IP Democracy: End of an Era: Kazaa to Officially Go Legit

It’s the official end of an era — the big news yesterday and today is the $100 mil.+ settlement that former renegade P2P company Kazaa entered into with the music industry and Hollywood studios. Kazaa owner Sharman networks, headquartered in Vanuatu (which, by the way, calls itself the “world’s happiest place”) but operating out of Australia, has reportedly agreed to pay $115 million to settle its longstanding legal battles with the copyright holders.

The deal covers the four major record companies, Universal Music Group, Sony BMG, Warner Music and the EMI Group, and anticipates that these companies will work with Kazaa to produce legitimate music licensing deals, with the recording companies getting 20% of Kazaa’s take.

In a press release, Sharman Networks CEO Nikki Hemming said “This settlement marks the dawn of a new age of cooperation between P2P technology and content industries which will promise an exciting future for online distribution in general and Kazaa users in particular.”

It’s a new age indeed. Napster, the first P2P technology to burst onto the scene, has already gone legit, and video-oriented P2P service BitTorrent is actively trying to woo the Hollywood studios. Niklas Zennstrom and Janus Friis, the founders of Kazaa who are named in the settlement, founded VoIP company Skype, sold it to eBay for tons of money and are now trying to work out a legit online video service.

I suppose it’s better late than never for the record companies, but all this drama and litigation around file-sharing was unnecessary. Back in 1999, when Napster first hit like a meteor, the music industry’s visceral reaction was to shut down P2P for good, not take advantage of it, despite Napster’s willingness then to work out legitimate deals.

Now, after millions in litigation costs, not to mention the revenue loss and bad publicity, the record companies are on board. The object lesson: disruptive technologies can’t be stopped so it’s better to figure out early on how to take advantage of them.

Update: Reuters’ Adam Pasick has this item today about where, exactly, Kazaa, which really doesn’t generate much revenue, got the $115 million from — Zennstrom and Friis paid the tab.

Posted by Cynthia Brumfield on July 28, 2006 8:06 AM to IP Democracy