Peer-to-peer nets 'here to stay'

Peer-to-peer (P2P) networks are here to stay, and are on the verge of being exploited by commercial media firms, says a panel of industry experts.

Once several high-profile legal cases against file-sharers are resolved this year, firms will be very keen to try and make money from P2P technology. The expert panel probed the future of P2P at the Consumer Electronics Show in Las Vegas earlier in January. The first convictions for P2P piracy were handed out in the US in January. William Trowbridge and Michael Chicoine pleaded guilty to charges that they infringed copyright by illegally sharing music, movies and software. Since the first successful file-sharing network Napster was forced to close down, the entertainment industry has been nervous and critical of P2P technology, blaming it for falling sales and piracy. But that is going to change very soon, according to the panel.

The music and film industries have started some big legal cases against owners of legitimate P2P networks - which are not illegal in themselves - and of individuals accused of distributing pirated content over networks. But they have slowly realised that P2P is a good way to distribute content, said Travis Kalanick, founder and chairman of P2P network Red Swoosh, and soon they are all going to want a slice of it. They are just waiting to come up with "business models" that work for them, which includes digital rights management and copy-protection standards.

But, until the legal actions are resolved, experimentation with P2P cannot not happen, said Michael Weiss, president of StreamCast Networks. Remembering the furore around VCRs when they first came out, Mr Weiss said: "Old media always tries to stop new media. "When they can't stop it, they try to control it. Then they figure out how to make money and they always make a lot of money." Once the courts decided that the VCR in itself was not an illegal technology, the film studios turned it into an extremely lucrative business. In August 2004, the San Francisco-based US Court of Appeals ruled in favour of Grokster and StreamCast, two file-sharing networks. The court said they were essentially in the same position that Sony was in the 1980s VCR battle, and said that the networks themselves could not be deemed as illegal.

P2P networks usually do not rely on dedicated servers for the transfer of files. Instead it uses direct connections between computers - or clients. There are now many different types of P2P systems than work in different ways. P2P nets can be used to share any kind of file, like photos, free software, licensed music and any other digital content. The BBC has already decided to embrace the technology. It aims to offer most of its own programmes for download this year and it will use P2P technology to distribute them. The files would be locked seven days after a programme aired making rights management easier to control. But the technology is still demonised and misunderstood by many. The global entertainment industry says more than 2.6 billion copyrighted music files are downloaded every month, and about half a million films are downloaded a day. Legal music download services, like Apple iTunes, Napster, have rushed into the music marketplace to try and lure file-sharers away from free content. Sales of legally-downloaded songs grew tenfold in 2004, with 200 million tracks bought online in the US and Europe in 12 months, the IFPI reported this week. But such download services are very different from P2P networks, not least because of the financial aspect.

There are several money-spinning models that could turn P2P into a golden egg for commercial entertainment companies. Paid-for-pass-along, in which firms receive money each time a file is shared, along with various DRM solutions and advertiser-based options are all being considered. "We see there are going to be different models for commoditising P2P," said Marc Morgenstern, vice president of anti-piracy firm Overpeer.

"Consumers are hungry for it and we will discover new models together," agreed Mr Morgenstern. But many net users will continue to ignore the entertainment industry's potential controlling grip on content and P2P technology by continuing to use it for their own creations. Unsigned bands, for example, use P2P networks to distribute their music effectively, which also draws the attention of record companies looking for new artists to sign. "Increasingly, what you are seeing on P2P is consumer-created content," said Derek Broes, from Microsoft. "They will probably pay an increasing role in helping P2P spread," he said. Looking into P2P's future, file sharing is just the beginning for P2P networks, as far as Mr Broes is concerned. "Once some of these issues are resolved, you are going to see aggressive movement to protect content, but also in ways that are unimaginable now," he said. "File-sharing is the tip of the iceberg."