By Melanie Warner
August 2002, FORTUNE
To the big record labels, Napster wasn't just a nuisance; it was their worst
nightmare--the online equivalent to everyone storming into record stores and making off with armfuls of CDs. So when an appeals court issued an order last July forcing Napster to shut down, there was a sigh of relief throughout the recording industry. It was the day free music died.
Or so it seemed. Napster as we knew it is gone. But what's taken its place is a lot scarier for the music industry--and perhaps unstoppable. They're called file-sharing services, or P2P networks in geek-speak, and the three most popular ones--Kazaa, Grokster, and Morpheus--have a combined 70 million active users, compared with only 20 million for Napster in its heyday. Oh, and it's not just music being zapped across the Internet anymore. The new Napsters house videogames, software programs, and movies, including ones now playing in theaters.
Not surprisingly, the big labels and the movie industry are trying to do to Kazaa, Grokster, and Morpheus what they did to Napster--litigate them out of existence. Only this time the outlaw networks may not be so easy to shut down. Kazaa, Grokster, and Morpheus work much the same way Napster did, but they're technologically smarter and, in a legal sense, a lot more amorphous. The Recording Industry Association of America (RIAA), representing eight record labels, and the Motion Picture Association, working on behalf of 19 movie studios, are suing the companies that own Kazaa, Grokster, and Morpheus--Sharman Networks, Grokster, and StreamCast Networks, respectively. (All three deny the charges.) But those entities don't run their networks the way, say, Sony does its record label; they have little control over what they created and can't tell who's downloading what file, whether it's an Eminem song or Grandma's recipe for blueberry pie. Thus the legal question becomes: If you can't control or see illegal activity, how can you be liable for it? In a memo leaked last December, the RIAA's legal team acknowledged that its claims against Kazaa, Grokster, and Morpheus "are not as strong as those against Napster."
http://www.fortune.com/indexw.jhtml?...&doc_id=208834
- js.