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Streamcast's new boss--same as the old boss

Rejoining Streamcast Networks after a federal judge invalidated film and recording industry claims, CEO Michael Weiss explains his faith in the file-swapping business's future.

Michael Weiss is coming back to the file-swapping business at a good time. The new CEO of Streamcast Networks is rejoining his old company--he left two years ago--just days after a federal judge issued a stunning rebuke to the film and recording industries, declaring that Streamcast's Morpheus and other decentralized file-swapping tools were legal.

With that newfound legal cover, Streamcast and the venture capitalists behind it are reinvigorated. They see a new future ahead--one that's still pockmarked by court dates and legal fees, to be sure, but one in which they can finally be seen to be running a legitimate software business, despite copyright holders' contrary assertions.

Weiss has a history of fighting Hollywood. He started one of the early chains of video-rental stores in the 1970s, and in 1984 wound up helping to organize other video-store owners against a Hollywood lobbying drive that would have given studios much more control over the rental business.

Hollywood lost that battle but wound up seeing revenue from video rentals revitalize the film industry anyway. Weiss believes that the Internet peer-to-peer story will have the same ending, as do other peer-to-peer advocates.

Streamcast and its Morpheus software have suffered over the past year and a half. Once the most popular download on the Net, it has taken hits to its user base after reluctantly switching to the Gnutella technology. Rival Kazaa is now the indisputable king of the peer-to-peer world.

In addition, ongoing legal bills have given the small company a rocky financial ride. A year ago attorneys said in a court filing that Streamcast could not sustain the expenditures necessary to fight its copyright case. A new legal team materialized not long afterward.

Shortly before the court ruling late last month, Streamcast's primary venture investors, Timberline Venture Partners, gave the company another round of funding. Along with the backers' renewed optimism, Weiss says, the new funding should help push Streamcast to a new level.

CNET talked to Weiss last week about the aftermath of the court ruling and the future of digital music on the Internet.

Q: What did the court ruling last Friday mean to Streamcast and to the broader peer-to-peer community?
A: It meant that Streamcast has a bright future. It's a new day, a new beginning for us.
There are some really wild claims about peer-to-peer out there, and I think that they're unfounded.
We can come out of the shadows. I think it opens up business deals and partnerships with major companies--whether they're advertisers, record companies or independents. We'll hopefully partner with majors someplace down the road, and also with recording artists, providing them with an effective distribution channel through which they can reach potential customers.

This is only your the second day on the job, but looking back, what did legal overhang mean to the peer-to-peer community? Was the community prevented from pursuing those business deals? Was it held back from pursuing new kinds of technology?
It was a dark cloud. It left a question mark. Who's liable? Who are they going to go after next? That cloud has been lifted. The judge has ruled. We are legal and legitimate. It's a strong ruling that should hold up going forward.

What the judge didn't say is that the actions of people using peer-to-peer software were legal. He alluded to direct copyright infringement taking place through the services. Is there anything that you can do, or that is possible to do about the large amount of copyright infringing occurring through software like Morpheus?
Again, we don't know exactly how large or not-large this infringement is--if there indeed is infringement. All that we can do is provide peer-to-peer software that works and works well. Users will use the software to do whatever they can with it. As the judge stated, there are many noninfringing uses. To characterize everyone using a peer-to-peer network as an infringer is a mischaracterization.

You have had some previous experience with this company, and some time to think about it. What would you like to see change at Streamcast?
I'd like to see us as No. 1. When I visit and look at the top five most-popular pieces of software, I want to see Morpheus right up there where it used to be. That's the beginning. But to get there, it is going to take listening to our customers and providing them with the software and the functionality that they want.

Sure, it's a David vs. Goliath thing, but we're in it for the long haul.
A big part of Morpheus' initial success, which made us number one, was the sense of community--providing users with community-building tools. That's what we still need to do. Peer-to-peer is about connecting people with people. I think that we could do a much better job of that--and we will.

Some critics of the Gnutella technology have said it's not as strong or as robust as the FastTrack system that Kazaa and Grokster use. What's your response to that?
Gnutella is improving on a daily basis. There is a large forum of developers worldwide who are working to improve Gnutella. I predict that some of the initiatives on which people are currently experimenting are making the technology stronger and more robust. I think that in no time at all you're going to see Gnutella able to stand up with the best of them. I actually think Gnutella works just fine now.

Does Streamcast play an active role in the Gnutella community?
In the past we haven't much, but we sure plan to going forward--supporting the community. It's an open-source community, and we plan to participate.

How do you think the entrance of Apple into the music download space changes the dynamics for peer-to-peer, if at all?
Apple's not really getting into the peer-to-peer space. They're providing a music download service. That's not what we do. We're not in that business. I believe that for iTunes or Pressplay or anybody else, peer-to-peer might provide a distribution platform for them to reach their target market in a cost-effective manner.

Apple views software like Morpheus or Kazaa, along with other paid services, as direct competition. Do you see that as true, or do you just see a complementary role down the road?
I see a complementary role. It's kind of interesting that over the past couple weeks I've seen Morpheus and peer-to-peer compared to lots of things. There are some really wild claims about peer-to-peer out there, and I think they're unfounded.

To date, there hasn't been an unambiguously successful business model for peer-to-peer. What do you see as the way out of that problem?
I think there has been a successful business model, and it's been advertising. I think there is more that could be done, and I plan on doing it. But I don't think advertising has been at all unsuccessful.

We have different rulings from different courts on the legality of peer-to-peer now. This latest ruling is clearly going to be appealed and perhaps will make it as far as the Supreme Court. Does Streamcast have the resources and the will to go that high, or will you be looking for a settlement?
We'll take it to the end. We believe that the ruling that was made on Friday was the correct one. We believe that it was a strong one, and we think that it will prevail in the end. The board of directors and the investors of Streamcast have stayed the course until now; a lot of other companies have dropped out, facing this adversity. Sure, it's a David vs. Goliath thing, but we are in it for the long haul. I would not be back unless I knew this company was here to stay, and it is. And so am I.