File sharing websites such as Napster will continue to grow despite the introduction of digital security and the threat of legal action, according to two separate studies.
Forrester Research warns that the music and book industries combined stand to lose $4.6bn by 2005 as copyright pirates use websites such as Napster to download their intellectual property.
"Consumers have spoken - they demand access to content by any means necessary," said Forrester analyst Eric Scheirer. "Neither digital security nor lawsuits will stop internet theft of content."
Scheirer believes most traditional companies are wrong to focus on using security to protect and control distribution of content. "That proposition has no future in it. Content won't be controlled and content can't be stopped legally," he said.
Forrester's report states that the content industry will experience a "collapse of control" when file sharing satisfies consumer demand for content and transforms distribution-based businesses. This collapse will cause a major shift in the power structures of the music and publishing industries, the report warns.
Forrester interviewed 50 entertainment companies that produce music, films, books, video games and television programmes. Executives interviewed said they will use digital rights management (DRM) technology to stop file sharing - the technology at the heart of Napster's service. They also said they will sue internet companies and consumers that do not respect their copyrights.
However, Forrester believes the two-pronged strategy will fail. Scheirer said DRM cannot prevent file sharing nor will businesses that depend on the control of content ever sustain revenues. "It only takes one person to break down the security barriers and share content on the net. Lawsuits will only succeed in driving consumers to underground internet services like Gnutella and Freenet," he said.
Another research company, Cahners In-Stat, reported that millions of consumers are hooked on portable digital players, despite doubts surrounding the legality of some digital music download programs.
According to Cahners, the growth of digital downloads has increased the popularity of portable digital music players, called MP3 players, and it predicts that annual sales will soar from $126m in 1999 to $1.25bn by the end of 2002.
Mike Paxton, senior analyst at Cahners, said the legal proceedings against companies including Napster and MP3.com have focused attention on digital music and its potential to change the current recording industry distribution model.
Cahners said all five of the US's major record labels plan to sell songs over the internet by the end of the year. However, the researcher points out that the search for a universal secure digital content protection scheme is proving to elusive.
The Secure Digital Music Initiative, an industry-backed security policy, will continue to suffer from disagreements between the record and technology companies, and alternative DRM solutions such as Windows Media Audio will attract more users and increased manufacturer support.
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