Tuesday, June 28, 2005

Grokster Goes Down

Betamax notwithstanding, I can’t say I’m too surprised by the news yesterday that the Supreme Court ruled against Grokster and StreamCast Networks -- the company behind the Morpheus network. Justices ruled that companies such as StreamCast can be held liable for copyright infringement if they encourage customers to illegally share copyright movies and music. The Supremes sent the case to district court, where Grokster and Streamcast will be tried for inducing infringement.

The test in this case was whether there were substantial non-infringing uses for Grokster/Streamcast’s technology. I’d say there certainly were – but Grokster and Streamcast certainly weren’t encouraging many of them. This may be oversimplifying things, but Grokster's business model is an advertising/subscription play, like any other dot-com venture. The carrot with which companies such as Grokster unabashedly lure their user base is free music.

I seriously doubt this ruling is the end of peer-to-peer. There’s something inherently democratic about file-sharing, which has done plenty to break up the death grip that Clear Channel, MTV and major labels have had on music promotion and distribution. As I said earlier, the only flaw in this model was the lack of a licensing or revenue sharing arrangement between the content owners and the distributors. That shortcoming hardly merits a dismantling of the whole enterprise, although I do think Grokster and its ilk should be compelled to augment their business models to include such arrangements.

There are plenty of companies – Weedshare and PassAlong Networks among them – who are proving out a peer-to-peer model that includes content owners. But I’m told that it’s way too easy to download a file-sharing source code, such as Gnucleus, re-skin it, adding place holders for advertising and thus launch a new p2p network.

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