P-to-P vendors forge ahead with business plans

Under attack from the U.S. entertainment industry and some members of the U.S. Congress, the largest peer-to-peer (P-to-P) software vendors are forging ahead with business plans that some critics find ironic: the distribution of music and content licensed from the very industry that calls them "outlaws."

At a kick-off event Sept. 29, the six members of the newly formed P2P United lobbying group pushed for Congress to legalize the sharing of music through P-to-P software by setting up compulsory licensing that would require the entertainment industry to make its content available on P-to-P networks for a price. Congress needs to "hold a gun to the head" of the entertainment industry, Wayne Rosso, president of Grokster Ltd., said in an interview.

Most P-to-P vendors agree that the unauthorized trading of copyright material has to stop, Rosso said. "I think you'll find that most of us feel the future for us is in original content," he added. "There are two ways to stop piracy online: nuclear holocaust and licensing the content. Obviously, the RIAA (Recording Industry Association of America Inc.) has opted for nuclear holocaust."

Meanwhile, Sharman Networks Ltd., owner of the popular Kazaa Media Desktop P-to-P package, wants to persuade companies in the music and movie industries to voluntarily license content to them. Sharman Networks is pushing ahead with this business plan even as it sues those industries for what the company calls an industry-wide "conspiracy" to shut Kazaa out of the market of distributing licensed content.

P-to-P vendors say it's almost inevitable that the entertainment industry will embrace P-to-P as a distribution model. They argue that P-to-P, with most digital content residing on users' hard drives, is a more cost-effective and efficient model of distributing digital content then maintaining a large array of central servers. They also talk up P-to-P's "viral" marketing benefits, where users trust recommendations from other users more than products hyped by large companies.

The goal of Sharman Networks and its partner Altnet is to become the premier distributor of licensed -- that is, authorized -- digital entertainment, said Alan Morris, Sharman's executive vice president. P-to-P companies including the privately held Sharman and Grokster feature authorized downloads of some video games and music from some independent artists or labels, and they also carry advertising, through banner ads or pop-ups that users must endure if they don't want to pay for ad-free versions of the P-to-P software.

"We want to work with them," Morris said of his current opponents in the entertainment industry. "(Licensed content) is not a sideline for us. I don't need the hassle of fighting lawsuits ... just to make a few bucks on some advertising."

Critics of the current crop of P-to-P vendors say there's little chance that the entertainment industry will suddenly turn an about face and start working with the vendors it has been trying to sue into submission. Compulsory licensing, which P2P United members champion as an approach that would allow artists to be paid for files traded, hasn't been part of the extensive P-to-P debate in Congress this year, although hearings on the issue have been held in past years.