FILM PIRACY RIFE ON NET STUDY SHOWS 500,000 MOVIES TRADED DAILY.

Byline: Jesse Hiestand Staff Writer

Even as attention focused on quashing Napster by legal means, Internet pirates had already graduated to trading movies illegally at a rate up to 500,000 each day, according to a report being released today.

That gives Hollywood's studios the daunting task of essentially trying to stop a leaking dam from bursting while scrambling to find ways to deliver their products safely to paying customers.

The popularity of song-sharing on Napster or downloading bootlegged movies proves people want to get entertainment online, regardless of its legitimacy, said Andrew Frank, principal author of ``The Copyright Crusade'' by Viant Corp. Internet consultants.

``My fear is you're going to force consumers to adopt measures that are tougher to fight legally,'' Frank said. ``The legal approach is creating this Darwinian environment where only the most resilient services will survive.''

So far, the survivors are far more difficult to thwart because they allow anonymous posting of encrypted copies of movies on networks that have no central authority, Frank said.

Napster Inc., by contrast, was a relatively easy target for record-industry lawsuits because it was an easily identifiable corporate entity whose computers enabled people to trade music.

The successful legal attack on Napster, forcing it to block access to many copyrighted songs, drove away about 80 percent of users - sending them to other sites that are more difficult to use and more difficult to monitor, Frank said.

In six months of study, the Viant consultants found evidence that people were trading fewer but larger files, especially video files that are often far bigger than MP3-encoded song files.

In addition to movies, researchers were surprised to find trading of television shows intercepted off satellite transmissions between the networks and their affiliated stations.

Estimates are that 300,000 to 500,000 feature-length films are being traded across diverse Internet channels each day. About one-fourth of those on the 1,500 Internet relay chat channels are devoted to sharing films, the consultants found, and those channels can serve 70,000 users simultaneously.

The rise in movie trading correlates with the increased use of fast, broadband Internet connections needed to download the massive files.

Broadband access, like cable modem and digital subscriber lines, will be key to industry plans to distribute entertainment on the Internet, according to the Motion Picture Association of America.

Several studios are planning to debut services this year to rent or sell movies on the Internet.

``We'll never be able to compete with free, but we can compete on quality, choice and selection, and I think legitimate consumers will embrace that,'' said MPAA spokesman Rich Taylor.

Keeping control of copyrighted songs and movies is the aim of technology unveiled Wednesday by Seattle-based RealNetworks Inc. The software will ensure the proper person gets the movie and cannot copy it. The initiative has the support of America Online Inc., Sony Pictures Digital Entertainment, Clear Channel Communications Inc., Metro-Goldwyn-Mayer Inc., Napster and others.

``Now is the time to unleash the true commercial potential of the medium by establishing standard business rules for secure digital distribution,'' said Rob Glaser, chairman and chief executive of RealNetworks.

For now, the industry has little control of its products on the Internet, said Viant's Frank, whose study took a comprehensive look at such file-sharing.

One solution may be to bundle the entertainment and means of gaining revenue in one package, dubbed modular media. That would mean a song or movie would come with its own advertising or payment system or means to gather information about the user, Frank said.