Grokster Shuts P2P Service, Owes $50m

UPDATED Grokster has become the latest casualty of the United States Supreme Court ruling that file sharing services can be held liable for actions of their users. The company reached a settlement with the recording and entertainment industries and shut down its P2P service on Monday.

As part of the agreement, Grokster will pay $50 million to settle music and movie piracy claims. Although Grokster has lost much of its user base to P2P newcomers following the backlash its bundled spyware, the RIAA trumpted the victory in a statement.

"At the end of the day, this is about our ability to invest in new music. An online marketplace populated by legitimate services allows us to do just that," said RIAA chairman Mitch Bainwol.

Although downloading of the Grokster client will no longer be allowed, current users will not be prevented from continuing to share files. Grokster utilized the FastTrack P2P technology and itself has no central control over the network.

A notice on the Grokster Web site describes its former service as "illegal," but promises that a legitimate P2P offering would launch soon. Grokster is likely to re-emerge under a new parent company, Mashboxx, which is in the process of building a licensed service.

Grokster joins iMesh and other former piracy havens in an endeavor to turn legal and avoid prosecution. "There are legal services for downloading music and movies. This service is not one of them," the company said.

StreamCast Networks, maker of Morpheus and Kazaa owner Sharman Networks will continue their legal battle against the RIAA and MPAA, although it's unclear how long the two P2P services will remain standing.