Knight Ridder Newspapers

More people are trading more bootlegged music online than ever before despite the recording industry’s relentless legal battle to quashInternet piracy. The industry successfully shut down Napster, the rogue site that popularized music swapping, but new statistics reveal that online music exchange continues to grow. A new generation of file-swapping sites has risen up from the Internet underground to fill the void. “It’s like playing whack-a-mole: You kill one of these guys, and another one pops up to take its place,” said Rob Batchelder, research director for GartnerDataquest, a technology research firm in Stamford, Conn. Exact numbers are elusive, but analysts estimate a record 15 million people downloaded music online this summer _ illicitly trading 3 billion songs in August alone. That surpasses the song-swapping binge that followed a federal appeals court ruling against Napster in February. Fear that the music free-for-all would stop brought Napster’s usage to its peak with 13 million people hoarding billions of MP3s, the digital version of popular songs. The courts ruled that anyone downloading copyright material without permission commits theft. But the record labels’ victory hasn’t deterred the practice.

The online bootleg bonanza isn’t limited to music anymore. Anyone with an Internet connection and a little patience can download pirated movies, including First-run films like “American Pie 2.” They can swap the collected works of popular novelists like Stephen King. And, of course, they can find enough porn to satisfy any appetite.

The fastest-growing of these new file-swapping services, MusicCity’s Morpheus and KaZaA, have attracted 3 million users since Napster introduced new, more effective song-filtering in June, according to Jupiter Media Metrix, a New York research firm that tracks Internet activity. Traffic on these services was too small to measure before then.

Other popular bootleg sites AIMster, AudioGalaxy, iMesh and BearShare are growing more slowly, but nonetheless attracted nearly a million users each, according data gathered by the online audience measurement firm Nielsen//NetRatings. “Not only are these services less centralized _ and more difficult to police,” said Aram Sinnreich, a digital entertainment analyst for Jupiter Media Metrix. “But whereas Napster was only an MP3 application, consumers now have been introduced to the wonderful world of porn and movie pirating.” In short, the recording industry’s prosecution of pariah Napster did nothing to halt Internet music piracy. It has fragmented and spread, like a glass shatteredagainst a tile floor. “After 15 months, other networks just stepped into Napster’s place,” said Matt Bailey, a senior analyst with Webnoize, a Massachusetts research firm covering digital entertainment. The millions of dollars in legal fees was a waste of money for the recording industry, he said. “We know there will be a certain amount of piracy online and offline,” said Amy Weiss, Recording Industry Association of American spokeswoman.

“We are not going to sue our way through the Internet as we do not believe that litigation is a business model.” However, piracy is cutting into the recording industry’s business. The sustained popularity of underground file-swapping services is eroding CD sales, says Gartner’s Batchelder. Indeed, sales of albums and singles are down 5.4 percent for the second quarter of the year, according to SoundScan, a firm that tracks retail record sales. Batchelder predicts CD sales will continue to decline dramatically, with revenue off 20 percent by 2005. “No amount of wishful thinking on the part of the music industry will stop this,” said Batchelder. The recording industry planned to use the legal precedents won in the Napster case to combat Internet pirates and bide time, as it prepares to launch paid subscription services.

Two new ventures backed by the record labels MusicNet and pressplay are expected to launch this month. But both services have become mired inlicensing disputes with music publishers that could postpone their consumer introduction. Even Napster plans to go legit sometime this year, remaking itself as a paid subscription service. Analysts like Sinnreich wonder whether the recording industry has already lost the battle to the gray market. “If the record labels put together a well-priced, easy to use service that has a broad catalog and a bunch of value-added tools and technologies that an underground service wouldn’t offer, then they have a business that can become popular,” Sinnreich said. “If they don’t do that… they’re going to drive consumers into the hands of the gray market alternatives.” The record industry is not about to surrender to pirates. “Our member companies have been offering music online for consumers so fans can get music when they want it and how they want it,” said RIAA’s Weiss. Asked if the recording industry was contemplating future legal action, Weiss declined to comment.