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Kazaa looks for salvation
NEW YORK (AP) -- Two Guy Trio's singer, Evan Gamble, doesn't mind that bootleg copies of his band's "Shelby Sugarcane" are spreading on the Internet through the Kazaa file-sharing system. A half-million fans have downloaded legal copies of the song through Kazaa, the Internet's leading bazaar. Illicit trading by a few million others is a minor nuisance. More important is Kazaa's ability to let an emerging pop-rock band like his find an audience. "Whether it's licensed or unlicensed, it's a fan," said Gamble, 21, a junior at the University of Texas. "We want people to hear the music, so they'll buy the album, so they will come to the show and request songs on the radio." Kazaa's owners at Sharman Networks Ltd. are trying to build a business out of giving stuff away on the Internet, so artists like Two Guy Trio can flourish. If only the major music labels would cooperate. Trying to gain acceptanceOf course, that would mean embracing a network engaged in what the entertainment industry considers massive digital theft. Instead, the industry has sued to shut it down. Sharman and its partner, Altnet, say the entertainment moguls ought to accept file-sharing as a viable distribution method. Altnet already offers a payment mechanism. Problem is, the songs that Altnet embeds with copy protection are but a trickle in the flood of pirated files available through Kazaa. Kevin Bermeister, Altnet's chief executive, says he has tried to establish a working relationship with music companies -- even after they sued. He says he has sometimes won the interest of executives, but never their lawyers. Maybe that's because Kazaa is exceeding the success of its ill-fated predecessor, Napster. Download.com distributes about 14 million copies of Kazaa software each month. At a typical moment, about 4 million Kazaa users are sharing some 800 million files -- movies, pictures, songs and more. Most are unauthorized. "I don't think it's legitimate to have a business model that depends on piggybacking on an unlawful enterprise," said Robert Schwartz, a Los Angeles lawyer who represents AOL Time Warner's music and movie units. (AOL Time Warner is the parent company of CNN.) Refusing to back downMatthew Oppenheim, the recording industry's senior vice president for business and legal affairs, compared Altnet's offer to a robber trying to sell security to a bank. "If this is a company that really wants to be in a legitimate business, they would get out of the illegitimate business first," Oppenheim said. But while they build that legitimate business, the companies behind Kazaa have refused to drop the free file-sharing, which brings them undisclosed advertising and other revenues. Altnet says it's better to ease users into something new before dropping the old. Search for songs on Kazaa and you get the authorized files on Altnet marked with an orange icon, alongside the regular shares in blue. After downloading an Altnet item, another click gets a license and informs of payments due. Altnet even developed a micro-payment system so you can enter a credit card number once and combine charges from future buys. In the case of Two Guy Trio, a music video costs just 10 cents and songs are free for 90 days, after which fans are encouraged to buy the album. Without a license, the song or video won't play. Few walk licensed roadThough the percentage of users walking the licensed road is still relatively low, Bermeister says it's increasing as folks get used to the process and Altnet makes payments easier. "Even though people trade content illegally on Kazaa, if they are doing sufficient volumes of legitimate business, what's the problem?" asks Gabe Zichermann of Trymedia Systems Inc., which distributes video games through Altnet. The bigger challenge is content. Since its launch in May, Altnet acquired about 800 items for licensed distribution -- mostly video games and obscure songs. Major movie and music libraries remain unavailable. "Sure, I'm frustrated," said Nikki Hemming, Sharman's chief executive. "The only thing preventing this product from being this amazing distribution mechanism is the lack of cooperation." Copyright holders led by major studios and labels consider Sharman and other companies behind Kazaa as villains, rather than potential partners. Countersuit filedLast month, a federal judge in Los Angeles agreed to hear the industry's lawsuit, determining that Sharman, based on a South Pacific island, is subject to U.S. copyright law. Sharman, whose main offices are in Sydney, Australia, countersued, accusing the entertainment industry of hoarding content in an illegal monopoly. Sharman also hired Washington lobbyist Philip S. Corwin to persuade Congress -- unsuccessfully so far -- to force content providers to license their works, as well as to establish user fees to cover lost royalties. The entertainment companies have set up their own subscription services like Movielink for movies, pressplay and MusicNet for music. Although consumers have frowned on their limited selections and usage restrictions, those ventures blame file-sharing for the tepid response. "They are illegal, illegitimate and free," said Michael Bebel, chief executive of pressplay. "It's making it difficult to convince people that they should even take the first step" of accepting a three-day free tryout. Similar to prohibition?But digital media analyst Phil Leigh at Raymond James & Associates sees an analogy with the end of prohibition, when drinkers returned to liquor stores and shunned bootleg booze. "They knew they were getting merchandise of quality, they didn't have to worry and their conscience wouldn't have been bothered," he said. "You'll find the same things with online music." Altnet, which charges artists to post their files, sells 500,000 licenses daily. For Sharman, which gets a cut, legal sharing offers its biggest revenue potential. The company won't reveal revenue figures. Ultimately, Kazaa's future depends on whether U.S. courts accept its argument -- demonstrated by Altnet -- that it has significant legal uses, just like videocassette recorders and photocopiers. "Actions speak louder than words," Hemming said. Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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