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"It is the most serious issue facing the music business this year."
—Industry insider about upcoming Supreme Court decision on peer-to-peer
GROCKING SONY BMG’S MOVE
Industry Reacts to Sony BMG’s Grokster Agreement with Skepticism, Citing Upcoming Supreme Court Appeal
In a move reminiscent of BMG breaking ranks with the industry to make a deal with Napster almost four years ago to the day (see hitsdailydouble.com, 10/31/2000), Sony BMG’s reported alliance with Grokster raises all sorts of issues for the record biz and its uneasy partnership with burgeoning peer-to-peer networks.

Several industry competitors have questioned the timing of the move, which comes less than two weeks before the U.S. Supreme Court was set to hear an appeal by the RIAA, MPAA and National Music Publishers’ Association on Nov. 8. The organization wants the Court to overturn the August 19 decision by the Ninth Circuit Court of Appeals upholding a lower court’s ruling exonerating Grokster and Streamcast’s Morpheus of copyright infringement (see hitsdailydouble.com, 8/20).

Many are asking if there is indeed a deal in place, and why the story appeared only in the L.A. Times. Did Grokster jump the gun in alerting the media?

One industry insider insisted the development of Digital Rights Management companies like Shawn Fanning’s Snocap and Audible Magic.com that can track and fingerprint legitimate files as opposed to illegitimate ones, as well as the recent resolution of the iMesh case, will hasten the record industry’s partnership with P2P compaies.

Others are saying Sony BMG’s Andrew Lack jumped the gun, or was "naïve" in giving the Court a chance to dismiss the appeal and allow the marketplace to work itself out, which could place the record industry in a precarious position in its attempt to control the online market.

"It is the most serious issue facing the music business this year," said one industry insider at a competitive company.

The RIAA, MPAA and National Music Publishers’ Association filed suit against Grokster and StreamCast in 2001.

The reasoning behind the Court’s recent decision had to do with Grokster and StreamCast’s software not involving centralized indexing servers the way Napster did, meaning the P2P companies have less ability to know about and prevent copyright infringement from taking place. Also, the fact that P2P software has "substantial non-infringing uses" (the Betamax theory), impacted the court’s opinion.

With the introduction of a comprehensive tracking system, though, these non-centralized P2P systems would be hard-pressed to say they have no control over their users’ allegedly illegal actions.

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