(Reuters) (12/08/03)

By Andy Sullivan

Edited By Michael Bennett

WASHINGTON, DC - Internet users who copy music through "peer-to-peer" networks should pay a flat fee to compensate musicians and record labels whose songs they download, a technology trade group has proposed.

The proposal by the Distributed Computing Industry Association is intended to nudge the popular peer-to-peer networks toward respectability, and forge peace with the record labels that have hounded them and their users in court.

Under the proposal, peer-to-peer users would pay a flat monthly fee to the networks or to Internet service providers, which would be divided up among the record labels and musicians whose songs were downloaded.

Music fans could eventually be charged small amounts for downloading individual songs, or pay slightly more for "channels" featuring one style of music.

DCIA chief executive Marty Lafferty said a $5 fee could generate $200 million per month for the ailing recording industry, which has seen CD sales plunge in the last several years due in part to the popularity of the peer-to-peer services.

"It's truly a band-aid to get it started," said Lafferty, who said DCIA developed the plan in consultation with record labels, Internet service providers and other interested parties despite several lawsuits pitting one group against another.

The Recording Industry Association of America said peer-to-peer networks must prevent users from trading copyrighted works and stop making pornography available to minors if they want to be taken seriously, echoing a letter sent by several U.S. senators last month.

"Until the larger industry accepts the recommendations recently outlined by six respected U.S. senators, there will continue to be questions about how seriously they want to become legitimate," RIAA spokeswoman Amy Weiss said.

DCIA's reputation could prove a stumbling block as many peer-to-peer companies see the trade group as a front organization for Sharman Networks, which produces the popular Kazaa peer-to-peer software, and its partner Altnet, a digital-media company.

Altnet is owned by Brilliant Digital Entertainment Inc.

DCIA's first proposal, released in October, would have relied on Altnet's copy-protection technology to get users to pay for music.

One executive said the flat-fee system could work but that DCIA was simply trying to force other companies to use Altnet.

"There's always a hidden agenda with them," said Wayne Rosso, president of Optisoft SL, which makes the Blubster and Piolet peer-to-peer clients.

Lafferty said DCIA has added two more member companies, Digital Commerce, a peer-to-peer sports media company, and Claria Corp., which makes the controversial Gator advertising software.

But he acknowledged that relations with the rest of the peer-to-peer industry were rocky.

"It's almost as if they view Kazaa with its much larger market share as threatening to them, much as some smaller software companies view Microsoft (Corp.)," he said.

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