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From NewsFactor Technology:

File-Sharing Drops as Industry Battles Rage

James Maguire, www.NewsFactor.com

Judging from reports of falling P2P site usage, the recording industry's legal tactics are working. Since this spring, when the record industry began suing college students who were high volume file-sharers, traffic at leading P2P site Kazaa has fallen 41 percent, according to Nielsen/NetRatings.

Traffic to Kazaa fell to about 3.5 million unique visitors in the week ending September 21st from 6.5 million in the week ending June 29th. In the same period, traffic to Morpheus fell to 261,000 unique users from 272,000.

"There's an element of fear going on," Yankee Group analyst Dominic Ainscough told NewsFactor. "At the same time, there's a greater number of options for paid download."

Wide Legal Net

P2P traffic may also be lower due to the 261 lawsuits filed by the Recording Industry of America on September 8th against individual file-sharers. The RIAA has reached settlements with 64 people, most of them for less than US$5,000.

But the lawsuits created a backlash of negative publicity for the recording industry -- among its targets were a 12-year-old girl and a retired teacher whose PC was incompatible with the network she allegedly was using.

"Suing a 12-year-old girl -- that's child abuse," Grokster president Wayne Rosso told NewsFactor.

Yet the continued significant usage of paid download services shows the public relations fallout is limited, Ainscough said. "There may be a backlash in terms of perception, but it's not affecting consumers' wallets."

As congressional hearings on file-sharing issues proceed, the RIAA says it now will begin sending letters to individuals before beginning legal action.

Publicity Campaign

To bolster its anti file-sharing campaign, the RIAA has claimed P2P networks are used by child pornographers and identity thieves, and that the networks install spyware on users' systems.

In response, file-sharing trade group P2P United said it would work with legal authorities to combat child pornography on the networks and to protect the privacy of confidential material on users' PCs. The group also said it would encourage P2P users to be aware of copyright issues.

The members of P2PUnited are Grokster, Lime Wire, Blubster, BearShare, eDonkey 2000 and Morpheus.

Limiting Sharing

Spurning an RIAA request, P2P United said it would not install any technology in the P2P clients that limited users' ability to trade copyrighted material. The group claimed that this would infringe on legal methods of file-sharing and would be technically infeasible.

"I don't believe it can be done," Rosso said, even with some sort of digital-rights management (DRM) scheme.

"We're a platform, like Windows or Explorer," Rosso said. "There are lots of DRM files on peoples' hard drives -- that's something the content owner has control of."

Compulsory Licensing

Rosso said he had tried to negotiate a licensing agreement with the recording industry for use on the P2P networks.

The proposed paid service would be similar to that used by Apple's iTunes service. "It would float on top of P2P systems, and we would try to drive users to the paid model," he said.

"But what they want us to do is shut down our networks, and then they'll license us," Rosso said, explaining that he found the suggestion unworkable.

At this point, "we feel we have no choice to put pressure on Congress to force some sort of compulsory licensing" similar to radio, he said.