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Music trading heads back underground

The new face of Napster and the scattering of its visitors are proof of how far the record labels and Hollywood have come in defusing the online threat.

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The new face of file-swapping service Napster and the scattering of its visitors are proof of how far the record labels and Hollywood have come in defusing the biggest online threat to their businesses.
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 Analyst: Napster users willing to pay
Matt Bailey, analyst, Webnoize

A year ago, the once-underground practice of online file trading was fast approaching the popularity and easy use of an America Online, with the help of Napster and its rivals. But for now it appears the copyright industry has forestalled the threat of a mainstream, long-lasting consumer rebellion.

The last few weeks have seen a precipitous drop in the number of songs being traded through Napster. Competing services have also agreed to start filtering out copyrighted works, and some have shed visitors by the tens of thousands.

The leading swapping sites are still attracting millions of people a day, but their roles are changing, beginning to look more like the underground's long-running digital swap meets than like the venture-funded Napsters and Scours of the last two years. Developers are working on newer, more anonymous services, but these have yet to demonstrate any wide support.

"It's definitely becoming more underground," said Kelly Truelove, CEO of Clip2.com, a company that tracks and supports "peer-to-peer" file-swapping services. "If it's harder to find what you're looking for, and if there's the threat of harassment, then people look elsewhere."

The big copyright holders, including the major record labels and Hollywood studios, are betting that the decline will continue well beyond Napster's borders. By putting enough pressure on individual file-trading services, and keeping the threat that individual people might be targeted, no future service will reach Napster's popularity, they hope. And that will make the entire phenomenon less dangerous, they say.

"I think peer-to-peer (file trading) will be a continuing part of the scene, but it won't have the dominant role it has today," said Cary Sherman, the Recording Industry Association of America's general counsel. "The important thing is that these services are only as good as the number of people who participate in them."

The P2P myth But even the record labels say that file-swapping services have left permanent marks on the industry and consumers' expectations. Moreover, the peer-to-peer computing model has begun to permeate larger companies such as Sun Microsystems and a handful of well-funded start-ups focused on new applications for the technology.

Resisting the decline
With filtering efforts ongoing in Napster's network, the biggest surprise may be that millions of people are still using the service every day.

Since early March, the company has been blocking access to many copyrighted songs to satisfy a court order. This filtering process evolved slowly, but late in April it reached the point where most major label songs became genuinely difficult, if not impossible, to find.

A peer-to-peer snapshot
Napster still has the most people and available files, but on any single server visitors might find more music elsewhere.

Service Files available Number of users
  Napster (single server)

    262,542     7,326  
  Napster network (about 100 servers)

    56.5 million     1.35 million  
  OpenNap (single server)

    957,000     3,052  
  OpenNap network (33 servers)

    5.54 million     23,000  
  Gnutella network

    2.57 million     32,718  
  iMesh network

    unavailable     118,218  
  MusicCity's Morpheus network

    5.57 million     61,083  
Sources: Napster, Napigator, Clip2.com, iMesh, MusicCity
The company added yet another layer of filtering technology late Sunday, releasing a new version of the software that has the ability to read the acoustic properties of individual song files and block their transfer based on that information.

The most recent efforts have led--according to Napster's figures--to an 80 percent drop in the number of files available. Independent research firm Webnoize reported that the number of files swapped on the service dropped by 36 percent in April. But despite all of this, Napster said it reached peaks last weekend of more than a million people on its servers at a time, with 8 million people logging on each day.

"There's certainly not the snowballing effect (of people leaving) that you would expect given the lack of content," says Matt Bailey, an analyst at Webnoize who has closely tracked usage of the service. "Napster does seem to be benefiting from strong consumer loyalty."

So what's going on?

The millions of files still available are partly responsible. Many of these are songs from independent labels, out-of-print and live recordings or cultural marginalia that together still draw an audience. The theme song for the Hanna-Barbera show, "Banana Splits," or an obscure recording of the Shaggs' "My Pal Foot Foot," for example, could be found and downloaded in moments.

Moreover, many major label songs still can be found through increasingly tortured misspellings. Bailey also speculated that many people are using the Napster software as a music player, logging in without actually downloading songs.

Several alternatives including Gnutella, MusicCity and Audio Galaxy have seen usage numbers climb as Napster's star dims. But no single service is emerging as a clear replacement. Gnutella is attracting about 30,000 people online at a time. iMesh posts peaks of more than 100,000 simultaneous visitors, and newcomer MusicCity is climbing with more than 60,000 people online at a time. But all of these are a long way even from a crippled Napster.

Like Napster itself, some of these services have begun filtering or are looking at filtering songs at the request of the RIAA or copyright holders. iMesh has been warning its visitors for weeks that songs will soon start being blocked, and Audio Galaxy has confirmed that it has blocked some songs as well. Aimster is one of the only services fighting back in court.

Others including FastTrack, the parent of up-and-coming KaZaA service, say they are planning their own subscription services as they cast around for a business model. Napster and partner Bertelsmann still plan to launch their own paid services in July. This likely will have the effect of driving many people to services that remain free, analysts say.

Revolution delayed?
Even if the original file-sharing tide has receded, developers say that more technology is in the works that could change the dynamics once again.

Napster wildfire As newer and larger companies gain interest in the peer-to-peer model, an increasing number of programmers are learning the skills to create file-sharing applications. Sun's Jxta project has spotlighted these efforts, but other smaller companies such as Groove Networks and Zodiac Networks are pushing the technology in different directions.

A new generation of file-swapping services is also creating techniques that make it more difficult to trace people and files, either by distributing bits of files across many different computers or encrypting networks so monitoring agencies can't easily pierce them. Although none of these are yet easy enough for mainstream Web surfers to use, they have the potential to revitalize the file-swapping underground, analysts say.

"To the extent that (file-traders) have become identifiable (by the RIAA and others)...it would be a natural reaction for developers to make their systems more anonymous," Clip2's Truelove said. "There is real potential to see that with Gnutella or with other new services."

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