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Supreme Court Ruling on Grokster to Spur Long-term Growth of Legitimate P2P Services

Dallas, Texas July 7, 2005 — The U.S. Supreme Court’s unanimous ruling on June 27, 2005, against peer-to-peer (P2P) services such as Grokster provides a framework for future growth of legitimate P2P services, according to research firm Parks Associates.

In the case MGM Studios Inc. et al v. Grokster Ltd. et al, the Supreme Court decided P2P networks such as Grokster and Streamcast Networks could be held legally liable if they induce copyright infringement to support their business operations.

“This ruling is favorable to the content industry in the near term but neutral in the long run,” said Harry Wang, research analyst at Parks Associates and author of Parks Associates’ recently-released report Digital Rights: Content Ownership and Distribution. “P2P technologies have been very adaptive in response to legal attacks, and this recent decision will drive P2P networks to adjust their business models to avoid lawsuits.”

Wang expects in the near term the content industry will capitalize on this legal victory and commit more resources against Grokster-like P2P Networks.

“Grokster is a second-generation P2P service built on the lessons learned from the old Napster venture,” Wang said. “Although the court ruling by and large outlaws Grokster’s current advertising-driven business model, P2P networks will experiment with new models that are not solely based on advertising revenues, thereby closing this new legal inroad for the content industry.”

One such business model could include collaboration between the content industry and P2P providers. By leveraging the efficiency of P2P in content distribution, content providers could create new streams of revenue while at the same time providing a legal outlet for P2P services and technologies.

“Adding digital rights management (DRM) control to P2P networks should be the end goal for both sides,” Wang said. “The content industry has gained significant leverage against P2P operators through this ruling, but there is also a golden opportunity to press for more legal content distribution over P2P networks. Simply put, while Grokster might not survive the Supreme Court’s ruling, P2P technologies will persist. If both sides are to succeed in the post-Grokster era, they should build a working relationship that will use their strengths to realize truly efficient digital distribution of content.”

Digital Rights: Content Ownership and Distribution provides an in-depth look at the significant issues, technologies, and players in the digital rights management (DRM) industry. It analyzes different stakeholders’ interests, reviews a variety of technologies, discusses current DRM-enabled content distribution models, and provides insights to future DRM adoption trends. Moreover, the report profiles key players in the DRM industry and features consumer data from several recently completed primary studies conducted by Parks Associates.

For additional information on Digital Rights: Content Ownership and Distribution, visit or contact 972-490-1113 or

About Parks Associates: Parks Associates is a market research and consulting firm focused on all product and service segments that are “digital” or provide connectivity within the home. The company’s expertise includes home networks, digital entertainment, consumer electronics, broadband and Internet services, and home systems.

Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, multiclient studies, consumer research, workshops, and custom-tailored client solutions. Parks Associates also hosts Fall Focus and co-hosts CONNECTIONS (in partnership with the Consumer Electronics Association) each year.

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