Variety editorial

For Hollywood, MGM v. Grokster, which goes before the Supreme Court next week, is the most significant technology case the court has heard in two decades.

So what’s wrong with the studios’ case?

Lawyers for the Hollywood majors and record labels, supported in briefs by a broad coalition of entertainment companies, are asking the justices to find Grokster and StreamCast — makers of so-called peer-to-peer (P2P) software — liable for copyright infringement.

Media congloms have good reason to be wary of P2P file-sharing. P2P has largely built its business on piracy, catering to people who, most of the time, use their networks to illegally download songs, movies and videogames.

A few P2P companies, like Snocap and Altnet, are distributing legal files via the technology, but the major P2P networks, like eDonkey and Grokster, have demonstrated scant ability to curtail piracy.

But conversely, no major label or studio has yet shown the foresight to recognize P2P for what it could be sometime in the future: a highly efficient means for virtually no-cost distribution of their content worldwide.

Eventually, a visionary content owner will experiment with business models until he finds one that works, in the process beating the studios to a huge new source of revenue.

When lawyers for the two sides face off next week, it will be hard not to think of Betamax.

It was the 1984 Betamax case, after all, in which Hollywood last argued before the Supreme Court that a new technology would eviscerate its business.

Hollywood was dead wrong. It lost the Betamax case, but the decision was a big win anyway. Once VCRs were declared legal, studios were forced to learn to live with them. In response, they ultimately created the homevideo business from scratch, a market that’s now bigger than the theatrical market.

P2P networks can be shut down by lawyers, but they won’t go away. They’ll simply move to third-world countries where the law can’t touch them and there’s no chance of rapprochement.

Efforts by the MPAA and the Recording Industry Assn. of America to protect intellectual property are laudable, because the creative work of even the smallest independent artist couldn’t thrive without it.

But regardless of how this case turns out, Hollywood must get its act together and find a way to co-exist with P2P, because it’s here to stay.

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