Going Straight: Peer-To-Peer Entertainment Deals

By Elise Ackerman
Mercury News
February 19, 2007
http://www.mercurynews.com/mld/mercurynews/business/technology/16732868.htm

It's the ending entertainment kingpins would have ordered Hollywood to produce if the industry's struggle with peer-to-peer piracy had been a scripted reality show: After years of ferocious legal battles and high-tech hijinx, the unsavory purveyors of illicit music, TV shows and movies come in from the cold, pledging to respect copyrights and to use their popular software to benefit the industry.

It's the ending the kingpins would have wanted -- and it's the ending they appear to be getting.

Next week, BitTorrent, the creator of software that made it possible to easily exchange full-length movies at virtually no cost, will launch a marketplace of licensed movies, television shows, video games and music. While details of pricing and available titles have yet to be unveiled, the San Francisco company says it has cut deals with 40 studios, production houses and game publishers.

The creators of Kazaa, a once-popular music-sharing program, are seeking similar licensing deals for Joost, a new European-based service that hopes to use its peer-to-peer network to legally distribute TV shows. Joost is currently available only for approved beta testers.

Peer Impact, of Sarasota Springs, N.Y., has deals with three major studios to offer legal downloads of TV shows like ``The Loop'' and ``Firefly,'' as well as movies like ``X-Men'' and ``Office Space,'' at prices ranging from 99 cents to $3.99.

Veoh Networks, a San Diego company partly backed by Time Warner, distributes episodes of shows like ``Beverly Hillbillies'' and ``Veronica Mars'' for free.

``Conceptually there is a place for peer-to-peer in the legal marketplace,'' said Mitch Bainwol, chief executive of the Recording Industry Association of America, an industry trade group. ``There is a ton of experimentation going on, not just here in the U.S. but all over the globe.''

``What the pirates showed us is that peer-to-peer is a great way to distribute content,'' said Dmitry Shapiro, who founded Veoh Networks in 2004 after first building a computer-security company called Akonix that prevented corporate networks from being used for illegal file sharing.

Shapiro isn't the only technologist to switch from fighting peer-to-peer to attempting to profit from the cost-saving efficiencies it offers. Robert Summer, ex-president of Sony Music International, is executive chairman of iMesh, a once renegade music-sharing service based in New York, which now uses audio filtering technology to screen out unlicensed content.

Ed Kozel heads Skyrider, a peer-to-peer advertising company based in Mountain View whose software was initially used by major studios to monitor and suppress copyrighted content being shared on peer-to-peer networks. Skyrider now tracks requests for files on the LimeWire peer-to-peer network and responds with advertising and/or licensed material.

``It was just a commercially larger opportunity,'' Kozel said.

Randy Ditzler, a partner from Sequoia Capital, which has invested in Skyrider, said the 420 million daily searches conducted on peer-to-peer networks around the world rivals the number of searches on either Google or Yahoo. Sequoia was an early investor in Google and YouTube.

According to research firm BigChampagne, about 100 million people use peer-to-peer services each month, as many as visit MySpace.

Thanks to the clever design of peer-to-peer networks, it costs next to nothing to reach this huge audience. While sites that stream video, like YouTube, pay hefty bandwidth fees to connect to their users, companies that use peer-to-peer distribution benefit from giant networks of personal computers that share the cost of moving data around the Internet.

This architecture has made peer-to-peer attractive to the giant corporations that own major studios and record companies. Still, it's unclear if companies like Time Warner can successfully co-opt giant peer-to-peer networks, which were built around the idea of sharing free content.

Copyrights have also been an obstacle. Allan Klepfisz, chief executive of Brilliant Technologies, which owns Qtrax, a peer-to-peer music service that is striving to go legit, said Qtrax will have to delay an anticipated launch into later in the year, as it continues to negotiate rights with both record labels and publishers who represent songwriters.

Legally distributing television shows on networks, such as peer-to-peer, is even more complex, as copyrights exist for individual performances, music and scripts. Shows themselves can have more than one owner.

So far, the video content available on both legal peer-to-peer services and conventional download services like Apple's iTunes is limited.

Finally, piracy of both music and videos continues to be a growing problem. According to the IFPI, an umbrella organization representing the international recording industry, an estimated 20 billion songs were illegally swapped or downloaded in 2005. That same year, the Motion Picture Association of America said its members lost $2.3 billion to Internet piracy worldwide.

``Illegal file sharing remains at unacceptably high levels that inhibit the development of the legal marketplace,'' said Bainwol of the RIAA.

Even as new legal peer-to-peer services launch, the prosecution of illegal file-sharing will continue. So far, the RIAA has taken about 18,000 people to court.

``Our work is not yet done,'' Bainwol said.