Despite Court ruling, file sharing still thrives

'Grokster ruling' introduced liability
The Recording Industry Association of America, a lobbying group that represents the major recording companies, credits the so-called Grokster ruling with helping to clarify the legal roadmap for copyright in the Internet Age and motivating some of the file-sharing operators to close down or go legit.

Without it, or the music companies' roughly 18,000 lawsuits filed against individual file-sharers since 2003, online piracy would be even worse, said Mitch Bainwol, chairman of the Washington-based group.

"We don't suggest that (unauthorized file-sharing) has been conquered, far from it," Bainwol said. "But it's not fundamentally decapitating the legal marketplace from growing in a pretty robust fashion."

Sales from music downloads, online subscription services and mobile phone ringtones have helped boost revenues and offset declines in CD sales for some labels.

By raising the potential for liability by online file-sharing companies, the Grokster ruling served to discourage private investment in them, suggested Jonathan Potter, executive director of the Digital Media Association, which counts Apple Computer Inc. and Microsoft Corp. among its members.

"It's fair to say there's more investment and more attraction and more potential in the (licensed) download services, the online subscription services, as a result of the Grokster decision," said Potter.

Licensed P2P not evolving as expected
One slice of the online music market that didn't grow as expected was that of licensed file-sharing services. The idea was some free-for-all networks would make deals with entertainment companies to sell music downloads and limit what users could share online.

Sam Yagan, chief executive of MetaMachine Inc., told the Senate Judiciary Committee last year that he would transform his firm's eDonkey software into a licensed music service rather than face the threat of litigation in the wake of Grokster.

But with 2006 nearly half gone, eDonkey remains an online free-for-all. A call to Yagan was not immediately returned.

Another licensed P2P service, Mashboxx, has yet to launch, despite suggesting it would do so as far back as early 2005. The firm didn't immediately return calls.

"The (licensed) P2P market did not evolve in the way a lot of people thought it would," said Ali Aydar, chief operating officer of San Francisco-based Snocap Inc. "A lot of the unauthorized P2P networks are still out there operating just as they were a year go."

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