Peer-to-peer file-sharing companies in the U.S. will cease to exist
in their current forms over the next few months, the president of MetaMachine,
the company responsible for the eDonkey software, predicts.
Speaking at a Senate Judiciary Committee on Wednesday, Sam Yagan said that in
order to avoid expensive litigation, file-sharing companies will have to change
their models to become similar to iTunes or the new Napster or face expensive
MetaMachine won't be an exception. "Because we cannot afford to fight a
lawsuit--even one we think we would win--we have instead prepared to convert
eDonkey's user base to an online content retailer operating in a 'closed' P-to-P
environment," he said.
Yagan's comments have been posted on a Senate Web site. MetaMachine created
the eDonkey P-to-P software client.
Companies like MetaMachine, he explains, will have to comply with terms of
deals made by entertainment rights aggregators and to do so they'll have to
build centralized indexed searches, filters and closed networks in order to
ensure that their users aren't conducting illegal file sharing. Such a setup
is different then most P-to-P file-sharing companies today, which usually don't
have centralized servers holding content.
This dramatic change is happening as a result of the Supreme Court's ruling
in June on the MGM v. Grokster case. The court ruled that someone who offers
a tool and promotes the use of the tool to infringe on copyright is liable for
the user's infringement. Since that decision, the Recording Industry Association
of America (RIAA) has sent cease-and-desist letters to leading P-to-P companies
including MetaMachine, threatening litigation based on the RIAA's interpretation
of the ruling.
Yagan concludes that because the court hasn't offered a standard to define how
to measure whether a company is inducing users to infringe, any litigation will
result in exhaustive trial proceedings during which organizations like the RIAA
will dig up company e-mails, advertising, and any other evidence that might
prove the file-sharing company intended to induce copyright infringement. Such
a process would be just too expensive for most P-to-P companies, he said.
In August, CacheLogic, a company that provides traffic management services to
telecommunication companies, released a survey that found that eDonkey has surpassed
BitTorrent as the world's largest P-to-P file trading network.
In addition to eDonkey, it appears that other file-sharing companies may indeed
be changing their models or shutting down, while the popularity of paid services
is increasing. On Tuesday, BitTorrent announced it hired Doll Capital Management
to help it raise $8.75 million in funding. The money will be used to support
the global growth of BitTorrent's technology into a leading platform for the
legal and secure distribution of content for commercial purposes, according
to a statement from BitTorrent. While BitTorrent's leaders have historically
said they aren't interested in supporting piracy, the funding may be used to
make changes that can help solidify the company's role as a legal content distribution
Another file-sharing company, WinMX, appears to have recently shut down its
operations as its Web page is no longer accessible. However, rumors online have
WinMX leaders relocating outside of the U.S., thus fulfilling another of Yagan's
He suggests that a wide variety of technology companies will choose to locate
outside of the U.S. to avoid such potential lawsuits. "It's hard to imagine
future 'open decentralized' P-to-P companies opening shop as American corporations,"
he said. "Where are the Skypes of tomorrow being founded? Your best bet
is to look offshore."