By Stefanie Olsen
Thursday, September 30 2004 09:55 AM
URL: http://www.zdnetasia.com/news/hardware/0,39042972,39195647,00.htm

SANTA MONICA, CALIF.--Here at Digital Hollywood, the debate over peer-to-peer technology rages--literally.

On Wednesday, executives from P2P software companies, along with audience members from a panel at the Digital Hollywood conference, openly argued--Jerry Springer-style--about whether sharing and downloading copyrighted film and music files over distributed file networks is legal.

, Panel members--from companies including P2P technology makers Altnet and Morpheus, software giant Microsoft and copyright-protector Overpeer--even fired off insults at one another during more heated moments.

"You've purposely destroyed P2P networks with bogus files--ones that, once downloaded on a user's machine, search out other copyrighted files on the hard drive and destroy them," said Michael Weiss, CEO of Morpheus-owner StreamCast Networks, to co-panelist Marc Morgenstern, vice president and general manager of Overpeer, whose technology helps protect record labels' copyrights.

Morgenstern replied: "That has nothing to do with us. We make it difficult for people to access that file without paying for it."

Yet Lee Jaffe, president of Altnet, persisted: "You destroy the music; just admit it." And an audience member added to the tension by directly asking Morgenstern whether his company spoofs the hashes, or encryption techniques, on Altnet files to limit the copying of copyrighted music.

"This is a discreet activity authorized by the content owners," Morgenstern said, without answering directly. "We're engaged in legal activity."

P2P technology was the topic of several discussions during the three-day Digital Hollywood conference because of its immense potential to promote artists' work, disseminate content to consumers economically via a distributed network, and foster new business models for technology and copyright holders, according to industry executives. But peer-to-peer technologies still carry a stigma in Hollywood for their ability to allow what the industry considers massive theft of copyrighted songs and films through users sharing digital files.

Hollywood has fought the P2P networks with lawsuits, charging that makers of file-swapping technologies are liable for copyright theft perpetrated on their networks. In one such case, the court ruled in favor of Morpheus.

The Motion Picture Association of America and the Recording Industry Association of America are also backing bills that would criminalize some forms of file swapping. One such bill, known as the Induce Act, is expected to face a Senate committee vote this week.

Nevertheless, new P2P services are emerging with business models that seem to take advantage of the distributed medium without offending copyright holders. iMesh, an Israeli-based peer-to-peer company that settled copyright lawsuits for US$4.1 million, plans to launch a new service that will give content owners a means of collecting money, according to panelists. Fox executive Ron Wheeler said Tuesday the studio is in talks with iMesh over potentially working together.

Although no executive on the panel disputed the potential P2P technology holds for new-media distribution, they all questioned how to make money from the services and ensure that artists and rights holders get paid for the downloading of copyrighted works.

So-called digital rights management (DRM) tools are deemed essential for assuaging Hollywood's fears about P2P piracy. DRM is considered crucial for new digital-entertainment services, giving studios, record labels and others powerful tools for protecting their copyrighted works and laying the groundwork for profitable new ways to sell their products.

"Kids today find new music on P2P networks, and we need to find a way to monetize that," said Elizabeth Brooks, executive vice president of Buy Music.

Andy Moss, Microsoft's director of technical policy, said artists and record labels are beginning to think about how to use P2P networks, and companies such as Intent are using blanket digital rights management technology to wrest money for downloaded films on P2P networks. Ronald Gertz, CEO of Music Reports, said there needs to be compulsory licensing pools that ensure that money from downloaded or shared files turns into royalties for artists.

"P2P is a digital archive, and it's a door to the Information Age," said StreamCast's Weiss.

Still, the group openly argued about whether P2P file swapping is legal, given that no final decision came from the courts in the Recording Industry Association of America v. Napster case.

"Taking and sharing are two different things," Jaffe said. "Sharing is not piracy. No one has ever challenged the RIAA lawsuits."

In reply, someone from the audience yelled, "Give me that jacket! We need to share it."

Richard Doherty, president of research firm Envisioneering Group and moderator of the panel, weighed in by saying that Western copyright law establishes that making unlimited copies of copyrighted works for the purposes of sharing with strangers is unlawful.

StreamCast's Weiss said with regard to consumer behavior on P2P networks that "the toothpaste is out of the tube" and that the industry has to develop a working business model to take advantage of consumer demand, which would probably include offering some content free, some paid--with a compulsory license that creates a monetary pool for artist royalties.

Weiss said Morpheus has experimented with a company called Weed to give people limited access to songs from the rock band Heart before requesting that the file swapper buy the music. Money from the purchases is then given to the band.

Weiss also said Morpheus plans next week to launch a third generation of its P2P software, called Neopet, which will improve users' ability to find files on a network of millions of users.

Still, before there's a detente between Hollywood and P2P companies, the entertainment industry wants to see networks like Morpheus filter out copyrighted works. Executives from Fox and Sony Entertainment at panels on Tuesday echoed this idea. But Weiss said that because it's network is distributed among millions of users--and doesn't run on a centralized server--filtering is not possible.

Still, Weiss said that in the next year, he'd like to have sealed a deal with a major entertainment company and see the Induce Act quashed. Jaffe said that within six months, he'd like to see P2P turned into the radio model, where content is sponsored by advertisers but kept free.

"We've got to separate peer-to-peer distribution technology from the bad actors," Gertz said.