package intended to
control the swapping of unauthorized songs.
Snocap also happens to be the creation of Shawn Fanning, the founder
of Napster, the original file-sharing, or peer-to-peer, service.
"Peer-to-peer is the way that people access content," said Mr.
Fanning. "There is a void in the marketplace, there are people who
are willing to pay for it."
Of course, getting people to pay anything is an enormous challenge.
There are about 60 million people using file-sharing services in the
United States, with roughly 8.5 million logged on at a time, said
Eric Garland, chief of BigChampagne, which studies traffic on
file-sharing networks.
While some surveys have suggested that file-sharing activity slowed
in 2003, when the Recording Industry Association of America began to
sue individual users for trading copyrighted songs, Mr. Garland said
that the number of people logging on to file-sharing networks had
risen steadily and that he expected the number to increase by 10
percent or more this year.
The music industry, meanwhile, is recovering from a long slump. It
sold 814 million CD's, cassettes and units of music in other formats
last year in the United States, up 2 percent, its first increase in
five years, the recording industry association said. It also sold 140
million digital tracks in the United States, the association said.
But the industry says it thinks it would have seen a bigger sales
rebound had it not been for online piracy.
The recording industry is exploring ways to release new CD's with
technology that will restrict copying. Sony BMG is expected to use
such technology on at least half their new recordings in the United
States by the end of this year.
Some independent record labels are taking a less confrontational
stance and trying to tap into the popularity of file-sharing networks
by selling their music on them, often alongside pirated versions of
the same songs.
Kazaa has been pursuing that idea for several years through an
affiliated company called Altnet, which allows labels to put
authorized files of songs on its networks. These files are either
offered for sale, or they are free for promotional purposes, often
with technology that restricts their use to a certain time period.
Altnet is still small, with revenues of less than $1 million in
2004, but it has been used by some independent labels, including V2,
the label of Richard Branson's Virgin Group.
V2 sells songs by its acts like the Stereophonics and Moby through
Altnet for 99 cents each because file-sharing networks have eclipsed
MTV and radio as the place fans discover new music, said Jeff
Wooding, its director of marketing and new media. He said that the
move would not stop piracy, but could be used to promote the bands'
merchandise and concert tickets as well as earn something for
download sales.
"No one's kidding themselves that we expect to convert a whole lot of
users," Mr. Wooding said, but he added that he thought many file
sharers would buy merchandise and concert tickets from bands they
liked and that some might eventually purchase a CD.
Altnet is also experimenting with an advertising-driven format
developed by Intent MediaWorks, which buys rights to songs from
artists for distribution in a special file format. The first time a
user tries to play the song, the file opens a Web page with an
advertisement on it. Intent MediaWorks is also working on ways to
insert audio commercials into the songs.
"The idea for the advertising model is to transform file-sharing
networks into radio," said Lee Jaffe, president of Altnet, which is
distributing Intent MediaWorks' files. "But unlike radio where
artists and labels don't get paid, they will be able to share the
revenue."
Major recording labels, however, have been very resistant to doing
deals with Altnet and similar systems, fearing that such alliances
might undercut their lawsuits against the file-sharing networks. They
have demanded that the networks remove all the unauthorized songs
before they do any business with them.
Shawn Fanning's Snocap system is an attempt to help file-sharing
networks do just that. It creates a way for copyright owners to
register the songs they own. The networks, using a technology called
acoustic fingerprinting, can identify whether a file being downloaded
is in a copyrighted registry. The copyright owner can choose to block
the download, offer the song for sale or offer a limited-use version
of the song as substitute.
Snocap, in addition to endorsements from Universal Music and Sony
BMG, will also be used by Mashboxx, a new file-sharing service
started by Wayne Russo, the former president of Grokster, which is
based in Nevis, West Indies.
But it still faces some significant challenges. First, the company
has not released a working version of the software, and many
file-sharing advocates dismiss the concept as thoroughly unworkable.
"Snocap will fail miserably in the market," said Michael Weiss, chief
executive of StreamCast networks, which makes Morpheus.
"If I was looking for a download, and I got some sort of truncated
file with a message that says buy this or do that, I don't see why
anybody would embrace that," he said. "If you wanted to buy music,
you could go to the online stores that are doing a great job like
iTunes."
Mr. Russo said that his approach did not need to win over all
file-sharing users to make some money for him and the record
companies.
"There are 2.5 billion music files traded every month," he said. "If
we can capture 1 percent of that, 25 million files, and we convert 5
to 10 percent of those to paid, I am very happy."
Aside from these attempts to reach détente with the free file-sharing
networks, the recording industry knows it also needs new products and
new avenues for distribution.
It has, for instance, placed a hefty bet on DualDiscs, a new
two-sided CD format that features music on one side and video on the
other. "We are committed to giving consumers what they want,
legitimately and in a way that fairly compensates those that work so
hard to create content," said Zach Horowitz, president of Universal
Music Group, which releases music by acts like U2 and 3 Doors Down.
"If we win the case," Mr. Horowitz said, "all the efforts we are
making to launch compelling legitimate alternatives will gain
traction. There will be no turning back the clock in terms of the
countless ways we are making our music available to take advantage of
the new technologies."
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