P2P retreat, iTunes advance
After a half-decade of fear, the entertainment industry this year finally managed to push file swapping's bogeyman at least partway back into the closet.
Dominating 2005's digital media landscape was the U.S. Supreme Court's June ruling that file-swapping companies could be held legally liable for the widespread copyright infringement enabled by their software.
Undoing two years of lower-court decisions that had given peer-to-peer software companies a free hand online, the ruling sent shock waves through the industry and emboldened entertainment companies to seek the closure of swapping networks, used by millions of people every day.
By the end of the year, some prominent networks, such as Grokster and i2Hub, had closed. Others were seeking a graceful way to start offering content legally, following the lead of Mashboxx and iMesh, a file-swapping network that turned itself into a paid subscription service this fall, after settling its own lawsuit with record labels.
Apple Computer's iTunes Store continued to dominate the world of legal digital music, retaining a market share of more than 70 percent. Interest in buying music in digital form grew among consumers, though download sales remained at just 4 percent of the music industry's U.S. revenue by midyear.
However, Apple's lead exacerbated tension between company CEO Steve Jobs and record industry executives, who are seeking the ability to vary the prices of digital downloads and want compatibility between iTunes and other download services.
Without giving ground to the labels, Jobs pushed his iTunes store ahead to include music videos and a handful of TV shows. Most film and television content remained legally unavailable online, though signs were growing that networks and studios were looking for new digital-distribution options.
All-you-can-eat monthly music subscription plans such as Napster and RealNetworks' Rhapsody gained the ability to transfer songs to some compatible MP3 players, using Microsoft's most recent content-protection technology. That "portable subscription" model remained a niche market due to compatibility questions and higher prices, however.
Subscription plans overall grew steadily as new entrants such as Yahoo offered far lower prices than their predecessors and as companies began offering inducements such as free music and Web-based access.
Buzz built to a near-deafening pitch over the idea of cell phones becoming a viable iPod rival, both for listening and purchasing music.
Most of the big U.S. cell phone carriers began offering radio-like digital music services or even music stores over their new high-speed data networks, following the lead of their peers in Europe and Asia. Motorola's long-awaited launch of the iPod phone, dubbed the Rokr, largely fizzled in comparison with Apple's simultaneous launch of its new iPod Nano.
On the offline front, record labels began releasing growing numbers of copy-protected CDs without much comment, until a blogger discovered that Sony BMG Music Entertainment was using a tool popular with hackers to hide some of its technologies on hard drives, opening up big security holes.
The resulting furor led Sony to recall 4.7 million CDs and gave the company a huge public-relations black eye. Both Sony and rival EMI Music say they will continue releasing copy-protected discs using different technology, however.
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iMesh relaunches as the first formerly unregulated peer-to-peer network to turn itself into a paid music service.
Anticopying tools used by SonyBMG could be adapted by virus writers, researchers say.
File-swap stalwart to pull plug on P2P network, hand $50 million in damages to studios, labels, publishers.
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