George Antunes
Fri, 28 Jul 2006 13:04:48 -0700
After Settling, Kazaa Promises A Legal Format By SARAH MCBRIDE Wall Street Journal
July 28, 2006; Page A9 http://online.wsj.com/article/SB115400080714018951.html?mod=home_whats_news_us Sharman Networks Ltd.'s Kazaa, a file-sharing service that helped introduce millions to online music theft, has agreed to settle litigation with the entertainment industry for more than $115 million. The settlement represents the waning of the era of Internet businesses facilitating unauthorized music downloading. The practice of file-sharing itself, however, will likely continue as users turn to grass-roots services like FrostWire that are created by fun-seekers who don't rely on advertising or other commercial support. But when profit is removed from the equation, it's "a real win" for the entertainment business, said Eric Garland, president of BigChampagne LLC, a service that tracks file-sharing. Napster, created in 1999, was the first file-sharing service that became popular for illegally downloading music. After it was shut down, Kazaa, StreamCast Networks Inc.'s Morpheus, and Grokster took off. After lawsuits from the record industry, Napster shut down and the name now belongs to a legitimate music download service. Grokster was purchased last year by Mashboxx, which expects to launch a legitimate file-sharing music service later this year. Kazaa was created by Janus Friis and Niklas Zennstrom in 2000, both based at the time in Holland, along with a team of Estonian programmers. The pair avoided travel to the U.S. since 2001 because they feared being served legal papers, a worry that ends with the settlement. Under the terms of the settlement, Kazaa agreed to introduce filtering systems to ensure that people can no longer use Kazaa to pilfer copyrighted music and movie files. Sharman, based in the Pacific Island nation of Vanuatu, also said it would work with the entertainment companies to sell licensed content. A large portion of the settlement will be paid by Messrs. Friis and Zennstrom, who sold the service to Australia's Sharman Networks in early 2002. The total settlement involves payment of $115 million to record companies, plus a smaller undisclosed amount to movie companies. The specific contributions by the two Kazaa founders couldn't be determined. After the Kazaa sale to Sharman, Mr. Friis and Mr. Zennstrom founded Internet phone service Skype, which is based on the same underlying technology as Kazaa. Last year, they sold Skype to eBay Inc. for about $2.6 billion in cash and stock. Legal file-sharing will increasingly benefit from the entertainment industry's eagerness to adopt new technologies and efforts to encourage erstwhile thieves to start paying for their products. Bittorrent.com, iMesh.com, Mashboxx.com and PeerImpact.com are among the file-sharing services that have recently struck deals with movie studios and record labels to distribute their products for fees. The technology underlying peer-to-peer distribution cuts back on the bandwidth that companies need to distribute large files such as movies, making it cheaper to use than traditional download methods. But legal file-sharing services are fighting an uphill battle. At any given time this month, some nine million people were on peer-to-peer networks globally, most of them illegitimate, according to BigChampagne. The settlement yesterday ends global litigation against Kazaa dating back to 2001. Kazaa was a defendant in the Metro-Goldwyn-Mayer Studios v. Grokster Ltd. case decided last summer by the Supreme Court, which ruled unanimously that file-sharing companies may be liable for copyright infringement if their products encourage consumers to illegally swap songs and movies. The high court sent the case back to lower courts to decide whether the defendants had induced illegal activity. Last year, Grokster agreed to settle that case for $50 million and promised to go legitimate. That leaves just StreamCast's Morpheus as the sole remaining defendant in the case pending in federal court in Los Angeles. Earlier this month, U.S. District Judge Stephen Wilson, who is overseeing hearings in the case, commented that so far "the evidence is overwhelming in favor" of the plaintiffs. People familiar with the matter say his comments encouraged StreamCast to return to the negotiating table for a settlement. A spokesman for StreamCast declined to comment. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list medianews@twiar.org To unsubscribe send an email to: [EMAIL PROTECTED]