October 8, 2003 6:56 AM PDT

P2P group seeks cross-industry detente

At an open meeting Wednesday of a peer-to-peer forum backed by the parent company of Kazaa, the discussion will turn to a seemingly improbable concept: how to eliminate piracy from file-swapping networks.

But in their bid to win respectability--as well as economic and legal breathing room--that's just what Distributed Computing Industry Alliance (DCIA) founding members Sharman Networks and the affiliated Altnet say they're seeking: At the group's meeting they'll unveil a plan they say can turn the millions of monthly music downloads on networks such as Sharman's Kazaa into cash for artists and record companies.

Evoking shades of Napster's five-year, $1 billion offer to the record labels in 2001, the plan foresees online revenue of $900 million a month for record labels--as long as everyone puts past grievances behind them and agrees to work together on a plan for turning file-swapping networks into cash cows.

"The goal is to begin a real discussion focusing on robust business models that have a depth of technical and practical specificity that makes them credible," said DCIA Chief Executive Officer Marty Lafferty.

The effort to establish file-swapping companies as legitimate businesses is picking up in Washington, D.C., but with mixed results.

Another trade association dubbed P2P United, which includes a larger group of companies including Streamcast Networks, LimeWire and Grokster, has begun actively lobbying Congress on issues affecting its members and other Internet companies.

The DCIA, by contrast, isn't explicitly a lobbying group. It was formed to create a forum where content, telecommunications and file-swapping companies could hash out and agree on a plan that would allow services such as Kazaa to exist while soothing content-companies' fears about losing online revenue.

That's a steep hill to climb, as other companies have found, and as the DCIA knows. As yet, the "Alliance" portion of its title remains somewhat theoretical because the group doesn't divulge its members. Not one of the big five major record companies is on board, something that will have to happen if any plan is to be universally accepted. The DCIA says it's in discussions on that matter.

Moreover, the plan being submitted Wednesday bears the clear fingerprints of Altnet and Sharman, which have outlined similar proposals in federal securities regulatory filings and in legal briefs that charge the record industry with antitrust violations. Lafferty said other plans will be submitted to the group in coming weeks, with an eye toward producing an open discussion.

The plan's outlines are ambitious and would require a cease-fire among parties that are now bitter enemies.

A plan, in stages
In a first stage, music companies would let their songs be distributed on file-sharing networks such as Kazaa, but wrapped in digital-rights-management tools that would require listeners to pay to unwrap them. This is roughly the business plan for a joint venture between Altnet and Sharman, but Lafferty said the technology could be handled by anyone, not just those companies.

The plan doesn't involve blocking unauthorized versions of songs from the network, something that the Recording Industry Association of America (RIAA) has repeatedly suggested. Seeding search results with authorized versions will be enough to reduce much of the piracy now going on, the plans' authors predict.

A second stage would let billing for these encryption-wrapped songs be handled though more familiar means, such as though a telephone number.

Finally, file-identification systems, such as those now being developed by Audible Magic, would be installed in Internet service providers. When songs are downloaded, they would be identified by this file watcher, and swappers would be billed through their Internet service provider, the proposal will suggest.

By the end of 3 years--assuming everybody involved voluntarily allows the entire project to happen--the record industry could be making $900 million a month from downloads, Lafferty said.

But bringing everyone on board will be difficult. Sharman is still the target of lawsuits from the recording industry, and it has filed its own countersuit against the record companies. The file-swappping companies affiliated with P2P United say they're deeply suspicious of the DCIA's Altnet-centric proposals, although they say they are looking for comprise too.

"It is premature for anyone to claim that they have the solution to the conundrum of how best to enable a marketplace for tomorrow," said Adam Eisgrau, a longtime lobbyist representing P2P United. "We believe that ideally the parties can come to a table and work something out. But failing that we think Congress should compel parties to come to a table."

Lafferty says he recognizes that today's meeting is just the early stages of a long and difficult attempt to bring respectability to file swapping.

"We're doing everything we can to earn (everybody's) trust," he said. "It's quite a bit to overcome. We are a peace table, but no one's declared a truce."

 

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