By Sue Zeidler
LOS ANGELES (Reuters) - The music industry is adding more firepowerto its arsenal in the fight against online piracy, planting "decoys" onfree peer-to-peer services and considering lawsuits against individualsong-swappers, sources said on Wednesday.
Many large record labels have resorted to what is known as"spoofing," by hiring companies to distribute "decoy" files that areempty or do not work in order to frustrate would-be downloaders ofmovies and music.
"Spoofing is just one example of a lawful and appropriate self-helpmeasure available to the labels to respond to the growing problem ofpeer-to-peer network piracy. It also happens to confirm the adage 'youget what you pay for,"' said a spokesman for the Recording IndustryAssociation of America, the trade association for the big labels.
Overpeer, a New York-based software firm funded by South Korea's SKGroup, is one firm helping the industry disguise online files to thwartunauthorized swapping.
"Companies that provide heavily pirated music, films and softwareare making a strong commitment to protect their content," said MarcMorgenstern, Overpeer's chief executive, who said such activity wasincreasing "on all fronts."
Additionally, sources said the RIAA, which represents music giantslike Bertelsmann AG BMG, EMI Group Plc, AOL Time Warner Inc, VivendiUniversal and Sony Corp, is considering taking a new tack by suingindividuals who use the services, rather than the companies that hostthem.
Entrenched in its worst sales downturn in more than a decade, themusic industry blames such unauthorized sharing in part for the 5percent decline in global music sales in 2001 and a continuing slump insales this year.
"They're talking about suing individual users. It's one of manyoptions to stop declining sales, but they haven't agreed yet whether togo forward or not," said a record executive.
The RIAA declined comment, but industry sources said the idea hassparked a debate among the record labels, who in the past have beenloathe to sue individual users for fear of losing customers.
"Launching a campaign of lawsuits against file swappers escalatesthe war against those who want online music. It invites retaliation,"said Phil Leigh, analyst with Raymond James, who estimates cumulativedownloads of services like Morpheus and Kazaa total 90 millioneach.
Warner Music, for instance, has expressed concerns about theproposal, while EMI and market-leader Universal Music were strongproponents, sources said.
Warner, Universal and EMI all declined to comment.
GENIE OUT OF THE BOTTLE
While the labels have scored legal victories against providers ofservices like Napster, Morpheus or Kazaa, users continue to find newways to get music for free on the Web.
The lawsuits, according to industry sources, would mostly targetthose individuals, known as "supernodes," who collect the biggestamounts of music and who in turn become a sort of centralized directoryfor online music-sharing.
Analysts said music labels would need the co-operation of InternetService Providers to identify offenders. The ISPs would also have toagree to send "cease and desist" messages.
"All of this involves getting the ISP to take on added duties as a'policeman' for which he receives no compensation," Leigh said, notingfew ISPs are keen on driving away users.
Analysts note further that any "legitimate" online market willremain constrained until the industry comes up with alluring commercialalternatives.
"If the labels fail to provide a viable licensed alternative,they're likely to continue battling a vast army of computer-savvyyouthful volunteers who are passionate about music in a digitalformat," Leigh said.
The labels for their part are ramping up online services likeMusicNet and Pressplay and have also increasingly licensed music toindependent services like FullAudio and Listen.com.
While admitting the challenge in charging money for something thathas been available for free, officials often cite the cable industry'ssuccess against similar dilemmas.
"If you offer a compelling alternative that's affordable andprovides features that people can't get from these free services,people will sign up over time," said a spokesman for Listen.com, whichprovides a service called Rhapsody.