A particularly striking part of the recent PFF panel on Grokster was the discussion by Cary Sherman of the RIAA on the market's response to the decision, which reduced uncertainty and assured people that the Supreme Court will indeed protect IP rights:

I want to spend a minute talking about the marketplace reaction, too, because we think that is very telling. Within a day or two of the decision you saw a number of announcements of legitimate P2P companies who have been licensed, who are getting into the marketplace. For them, this decision was very good news because it means that they’ve got a business model that captures the benefits of P2P but avoids any of the legal problems associated with it.

Mashbox is one. It is particularly interesting because it was founded by Wayne Rosso, the former president of Grokster. I think he said that he was the only guy who was both a victim of the decision and a beneficiary of the decision on the same day. And he also said that “nine old geezers in black dresses eliminated all his competition and God bless them.” Wayne knows how to give a good quote, that’s for sure. He is getting close to getting a product out there.

iMASH is another company that people haven’t heard about much but is going to be launching a legitimate P2P. I have seen a demo of what they’ve got and I can only tell you I was really pleasantly surprised by just how good it is. It’s a combination subscription service like Napster and Rhapsody and others with a download service with peer-to-peer built in, with all sorts of communications among the participants on the network and all sorts of features that I think are extremely clever.

What it underscored for me was how much better the P2P experience is going to be when it’s legal, because the P2Ps up to now who have had to hide under the Napster case from knowing who their users were or what they were doing and to disclaim any ability to actually control what they’re doing – all that goes by the boards in a legitimate service and you take advantage of the fact that you know what your consumers are doing and what they want and how to give it to them.

There was one press report in which Sam Yagan, the CEO of eDonkey, was talking about the fact that because of legal reasons his company hasn't been able to know who its customers are, so it’s very difficult to market to them, to figure out who it should be promoting what kind of music or what kind of products to; it’s very difficult to offer things to record companies or movie studios or the like. Well all that goes away in a legitimate P2P model and, he thinks, therefore, we are going to see a much better P2P experience because it’s legitimate.

There is also Snocap. In case you haven’t heard of that, it is Sean Fanning’s system where he actually offers an entire back office function to P2P and any other retailer so it filters out the content that is claimed by copyright owners to be protected and redirects you to a legitimate retailer who can sell you the product and it offers all the back office accounting systems and licenses and everything else.

There is another one called Peer Impact by World. There is another one called P2P Revolution.

I think you’re going to see a lot of these in the coming months and I think you’re going to be impressed. There is a lot of additional activity going on behind the scenes that I can’t discuss at this point but it’s very clear that the Grokster decision can be something of a milestone in terms of the relationship between P2P and the content community.

The San Jose Mercury News had an article describing how the P2Ps are taking a fresh look at their business models. For example, you had Sam Yagan, the eDonkey guy, saying: “I think we are just rethinking everything about our business from floor to ceiling and I think everything is on the table."

And Sean Fanning was commenting that he thinks there is going to be a lot of interesting things happen over the next few months and he basically explains how, because Grokster was pending, deals really couldn’t get done because everybody was waiting to see where the Court was going to come out. Now that that has become clearer, deals can be struck. And I think that the marketplace and consumers and music fans as well as creators are going to be the ultimate beneficiaries of that. That’s a really great thing, and another reason to be very gratified by that decision.

posted by James DeLong @ 10:23 AM | Markets: Business, Investment & Innovation

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