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P2P or Peer-to-peer file sharing allows users to download media files such as music, movies, and games using a P2P software client that searches for other connected computers.[1] The "peers" are computer systems connected to each other through the Internet. Thus, the only requirements for a computer to join peer-to-peer networks are an Internet connection and P2P software.[2] The first generation of P2P software is Napster, a central server-based model that was eventually shut down. The second generation of P2P software is Gnutella and Kazaa, which are user-based models. BitTorrent became the third generation of P2P networks. The difference between BitTorrent and previous generations is that it creates a new network for every set of files instead of trying to create one big network of files using SuperNodes, web caches or servers.[3]
There are a number of factors that contribute to the widespread adoption and facilitation of peer-to-peer file sharing. These include increasing Internet bandwidth, the widespread digitization of physical media files, and the capabilities of home PC's increasing to better handle playing and storing digitized audio and video files. Users were able to transfer either one or more files from one computer to another across the Internet through various file transfers and file-sharing networks.[4]
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File sharing began in 1999 with the introduction of Napster, a file sharing program and central server that linked people who had files with those who requested files. The central index server was meant to index all of the current users and to search their computers. When someone searched for a file, the server would find all of the available copies of that file and present them to the user. The files would be transferred between the two private computers. One limitation was that only music files could be shared.[5] Because this process occurred on a central server, however, Napster was held liable for copyright infringement and shut down in July 2001. It later reopened as a pay service.[6]
After Napster shut down, developers tried to create new ways of sharing files that would not infringe on copyright laws. The most popular of these new services were Gnutella and Kazaa. While Napster connected users through a centralized server, these new services connected users remotely to each other.[7] These services also allowed users to download files other than music, such as movies and games.[8]
Another protocol that emerged after Napster shut down is Bittorent. Bittorent allows users to connect with more than one peer and download individual bits from those peers.[9] Bittorent users voluntarily upload their files; this contrasts to other services like Napster and Gnutella that search your computer’s hard drive for files and make them available to anyone.[10]
There is still discussion going on about the economic impact of P2P file-sharing. Some have suggested that there have been relatively few studies though it has been growing lately, but the overall number of studies is still small.[11]Mr. Norbert J. Michel, a Policy Analyst in the Center for Data Analysis at The Heritage Foundation has raised in his article in 2004 that because of econometric and data issues, studies thus far have produced disparate estimates of file sharing's impact on album sales. For example, a study found that cross-country aggregate data support a 20 percent reduction in compact disc sales from file sharing, but that researcher's individual-level (or micro-level) data tests support a much smaller negative impact (8 percent) on sales. Using a different econometric approach, this same research estimates that file sharing reduces the likelihood of buying music by 30 percent. The author's research also uses micro-level data and finds that file sharing decreased CD sales in the U.S. by approximately 4 percent between 1999 and 2001.[12]
In the book The Wealth of Networks, Yochai Benkler says that peer-to-peer file sharing is economically efficient and that the users pay the full transaction cost and marginal cost of such sharing even if it "throws a monkey wrench into the particular way in which our society has chosen to pay musicians and re-cording executives. This trades off efficiency for longer-term incentive effects for the recording industry. However, it is efficient within the normal meaning of the term in economics in a way that it would not have been had Jack and Jane used subsidized computers or network connections".[13]
The economic effect of copyright infringement through peer-to-peer filesharing on music revenue has been controversial and difficult to determine. Music sales dropped globally from approximately $38 billion in 1999 to $32 billion in 2003, and an increasing number of studies found that file sharing had a negative impact on record sales,[14][15][16] although it has been alleged that reports funded directly and indirectly by media companies are biased towards portraying pirates "as the movie industry wants them to be seen, rather than presenting the facts".[17] It has also been reported that the movie industry has been burying commissioned studies which demonstrate that people involved in file sharing actually represent better than average customers, by describing file sharers as people who "purchase more DVDs than the average consumer, and they visit the movie theater more, especially for opening weekend releases which typically cost more to attend."[17] These findings are supported by other studies, including one by the BI Norwegian School of Management that found that those who download music illegally are also 10 times more likely to pay for songs than those who don't.[18]
A study, done by KTH researchers in 2006, about the impact of peer-to-peer file sharing showed that the decrease of CD Sales is due to a main reason : The music industry was to slow to meet the new demand. Indeed, it says that the decline of music sales happened when a new format called MP3 appeared and there wasn't any legal attractive websites covering this new kind of demand. The same study also brings the information that, in the United States during the last years, an increase of access to internet has correlated to an increase of file shares but also to an increase of sold music units counting digital and physical units.[19]
It has proven difficult to untangle the cause and effect relationships among a number of different trends, including an increase in legal online purchases of music; illegal file-sharing; drops in the prices of CDs; and the extinction of many independent music stores with a concommitant shift to sales by big-box retailers.[20] According to David Glenn, writing in The Chronicle of Higher Education, "A majority of economic studies have concluded that file sharing hurts sales", though not always to the precise degree "the record industry would like the public to believe."[21]
A study by Felix Oberholzer-Gee and Koleman Strumpf in 2004, analyzing logs of downloads on file sharing networks, found that file sharing had no negative effect on CD sales, and would possibly slightly improve the sales of top albums.[22] This work was challenged by Professor Stan Liebowitz, who accused Oberholzer-Gee and Strumpf of making multiple assumptions about the music industry "that are just not correct."[23][24] Professor Liebowitz, whose work is funded by the record industry,[25] has not published any of these claims in a peer-reviewed journal.
The MPAA reported that American studios lost $2.3 billion to Internet piracy in 2005, representing approximately one third of the total cost of film piracy in the United States.[26] The MPAA's estimate was doubted by commentators since it was based on the assumption that one download was equivalent to one lost sale, and downloaders might not purchase the movie if illegal downloading was not an option.[27][28][29] Due to the private nature of the study, the figures could not be publicly checked for methodology or validity,[30][31][32] and on January 22, 2008, as the MPAA was lobbying for a bill which would compel universities to crack down on piracy, it was admitted that MPAA figures on piracy in colleges had been inflated by up to 300%.[33][34]
A 2010 study, commissioned by the International Chamber of Commerce and conducted by independent Paris-based economics firm TERA, estimated that unlawful downloading of music, film and software cost Europe's creative industries several billion in revenue each year.[35] Furthermore, the TERA study entitled “Building a Digital Economy: The Importance of Saving Jobs in the EU's Creative Industries” predicted losses due to piracy reaching as much as 1.2 million jobs and €240 billion in retail revenue by 2015 if the trend continued. Researchers applied a substitution rate of ten percent to the volume of copyright infringements per year. This rate corresponded to the number of units potentially traded if unlawful file sharing were eliminated and did not occur.[36] Piracy rates of one-quarter or more for popular software and operating systems have been common, even in countries and regions with strong intellectual property enforcement, such as the US or the EU.[37]
In 2004, an estimated 70 million people participated in online file sharing.[38] According to a CBS News poll, nearly 70 percent of 18 to 29 year olds thought file sharing was acceptable in some circumstances and 58 percent of all Americans who followed the file sharing issue considered it acceptable in at least some circumstances.[39]
In January 2006, 32 million Americans over the age of 12 had downloaded at least one feature length movie from the Internet, 80 percent of whom had done so exclusively over P2P. Of the population sampled, 40 percent felt that downloading copyrighted movies off the Internet constituted a very serious offense, however 78 percent believed taking a DVD from a store without paying for it constituted a very serious offense.[40]
In July 2008, 20 percent of Europeans used file sharing networks to obtain music, while 10 percent used paid-for digital music services such as iTunes.[41]
In February 2009, a Tiscali UK survey found that 75 percent of the English public polled were aware of what was legal and illegal in relation to file sharing, however there was a divide as to where they felt the legal burden should be placed: 49 percent of people believed P2P companies should be held responsible for illegal file sharing on their networks, 18 percent viewed individual file sharers as the culprits, while 18 percent either didn’t know or chose not to answer.[42]
According to an earlier poll, 75 percent of young voters in Sweden (18-20) supported file sharing when presented with the statement: "I think it is OK to download files from the Net, even if it is illegal." Of the respondents, 38 percent said they "adamantly agreed" while 39 percent said they "partly agreed".[43]
Researchers have examined potential security risks including the release of personal information, bundled spyware, and viruses downloaded from the network.[44][45] Some proprietary file sharing clients have been known to bundle malware, though open source programs typically have not. Some open source file sharing packages have even provided integrated anti-virus scanning.[46] A drastic increase in inadvertent P2P file sharing of personal and sensitive information became evident in 2009 at the beginning of President Obama's administration when the blueprints to the helicopter Marine One were made available to the public through a breach in security via a P2P file sharing site. Access to this information has the potential of being detrimental to US security.[47]
Furthermore, shortly before this security breach, the Today show had reported that more than 150,000 tax returns, 25,800 student loan applications and 626,000 credit reports had been inadvertently made available through file sharing.[47]
Since approximately 2004 identity theft has become more prevalent, and in July 2008 there was another inadvertent revealing of vast amounts of personal information through careless use of a P2P site. The "names, dates of birth, and Social Security numbers of about 2,000 of (an investment) firm's clients" were exposed, "including [those of] Supreme Court Justice Stephen Breyer."[47]
Researchers have discovered thousands of documents containing sensitive patient information on popular peer-to-peer (P2P) networks, including insurance details, personally identifying information, physician names and diagnosis codes on more than 28,000 individuals. Many of the documents contained sensitive patient communications, treatment data, medical diagnoses and psychiatric evaluations.[48]
The United States government has attempted to make users more aware of the potential risks involved with P2P file sharing programs through legislation such as H.R. 1319, the Informed P2P User Act.[49] According to this act, it would be mandatory for individuals to be aware of the risks associated with peer-to-peer file sharing before purchasing software with informed consent of the user required prior to use of such programs. In addition, the act would allow users to block and remove P2P file sharing software from their computers at any time,[50] with the Federal Trade Commission enforcing regulations.
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