Q&A: Kazaa settlement

File sharing site Kazaa has announced that it plans to go legitimate and is handing over more than $100m to the music industry in an out-of-court settlement.

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Kazaa lost a landmark court case in Australia

Why has Kazaa decided to do this?

There had been mounting pressure on the peer-to-peer network following a series of landmark court rulings.

Last year, the Federal Court of Australia found Sharman Networks, the operators of Kazaa, guilty of encouraging its users to illegally swap songs, breaching copyright law.

In June 2005, the US Supreme Court ruled that companies could be held accountable for promoting copyright theft by users of their services.

This move led fellow file-swapping network Grokster to settle with record labels and film companies.

Kazaa has agreed to pay $100m (£53m) to the four major records labels, Universal Music, Sony BMG, EMI and Warner Music, who were pursuing the company in a series of legal proceedings in the US and Australia.

The terms of the out-of-court settlement also state that Kazaa must introduce filtering technologies so its users can no longer swap copyright infringing files.

What does the music industry say?

The music industry is thrilled with the decision.

It has been engaged in an ongoing battle against the file-sharing networks and sees this latest settlement as another milestone.

But in addition to this, record labels will now also stand to profit from the fact that Kazaa is going legitimate.

A proportion of the money from the legal music downloads will go to the label, song writer, producer and artist.

John Kennedy, chairman of International Federation of the Phonographic Industries (IFPI), said: "This is the best possible outcome for the music industry and consumers.

"Our industry will have a new business partner and consumers will experience new ways of enjoying music online, with more choice. This is a win-win scenario."

Mitch Bainwol, chairman of the Recording Industry Association of America, said: "The winners are fans, artists and labels and everyone else involved in making music, and our partners in the technology community."

They believe the "writing is now on then wall" for file-sharing companies.

Why is file-sharing still an issue?

The internet has changed the face of how people get music.

Rather than heading to record shops to buy the latest CD or vinyl, there has been a huge shift towards downloading music online.

While record labels and musicians profit if people download music from legitimate file-sharing sites, such as iTunes, they lose out if consumers opt to head to sites where they do not pay anything to swap or download music.

The IFPI has also pointed to several studies which have revealed a link between falling record sales and unauthorised file sharing.

And, they claim, file-sharing networks have caused significant damage to the music industry.

The latest estimate from IFPI reveals that 20 billion illegal downloads took place in 2005.

What should I do if I want to download music?

There are now more than 360 sites offering three million tracks for download.

The most popular include iTunes, Napster and Rhapsody.

A full list of download sites can be found at www.pro-music.org.

Critics of legal download sites say that prices for songs and albums are too high, the audio quality of songs is less than CD quality and that copy protection unfairly restricts use of the music.