June 30, 2004 12:35 PM PDT

Does Kazaa matter?

The owners of the popular Kazaa file-swapping software have withstood assaults from the record industry for years, but now they're facing a new enemy that may be even harder to fight: competition.

When a federal judge shut down Napster in 2001, Kazaa parent Sharman Networks quickly stepped in as the replacement of choice, signing up millions of users and even surpassing its predecessor in some respects. Since then, however, newcomers such as eDonkey and BitTorrent have been coming on strong amid reports that millions of people are logging off Sharman's network.

Although it's too early to draw broad conclusions about Sharman's future, experts said many people appear to be shopping more intently than ever for file-swapping alternatives that incorporate improvements in peer-to-peer technology that have not yet made it onto Kazaa.


What's new:
Top file-swapping network Kazaa is facing lawsuits, junk downloads and strong rivals such as eDonkey and BitTorrent.

Bottom line:
File swappers are trading in Kazaa for a new generation of software, throwing a monkey wrench into Sharman's plans to turn its network into a legal and profitable media distribution channel.

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"At heart, most of these peer-to-peer users are lazy," said Chris Hedgecock, president of Zeropaid, a popular portal site dedicated to file-swapping services. "Kazaa was simply the easiest way to get things they were looking for. Now they're being frustrated. It's taking longer to get files, so they're looking elsewhere."

Having traded billions of files over Kazaa, file swappers are trading in the popular peer-to-peer client for a new generation of software, throwing a monkey wrench into Sharman's plans to turn its network into a legal and profitable media distribution channel. It's not clear how many people have jumped ship so far, but one recent study estimated that the service lost some 5 million users between November 2003 and February.

Signs of migration underscore the sometimes evanescent success of media rebels facing attacks from record labels and movie studios. Not only has Sharman itself been hit with lawsuits seeking to shut it down; thousands of its customers have been charged with civil copyright infringement violations, and media companies have flooded its network with fake files to interfere with file-swapping activities.

Sharman Networks declined requests to comment for this story. A company representative said reports of a decline in its user base were inconclusive.

Outside estimates of user numbers for Kazaa have fluctuated in recent months but appear to show some slippage overall. Kazaa's average simultaneous user base reached more than 4 million people a year ago. For May of this year, estimates from several network watchers put average daily usage between 2.9 million and 3.5 million people.

It's unclear whether the statistics point to a temporary or more lasting trend. Declines over the last few months may be seasonal. Many of Kazaa's most avid users are students at universities who go home or otherwise lose their fast Net connections during winter and summer breaks but return when school restarts.

Although Kazaa's numbers could yet rebound, they contrast sharply with results for some competitors.

The number of people using eDonkey and its associated Overnet network has doubled since the beginning of 2004. That network showed an average of more than 2 million people simultaneously online in May, according to BigChampagne, a company that sells peer-to-peer market research to record labels, among other customers.

Fast growth in newer networks may reflect a growing hunger among broadband users for video files such as movies and TV shows, a development that could spell trouble for Hollywood studios.

"I think people are more interested in larger content, like whole albums and movies," said Jed McCaleb, the founder of the rival eDonkey network. "People are looking for a wider variety of things than just MP3s."

Like another fast-growing technology called BitTorrent, eDonkey was designed from the outset to provide efficient distribution of big files. Copyright companies say they see these new networks as the focus of demand that is increasingly shifting toward downloads of video and software.

"We see eDonkey as being the file traders' network of choice now for large files," said Mark Ishikawa, chief executive officer of BayTSP, a company that monitors copyright infringement on file-trading networks.

Slow change
The file-swapping universe has already seen two generational changes in its short history. The first came when Napster was forced by courts in mid-2001 to begin filtering out trades of copyrighted songs, leading it to shut down.

The second was in early 2002, when Sharman disconnected competitor Streamcast Networks from the FastTrack network. The incident, attributed to a licensing dispute, affected millions of file swappers then using Streamcast's Morpheus client, pushing many to Kazaa.

Swapping rivals

In 2004, Kazaa's growth has slowed or reversed, while newer networks are expanding quickly. Average number of simultaneous users during a given month, in millions:


*Kazaa dominates the FastTrack network, which is also shared by Grokster and iMesh.
Source: BigChampagne

Change this time around has been more gradual.

Lawsuits from the Recording Industry Association of America have helped spread concern about liability among casual file swappers, many of whom previously were unaware of legal risks to trading files. Most of the RIAA's early subpoenas and lawsuits targeted Kazaa users, although it no longer breaks out this information in its filings.

In recent months, the practice of seeding networks with fake files that appear to be popular songs or movies has spiked, as copyright holders have tried to divert file swappers. Overpeer, one of the leading companies that provides this service to copyright holders, said it sends more than 25 billion files, or pieces of files, to file swappers every month.

"Kazaa has been the center of a lot of this activity, because it is a leading network," said Marc Morgenstern, Overpeer's chief executive officer.

Part of the plan?
Another force also may be at work.

Along with joint venture partner Altnet, a subsidiary of Brilliant Digital Entertainment, Sharman has said it ultimately hopes to turn the Kazaa network into a distribution platform for authorized, paid versions of music and movies, crowding out copyright-infringing trades.

"By relegating non-(copy protected) files to a subordinate and comparatively unattractive access location...Sharman intended to promote and encourage only business appropriate file sharing and to share the net payments for (copy protected) works lawfully exchanged by users of the (Kazaa) software with Altnet," court papers filed by Sharman last September said.

Sharman itself has not provided any financial updates, but Brilliant Digital Entertainment's publicly available financial statements show a project that remains in its financial infancy. The company has touted growing use of Altnet by independent musicians, filmmakers and video game companies. In February, it said it was distributing more than 50 million authorized files a month.

However, revenue from this venture remains small, and may even be shrinking. According to documents from the Securities and Exchange Commission, Brilliant made just $124,000 from its online content distribution in the first quarter of this year, down from $171,000 in the first quarter of 2003.

Altnet executives did not return requests for comment.

File-swapping observers say the coming fall will be a test for Kazaa's future. A strong surge back from its seasonal decline might mean that the onetime leader will simply have to share the limelight with rival networks. If it continues to drop, a more significant shift might be under way, they say.

"If in September we don't see massive pile on (back to Kazaa), it will be something worth looking at," said BigChampagne Chief Executive Officer Eric Garland. "If we see a whimper rather than a scream, there is a good argument to be made that at least some sizable population is moving on."


Join the conversation!
Add your comment
Chris Hedgecock is quoted as saying, "At heart, most of these peer-to-peer users are lazy."

I guess I'm lazy if I choose the convenience of online banking, commerce,etc. and order products online rather than drive around town and fighting the crowds at the local bricks & mortar retailers?

Even driving to the mall could be viewed as laziness! I hope Mr. Hedgecock walks to the mall to do his shopping this Christmas.
Posted by ssalava (41 comments )
Reply Link Flag
No, lazy is right.
Most people involved with shady subjects (i.e. p2p, piracy, etc.) do it solely because of the laziness aspect. I mean, why would they want to go to all that trouble of grooming themselves, leaving the house, getting in the car and going to a store -- when they can get it for free without even getting out of their chair?
Posted by katamari (310 comments )
Reply Link Flag
The use and proliferation of the internet has created a certain set of circumstances.

The fact is.....there is quite alot that you can get online that you would spend possibly years and maybe hundreds or thousands of dollars just in the search otherwise. Many mp3 downloaders are out there looking for "out of print" music. Music that someone somewhere has copied to there pc and made available. It is not just lazy college kids looking for what's hot at the moment.
Posted by Prndll (382 comments )
Link Flag
Why steal when you can pay?
Why steal (i.e., use Kazaa or something similar) when you can pay (3-5 cents per song) www.allofmp3.com.

AllofMP3.com offers:
1. bit rate of your choice
2. encoding format of your choice
3. typical cost of $0.04 USD per song
4. legal (in Russia)

My daughter just purchased 250 songs for $10 USD for her iPod.

Competition is right!
Posted by davebarnes (40 comments )
Reply Link Flag
Damn straight. Why steal the music anymore when you can pay a VERY LOW price and get music that is LEGAL and cheap? I mean, I know that the RIAA doesnt deserve our money because of their horrid business practices and how expensive a cd costs now, but <a class="jive-link-external" href="http://www.allofmp3.com" target="_newWindow">http://www.allofmp3.com</a> is a great service that offers a HUGE collection of music for a CHEAP price and they have ONLINE ENCODING. At least check them out because I love the site.
Posted by KDoggMDF (25 comments )
Link Flag
True, although I don't use it, if I did download music from the internet, I'd do it this way. If word of this gets around it's going to give iTunes some pretty stiff competition. Heck, it'll probably shut it down with how low these guys prices are. Honestly, people, check them out!
Posted by (26 comments )
Link Flag
Steal what? Noone is stealing anything
MP3 downloaders do not own the copy rights to the music (that much I will agree). They also do not own "ANY" of the software on their pc (or IPOD), including the software that they use to transfer, copy, or burn to cd any music they listen to. You may own the hardware, but ALL the software is owned by someone else, even the mp3 itself (which is in itself "software").
Posted by Prndll (382 comments )
Link Flag
Why hassle with Kazaa when you can Record?
As more users are getting sued, and it becomes more of a hassle to find vaild downloads, less people will be using Kazaa and he like.

Recording products like Replay Music are the future -- users can record the songs they like from online radio or subscription services like Rhapsody, decide if they like them, and then purchase legitimately. Replay Music also splits MP3 streams into individual songs and adds artist and song title info to each file, so you know what you're listening to.

Recording for personal use is 100% legal, and there is a lot of legal precedent in that area, starting with the BetaMax case several years ago.

There's more information on the legal issues and the Replay Music product here:

Posted by applian (13 comments )
Reply Link Flag
Kazaa SUCKS...
When Kazaa was updated, and they integrated that stupid "PeerPoints" thing in with KMD, I dumped Kazaa, and went to Kazaa Lite (www.kazaaliteinfo.com) and Ares (<a class="jive-link-external" href="http://www.aresgalaxy.org/index.html" target="_newWindow">http://www.aresgalaxy.org/index.html</a>). I think Kazaa is now getting what they deserve. They are trying to integrate useless crap in with their software to make them seem like a better company. Face it Kazaa, Your downloads are SLOW, and your software needs updated, BADLY!!...
Posted by PCCRomeo (432 comments )
Reply Link Flag
There are alternatives.
There are spyware free alternatives. Winmx for music, emule, and a bitorrent client for everything else. Even the latest Limewire, a java based gnutella client is spyware free. There is no good "all in one client" anymore.
Posted by swifty5033 (1 comment )
Link Flag
Daniel K
Yes, Kazaa is truly the most horrific P2P software out there. I used to use it, but very quickly realized what an evil and just plain BAD quality of its fasttrack network. Besides having your computer loaded to its rim with spyware, trojans, and so on, it is just way too difficult to get an actual file that isnt completely corrupted. Anyway, i reccomend to anyone using kazaa and fasttrack network to ABANDON IT COMLETELY. The best program for downloading music files is LimeWire of the gnutella network, without a doubt. Although there are less users, that doesnt seem to matter. It is EXCELLENT, and as a bonus it has NO EVIL COMPUTER INVADERS. For big files, the BitTorrent network is definitely the best of all choices. All you need to do is first download a bittorrent client (Azureus is the best) and to find a good torrent hosting website, which there are (but of course i cant say it here). DOWN WITH KAZAA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Posted by (1 comment )
Link Flag
Kazaa Sucks
After paying about $30 bucks for Kazaa Plus I am told that after one year there is no support for their product. I bought it and yet I can't reload it if I need to without paying again. I ignorantly believed that when you bought something that you could reload it as many times as you need to. What happens when a hard drive crashes??? If I buy a product on CD it is mine to use as many times as I wish, not so with Kazaa.
Posted by roydaniel1149 (1 comment )
Link Flag
Kazaa should be shot and buried.
As a technician for an ISP, I must say that Kazaa (and most other file-sharing utilities) are the bane of our existence. In order to be provided "free of charge" and to increase "useability and compatibility with other file-sharing networks," they load these programs with nothing but crapware that can do anything from bombarding your computer with pop-ups, pop-unders, and other assorted nuisances to totally trashing your Winsock. Either way, we get calls from people complaining that our service is causing all this havoc on their systems when it's them or their snot-nosed brats loading this crap on their computers that's causing it. My solution to the problem? I tell them that it's that software that's causing it and that they're opening themselves up to viruses, hackers, and lawsuits. That usually gets them to quit their whining about what they've done to their own systems and beat their kids into submission so that they don't put it back on there again. I then tell them that they have two options: subscribe to a legal service and pay less than what they'd pay for the actual item they're trying to steal anyway, or keep doing what they're doing and risk paying $3,000 for a $12.99 CD or $25,000+ for a $40 game... not including court costs, jail time, and unwantingly becoming the girlfriend of a big guy named "Bubba." They're usually quick to remove the crapware after that.
Posted by neptolac (12 comments )
Reply Link Flag
Fighting the wave of change?
It is like fighting the change of seasons. You may
not enjoy winter, but it will be here. The best that
you can do is prepare for it. P2P is the future my
friend. Whether it is being used for legal or illegal
gain is irrelevant. It is how the internet will
evolve. There will always be questionable uses of
technology. Our funtion is to prepare for it and
teach others about it or simply get out of the way.
Posted by Johnny Mnemonic (374 comments )
Link Flag
This whole thing is crazy......
I have yet to come across a single P2P program that is clean and free of some kind of problem. Not only is the use of "ANY" P2P software dangerous for you pc, most of them are really not that good anyway.

I am however very affended by this idea of my morality being put into question. The recording industry is using a very outdated (technologically) loophole to state their case. The problem however is the fact that this really is a war between several very large corporations and the average pc user is caught in the middle. The same companies that produce, promote, and distribute the hardware and the software for playing, burning to cd, and recording music are the very ones doing all the complaining. P2P networks are nothing more than the "middleman" in the whole equation. I think THAT is what the RIAA has such a problem with: they can't really make money on P2P networks. Music was here long before the recording industry and will be long after it. The ONLY way the RIAA can win is to make computers incapable of recording and playing sounds.

Tell me----Why is the creater of the MP3 compression format not treated as a criminal? Why is he infact proped up by the entertainment industry and allowed to make MP3 even more powerfull?

Tell me----Why does Time Warner "give" away Winamp (and they do own it), which is the most popular player, when they also sue little girls for aquiring mp3's to play on winamp....mp3's that are often copied over their own networks?

Tell me----Who really are the one's profiting from the sale of mp3 players (the hardware and the software), the cd burners, and all those blank cd's (which have become so cheap)?

The point.......
NO, in the grand scheme of things, KAZAA really does not matter. The fact is, if not them, then someone else. Pandoras box has been opened and the people have spoken. With technology being what it is (and is going to be), The recording industry has no chance of really winning this thing. But, the fight will have a profound impact on the internet and what people can do with it.
Posted by Prndll (382 comments )
Reply Link Flag
I as the head of the network monitoring department of an ebook agency used to work with baytsp but after receiving a call from OM-p (Online Media Protection) we decided to stick with http://om-p.com. We slowly shifted our hole operation over to them and have not had any problems since. - recommend them

Read more: http://news.cnet.com/2009-1027_3-1009541.html#ixzz0yTjxetvA
Posted by goodguy1234ass (63 comments )
Reply Link Flag

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