Jonathan Arber
Kazaa settles up and goes legit: good luck!
Sharman Networks, the owner of the P2P filesharing software company Kazaa which has long been the target of legal action in both the US and Australia over copyright infringement, has reached a financial settlement with the recording industry. It has agreed to pay about $100m to the industry, in exchange for all outstanding lawsuits against it being dropped. It will continue operating, but as a legal music service. Kazaa was at one point thought to be the most popular P2P filesharing service worldwide, with around 4.5m users. Comment: There are two parts to this story. First, the settlement. The legal tide has slowly and inexorably been turning against Kazaa and filesharing companies like it for some time now, as heralded by the landmark Grokster-MGM decision in June 2005 (EuroView Daily, 20 September 2005). It is fairly unsurprising that Kazaa has chosen to settle up rather than continue to fight seemingly unwinnable legal battles. Indeed, while $100m is a hefty sum, the legal costs must have been crippling it, and had it come to a court ruling, Sharman could have been ordered to pay even higher damages. So far, so expected - Sharman is cutting its losses and making a run for it.But rather puzzlingly, the story doesn't end there. Apparently, Kazaa is now to be turned into a legal music service. Oh dear. It certainly isn't the first of the ex-illegal filesharing companies to attempt this, but perhaps it needs to take a closer look at the success, or rather lack of, that its peers have so far achieved. Many of those promised legitimate services have thus-far failed to launch, and those that have (such as iMesh) have been abject failures. Setting up a legitimate service will cost Kazaa a great deal of cash, both for licensing music content and for getting the necessary technology up and running, not to mention the hefty settlement. In addition, Kazaa's user base is made up of people who want to get their music and other content for free - how will it turn them into paying users? It will have to come up with something pretty impressive if it is to reform all those filesharers, not to mention compete with other legal services, such as iTunes. There have been rumours that it might offer free, ad-supported streaming content rather than downloads, but this model is yet to be proven, and hardly a good risk for a company with limited resources. Kazaa's user base has steadily been falling for some time due to the fact that it casually inserted spyware and adware in its software, while neglecting to inform its users. As a result, many have migrated to other filesharing platforms such as eDonkey and BitTorrent. So this victory is largely symbolic for the record industry - the hardcore filesharers will long ago have moved on, and Kazaa's remaining users will soon find another platform. However, it does emphasise the fact that the era of businesses based around illegal filesharing is well and truly over.
