Grokster, Other P2Ps Reportedly In Talks To Go Legit With Paid Downloads

RIAA suits and cease-and-desist letters helped spur P2Ps to convert their networks.

Just a week after receiving cease-and-desist letters from the Recording Industry Association of America suggesting they go legit or face the consequences, at least five peer-to-peer file sharing services are in talks to convert their networks to paid downloads.

The New York Times reports that the most advanced discussions are between the RIAA and Grokster, the small California P2P that was at the center of a recent Supreme Court ruling that P2Ps may be held liable for contributing to the infringing actions of their users (see "File-Sharing Networks Can Be Liable For Copyright Infringements, Supreme Court Rules").

Grokster has reportedly agreed to be acquired by Mashboxx, a new Sony-backed company that is launching a legal file-sharing service. Mashboxx has also reached out to popular P2Ps such as eDonkey, Morpheus and LimeWire, but those discussions have stalled.

Grokster's lawyer did not comment on the deal, but The Wall Street Journal reported that the tentative agreement calls for Mashboxx to pay a token amount for Grokster and share future revenue from the sale of legitimate downloads.

Mashboxx has a deal with Sony to sell its music and is in negotiations with other labels. The company, which is run by the former president of Grokster, is hoping to launch a test of its service in December.

At the same time, file-sharing service iMesh — which reached a deal with the RIAA to convert to a legal paid service before the June Supreme Court ruling — has also begun talks with other services. "We have initiated discussions with a number of well-known players," iMesh executive chairman Robert E. Summer told the Times, declining to name names.

Because the agreements call for the services to first settle their claims with the RIAA and avoid what could be costly litigation, Summer said he didn't think "anyone will get rich off these deals." Having reached deals with all the major labels, Summer said the iMesh service plans to launch any day.

"There is considerable momentum out there because the current peer-to-peers, in my view, would be foolish to ignore what's taking place," Summer told the Los Angeles Times. "They will be pursued."

Unlike P2P services, which let users download files for free from each other's computers, both iMesh and Mashboxx plan to use technology that scans downloaded files and compares them with a master list of copyrighted files provided by record companies. If a user is trying to download a copyrighted file, the download will either be blocked or the user will be asked to pay for it. Both companies are working on methods to lure people used to downloading for free to their services.

Mashboxx will let users download low-quality files for free several times before making them pay, and iMesh is considering setting up a lengthy free-trial subscription of its service, which will allow users to listen to an unlimited number of songs for a fixed monthly price.

The Journal reported last week that among the targets of the RIAA cease-and-desist letters were such popular services as LimeWire, WinMX, eDonkey and BearShare (see "RIAA Hits Seven Peer-To-Peer Services With Cease-And-Desist Letters"). Most of the recipients have started some form of settlement talks so far, a recording industry executive told The New York Times. The RIAA is looking for settlements similar to the one reached with iMesh, in which the company paid $4 million in damages and agreed to switch to a paid service.

"Ever since the Grokster decision, we have been thinking about what our next iteration should be, and obviously the letter last week made that process more urgent," Sam Yagan, the president of eDonkey distributor MetaMachine told The New York Times. Yagan said he'd spoken to both iMesh and Mashboxx but had not yet decided if he was going to sell the company, convert to his own legal service or keep fighting the RIAA.

For complete digital music coverage, check out the Digital Music Reports.