Morpheus' downfall: Bills weren't paid

The Morpheus file-trading network, which drew more than a million people a day to trade movies, songs or software at its peak, went dark last Tuesday. Although it relaunched with new technology late Friday, the service is struggling to regain its footing.

In progressively more extreme statements, StreamCast Networks Chief Executive Steve Griffin has characterized the shutdown as an "attack" on his company and on the millions of people who used the Morpheus software. Bulletin and chat boards around the Web have been buzzing with conspiracy theories, ranging from a competitor's sabotage to plots by the record industry.

But in its first public statements since the blackout, Dutch company Kazaa BV, which provided StreamCast with its peer-to-peer technology, said there was a simple explanation.

"MusicCity (also known as StreamCast Networks) has failed to pay any amounts due to Kazaa BV under the parties' license agreement," Kazaa BV founder Niklas Zennstrom wrote in an e-mail to CNET News.com. "As a result of MusicCity's breach, Kazaa BV did not provide version 1.5 to MusicCity. Kazaa has also terminated MusicCity's license."

Zennstrom did not provide details on how the Morpheus software could have been shut down as a result of the fee dispute. StreamCast has said that Kazaa BV was able to change settings stored deep inside Morpheus users' computers as they logged on to the file-trading network.

StreamCast's Griffin conceded last week that there had been some dispute over licensing terms for the peer-to-peer software. But he said that a wholesale shutdown of the Morpheus network would have violated the terms of his contract with Kazaa BV.

In a message to Morpheus users this weekend, Griffin pointed fingers at Kazaa BV and warned people not to use the company's software.

"Since it appears that the attack on your computers came from the closed proprietary FastTrack-Kazaa software, we have opted not to continue with this (technology)," the company wrote on its Web site. "We believe it to have the ability to access your computer at will and change registry settings."

Griffin could not immediately be reached for comment on the issue of unpaid license fees.

The closure, and the resulting rush of users to find an alternative, has set off a scramble that will quickly change the face of the file-trading world. StreamCast's Morpheus, with more than 51 million downloads of its software before last week, had formed the largest part of the biggest file-swapping network to develop after Napster's demise.

Anyone using Morpheus had also been able to search computers running another piece of software called Kazaa, originally built by Zennstrom's company but sold to an Australian company called Sharman Networks. With Morpheus temporarily crippled, the Kazaa software has taken over the mantle of file-trading heavyweight.

The shutdown, whatever its cause, could also have serious ramifications in court--even for Zennstrom's own company.

Kazaa BV and StreamCast each are being sued by the Recording Industry Association of America and the Motion Picture Association of America. One of the key issues in that case, which had its first hearing Monday, was whether the companies could control what happens on their networks.

Each company has contended that the networks are wholly decentralized, and that the companies could not exert any control over computer users' actions. But the failure of Morpheus' network appeared to indicate that at least one control point existed that would allow part of the network to be shut down.

The RIAA reacted to this development quickly last week.

"We have been saying all along that they control the system, and this proves it," RIAA Senior Vice President Matt Oppenheim said in a statement last week.