LimeWire settlement unlikely to blunt music piracy

Peer-to-peer software maker LimeWire's willingness to pay a whopping $105 million to settle music piracy claims marks a decisive, if somewhat symbolic, victory for the Recording Industry Association of America (RIAA).

The proposed settlement will bring to an end another successful campaign by the music industry to stop those it contends are enabling widespread music piracy.

In recent years, the recording industry has paid what some say are enormous legal costs to fight similar battles against Napster, Grokster, Kazaa and Streamcast.

Despite the successful suits, industry experts wonder whether the effort has succeeded in slowing down online music piracy.

LimeWire said on Thursday it will pay $105 million to settle claims by 13 recording companies that its P2P file sharing software was responsible for enabling billions, and potentially even trillions of dollars in damages.

The U.S. District Court for the Southern District of New York, which heard the case, last year agreed with the RIAA's claims that LimeWire and its chairman, Mark Gorton, had enabled widespread music piracy.

The court ordered LimeWire to cease its file sharing operations last October. A jury was in the process of deciding an appropriate penalty when LimeWire made its settlement offer yesterday.

The settlement was hailed at the time by RIAA Chairman and CEO Mitch Bainwol as a "reason for celebration by the entire music community."

Ray Beckerman, a New York attorney who has defended individuals against RIAA lawsuits said the record labels have reason to feel happy. "They got LimeWire shut down, and got some money," in the process, Beckerman said.

"But what would be interesting to see is how much of the $105 million that it will get from LimeWire was eaten up by legal fees," he said. "As I see it, the big four record labels have now managed to shut down the big first generation, file sharing" services, he said.

But for the past several years it seems the more dominant file sharing protocol has been BitTorrent, which the the indistry has yet to litigate, said Beckerman who maintains a blog chronicling the recording industry's anti-piracy campaign.

The music industry "basically took what they could get" from Gorton and LimeWire, said Eric Johnson, professor of operations management at Dartmouth College's Tuck School of Business.

"The $105 million has more to do with Gorton's potential ability to pay" than with any real damages that might have been sustained by the music industry, said Johnson, who has testified before Congress several times on P2P-related security issues.

RIAA has now successfully managed to force settlements from the major file-sharing services, he said.

"But I don't think it has slowed piracy down an iota," Johnson said. With the closure of LimeWire and other major P2P networks, users have just moved to different sources for illegal music downloads, he said.

Those sources include Frostwire, an open source tool that uses the same Gnutella technology that LimeWire is based on. Other examples include BitTorrent, eDonkey and BearShare he said.

A recent report by The NPD Group, a market researcher, shows that the percentage of people in the U.S. using a P2P file-sharing service to download music has fallen from 16 per cent in the fourth quarter of 2007 to around nine per cent after LimeWire ceased file sharing operations last fall.

Even so, Johnson believes that piracy will continue unabated as users turn to other music sharing technologies. NPDs survey, for instance, showed that while LimeWire usage has fallen off the cliff, usage of FrostWire and BitTorrent have shown marked increases.

"The RIAA has put their hands around the necks," of every entity they could, Johnson said. But many of the remaining ones are in the open source realm and are going to be harder to go after.

"There's been a steady stream of closure signs pounded on the walls of Web sites" over the past few years, he said. But every time that has happened users have simply migrated elsewhere, he said. "It's just like a tube of toothpaste. You squeeze one end and it just pops over to the other."

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