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P2Ps Still Dominate Downloads

Peer-to-peer (P2P) file sharing has many emerging legal uses but downloading music and movie files – often illegally – remains the most popular use of the software, according to two reports released today.

According to the Federal Trade Commission (FTC), businesses, government agencies, academic institutions and others use P2P applications for a variety of legal tasks including sharing communications, processing power and exchanging data files with others.

However, the FTC said, the most common application "by far" is commercial file-sharing software programs such as Grokster and Kazaa used to exchange music and movie files. The FTC report claims "tens of millions of individuals have used a P2P file-sharing program."

The new FTC report coincides with another report released Thursday by the NPD Group stating that although the paid download digital music marketplace continues to grow, downloading free digital content from P2P services continues to draw the vast majority of downloads in the United States.

The NPD report notes that in March of this year, 243 million songs were downloaded from P2P services. By comparison, 26 million songs were purchased from digital music stores during that same month.

NPD estimates that 11 million U.S. Internet households had at least one member who downloaded a music file in 2004, nearly three times as many as paid to download a music file.

The NPD report says many younger consumers continue to use P2P services to download music, but consumers in other demographic brackets have reduced usage of P2P or stopped entirely, especially among older, middle-income consumers.

"The music industry's litigation has had an adverse effect on overall P2P usage," NPD said in its report. "Between April 2003 when the lawsuits were announced and April 2004 there was a 16 percent decline in the number of songs acquired from P2P; however, those levels have been creeping up again recently although the rise is lagging the growth of broadband."

Both reports come as Hollywood and P2P developers are awaiting a Supreme Court decision in MGM v. Grokster. Hollywood-led content owners are seeking to sue the P2P technology companies for the widespread copyright thefts of their file-swapping end users.

The P2Ps contend their business models are legal based on the 20-year-old Sony Betamax decision of the Supreme Court. In that case, the justices ruled that technology is neutral when it comes to copyright laws if the technology can otherwise be used for legal purposes.