Some See Benefits of File Sharing

Lahr, co-founder and president of Kufala Recordings, is one of a number of file-sharing advocates who argue that the networks can play an important role in e-commerce.

While the major entertainment conglomerates argue that popular file-sharing networks have no "commercially significant" use, Lahr and numerous other independent artists, labels and filmmakers are trying to sell their digital wares amid the profusion of bootlegged goods.

So far, though, the results have not lived up to many of the pioneers' hopes.

Despite the enormous number of users on the networks, sales have been slight. Labels that use the peer-to-peer networks say they generate less than 10% of the sales that industry-sanctioned outlets such as Apple Computer Inc.'s iTunes Music Store do.

The networks' ability to become legitimate sources of music, movies and other goods is a key issue for the Supreme Court, which is considering whether two popular file-sharing companies should be held liable for their users' rampant piracy. The major labels, studios and music publishers have asked the court to overturn the U.S. 9th Circuit Court of Appeals, which shielded StreamCast Networks Inc. and Grokster Ltd. from liability.

The court's ruling is expected this month.

Regardless of the low music sales, file-sharing advocates believe the networks are too good an opportunity to ignore.

"We really want to sell our material through this new sales channel," said Lahr, whose Santa Monica-based label specializes in concert CDs. "It really gives new artists or breaking artists an opportunity to expose themselves to a new audience."

To many independent labels, the main goal is simply to introduce music fans around the globe to little-known artists who have no chance of being played on commercial radio stations. The payoff they hope for in the long term is greater CD sales; any downloads they sell on the networks are icing on the cake.

"It is small, but everything starts small," Chief Executive Daniel Glass of Artemis Records said of his company's revenue from Kazaa and other popular file-sharing networks. "To not be part of it is insane."

The amount of piracy on the networks is staggering, with estimates running into the billions of files per month. Executives at four companies that distribute authorized copies of songs and games said demand for their wares was small by comparison yet growing quickly.