[LINK] (Bizarre?) Kazaa Settlement

Roger Clarke Roger.Clarke at xamax.com.au
Sat Jul 29 17:33:35 AEST 2006

[No-one else has posted this, so I guess I'd better.  5 years on, 
with tens of millions having gone into the pockets of lawyers, the 
music industry appears to have finally understood what Kazaa was 
actually all about]

Kazaa forced to play a new tune
The Sydney Morning Herald (reprint from the NYT)
Date: July 29 2006
Eric Pfanner in London

THE music industry and Hollywood movie studios have settled lawsuits 
against a long-time nemesis, the owner of the digital file-sharing 
network Kazaa, which will try to transform itself into a 
royalty-paying online distributor of films and music.

Sharman Networks, a privately held company that is incorporated in 
Vanuatu and operates Kazaa from Australia, agreed to pay $US115 
million ($151 million) to the major record companies and movie 
studios, which had accused Kazaa of aiding the illegal copying of 
music on the internet.

Sharman Networks said the agreement, which follows a court ruling 
against Kazaa in Australia last year and a US Supreme Court decision 
against other file-sharing services, cleared the way for it to offer 
"the broadest range of licensed content over Kazaa".

The chief executive of Sharman, Nikki Hemming, said: "All the parties 
involved now recognise the time is right to work together, and we are 
looking forward to collaborating with the music and motion picture 
companies to make P2P an integral part of the future of online 
digital entertainment."

Peer-to-peer network technology, or P2P, allows users to share 
computer files over the internet, including music and movies stored 
in digital form. Kazaa was a pioneer of peer-to-peer network software.

Under the settlement, Sharman would pay the record companies "in 
excess of $US100 million", said John Kennedy, chief executive of the 
International Federation of the Phonographic Industry in London.

Executives who were briefed on the agreement said the total payment 
was $US115 million; they did not provide a breakdown of payments. No 
details of the settlement with the movie studios were available.

The music industry federation said Sharman had agreed to license 
music from the four major recording companies - Universal Music 
Group, Sony BMG, Warner Music and the EMI Group - that own the 
majority of music copyrights. Independent record labels weren't 
included, but would be free to pursue their own licensing deals with 
Sharman, executives said.

Sharman also said it would take steps to prevent unauthorised 
distribution of material through Kazaa.

"We are under no illusion that this solves everything," Mr Kennedy 
said, noting that other file-sharing services thrive. "But this is 
very encouraging."

Under the agreement, the major recording companies would not invest 
directly in Kazaa but will be entitled to 20 per cent of the proceeds 
of any eventual sale of the service, Mr Kennedy said, giving them a 
stake in the success of the new arrangement. Music company executives 
welcomed the settlement and Universal said it would share the 
proceeds with its artists.

David Munns, vice-chairman of EMI Music, said in a statement: "While 
the award may seem like a vast pot of money, it will merely offset 
the millions we have invested - and will continue to invest - in 
fighting illegal pirate operations around the world and protecting 
the works that our artists create."

In making the switch to a licensed, royalty-paying business, Kazaa 
would follow Napster, one of the original file-swapping services, 
which was reborn after an adverse court ruling in 2001.

Kazaa has been earning revenue primarily from advertising, and Mr 
Kennedy said the recording industry would not object if it persisted 
with an advertiser-supported model, rather than charging users, as 
long as it pays royalties.

The New York Times

Roger Clarke                  http://www.anu.edu.au/people/Roger.Clarke/
Xamax Consultancy Pty Ltd      78 Sidaway St, Chapman ACT 2611 AUSTRALIA
                    Tel: +61 2 6288 1472, and 6288 6916
mailto:Roger.Clarke at xamax.com.au                http://www.xamax.com.au/

Visiting Professor in Info Science & Eng  Australian National University
Visiting Professor in the eCommerce Program      University of Hong Kong
Visiting Professor in the Cyberspace Law & Policy Centre      Uni of NSW

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