A Rising Chorus of Music Downloaders?

It is a helluva comedown. Not too long ago, the brash entrepreneurs who launched the peer-to-peer file sharing services were nearly as exalted as rock stars to a new generation of music fans. But along came the music industry with its gloves-off campaign to fight piracy. The moguls are now painting the P2Ps as nests of evildoers and even accusing them of helping to proliferate child pornography.

But P2P executives have begun to mobilize, hoping to send out the message that, despite attempts to vilify it, file-sharing is a legitimate technology. And the companies that once gloried in the anarchy of the cyberfrontier are now offering an olive branch to the music establishment by suggesting ways it could make money on peer-to-peer.

The file-sharing companies are forming a trade group to counter the powerful to Recording Industry Association of America (RIAA). In late September, six companies, including Morpheus, Grokster, and Lime Wire, will introduce a Washington lobbying group called P2P United. Its first initiative will be to distance itself from charges that the file-sharing sites abet pornography. One early move: agreeing to install software that will restrict minors' access to X-rated sites.

Second, P2P is working to unify file sharers to help convince Congress that peer-to-peer technology is not a criminal enterprise. "We may not have as much money as the entertainment industry," says Michael Weiss, CEO of StreamCast Networks Inc., which owns Morpheus, "but we have something stronger -- 62 million Americans who use file-sharing software" to download music. A college speaking tour is being organized and a Web site created to encourage file sharers to write their lawmakers in support of peer-to-peer.

These fervent Net defenders believe, too, that history is on their side. As they see it, technology isn't the enemy. Instead, it expands the pie for everybody by opening a fresh source of music revenues. Just look at the evolution of videocassettes, says Weiss, who early on, in 1978, opened a video store. Although film studios initially fought the advent of VCRs, he points out, the U.S. Supreme Court blessed the use of the new technology in a landmark 1984 ruling. Today, movie studios reap up to 50% of revenues from videotape and DVD sales. So, too, insist P2P proponents, could online distribution boost sagging music sales.

In its biggest conciliatory gesture so far, the Net group that built its following on the notion of free content is proposing ways labels can make money on peer-to peer. One scenario: file-sharing services could volunteer to pay license fees to record companies for music downloading. P2P leaders may lobby for new surcharges on blank CDs, MP3 players, and CD burners to help create a $3 billion annual royalty pool for the music industry. A $5 fee on monthly broadband connections is on their wish list.

Recording-industry execs aren't thrilled about sharing the business with P2P upstarts. But longer term, insists the Internet crowd, the labels will have to put aside their lawsuits and join the march of technology -- or risk losing even more customers.

By Catherine Yang in Washington

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