EDonkey Carts Load of Criticism

Sam Yagan's critics call him a pirate, an illegal operator and an encourager of child pornography because of his free online file-swapping service.

Yagan begs to differ. He's the president of New York-based MetaMachine, owner of eDonkey, where the latest music and movies are available at no charge. And all he wants is the entertainment industry to stop fighting him and instead use his giant audience -- an average 2.2 million -- to sell media with him. But on his terms.

"The peer-to-peer community is massive," he says. "Show me another technology on this scale that's been litigated or legislated out of business. You can't make us go away."

Yet some in Congress hope to do just that. The Senate Judiciary Committee held hearings Thursday to discuss a bill aimed at making peer-to-peer companies directly liable for copyright infringement.

The bill is a response to a recent court win by P2P companies Grokster and Morpheus that said they weren't liable for copyright infringement -- but their users were. Record labels and Hollywood studios are appealing the decision.

High-Profile Sponsors
Bolstering the bill are its many high-profile co-sponsors, including Sen. Majority Leader Bill Frist, R-Tenn., Sen. Minority Leader Tom Daschle, D-S.D., and Hillary Rodham Clinton, D-N.Y.

Opponents include technology companies Intel (Nasdaq: INTC) , Google , Yahoo (Nasdaq: YHOO) and Cnet Networks. They say the bill is written so broadly it could make them liable for inducing consumers to engage in copyright infringement -- not just the P2P networks.

If the bill passes, "We'd have to figure out whether we need to close down (or) move abroad and keep doing what we're doing," Yagan says.

Unlike competitors, eDonkey is incorporated in New York and pays taxes there. That should account for something, Yagan says. Kazaa is incorporated on the small island of Vanuatu; Grokster is headquartered in Nevis, West Indies; and Earthstation 5 is run from the Jenin refugee camp in Palestine.

Deal Called 'Good Sign'

Kazaa is being sued by the Recording Industry Association of America and its international counterparts. The RIAA this week settled its lawsuit against Israel's iMesh, one of the longest-running P2P firms, since 1999, for $4.1 million, and the company promises to take down unauthorized files by year's end.

Yagan calls it a "good sign" that the labels made a deal with a P2P company, but says, "I'm curious to know if there will be any files shared and downloaded for free. How will iMesh keep their user base if they do this?"

He has offered to sell licensed music and movies on eDonkey. But Hollywood and the record labels aren't interested because he would put licensed content next to free stuff. Yagan says his audience would disappear overnight if he did it any other way. However, RIAA President Cary Sherman says, "Financially supporting a network where 99% of the traffic is illegal does not make sense."

'Not Illegal'

Yagan hears the word "illegal" often, but he doesn't agree with the assessment. "The software provided by P2P companies is not illegal," he says. He notes that copyright law says works cannot be infringed. "I produce software," Yagan says. "The software does not infringe. Are there people who use the technology to infringe? I'm sure there are."

Indeed, eDonkey is a haven of copyrighted material. Do a search for any current movie -- Spider-Man 2, Anchorman, Fahrenheit 9/11 -- and multiple copies pop up. Same for songs: all the latest from hitmakers Usher, Alicia Keys and Janet Jackson.

Internet measurement firm BigChampagne says 1 billion songs were available for free on P2P services in June, the same month Apple (Nasdaq: AAPL) announced it had sold 100 million songs to users since April 2003.

A Different Start

Yagan majored in economics at Harvard University and co-founded study guide company Sparknotes, now owned by Barnes & Noble (NYSE: BKS) . An old friend of software designer Jed McCaleb, he signed on with eDonkey when McCaleb was looking for a way to make the service profitable.

The labels say P2P firms make millions of dollars from advertisers and spyware program vendors. Yagan says the money he reaps from advertising is a modest amount that pays for its five-person staff and 14th Street office in New York.

Unlike Kazaa, Grokster and other P2P firms, eDonkey users can choose whether to opt in for the ad programs. Most users agree to take them, Yagan says.

EDonkey has been downloaded by more than 50 million people and is even more popular in Europe, he says.

'Kazaa on the Decline'

"Kazaa is on the decline," adds Andrew Parker, chief technology officer of London-based Internet measurement firm CacheLogic. "EDonkey is faster to use, has more content, doesn't have as much ad and spyware and is available in more languages, which is why it's so popular worldwide."

EDonkey's speed shows in its technology. It downloads bits of files simultaneously, and then seamlessly puts them into one file after they reach your computer. The name eDonkey is meant to spotlight its specialty in big files. The donkey is carrying a big load for you.

The donkey has nothing to do with politics. But ironically, while senators debate P2P's merits, their parties are supporting it in advertising. Both the Democratic and Republican national committees are advertising on eDonkey for President Bush's and Sen. John Kerry's presidential campaigns.
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