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Digital security plans and copyright infringement lawsuits will not stop the strides being made by file sharing sites such as Napster, according to a new report released Tuesday by Forrester Research.
In fact, the study predicted that the record industry will lose $3.1 billion (US$) in potential sales by 2005, in large part because of an increase in illegal music file sharing.
"Consumers don't want business rules or restrictive technology, and it only takes one person to break down the security barriers and share content on the Net," said Forrester analyst Eric Scheirer.
All Access Pass
For the study, "Content Out of Control," Forrester surveyed 50 entertainment companies that produce a range of content, including music, movies, books, video games and television programming.
Those interviewed said they plan to use digital rights management (DRM) technology to stop file sharing, as well as sue companies and consumers who violate copyrights. However, Forrester believes this strategy is doomed to fail.
DRM allows a content provider to set restrictions on the usage of its material, such as limiting the number of copies customers can make of the product. Because there will always be a market for content, legal action will only succeed in driving consumers to underground online services such as Gnutella and Freenet, the report found.
"Consumers have spoken -- they demand access to content by any means necessary," said Scheirer. "Traditional publishers must focus on beating Napster at its own game. They must create compelling services with the content consumers want, in the formats they want, using the business models they want."
Literary Publishers Face Losses
The report also said that while rampant file sharing will not destroy the music and publishing industries, it will cause a major shift in their power structures.
As the availability of books online grows, publishers will lose $1.5 billion in potential sales 
, the study predicts. The research firm found that this shortfall will be driven not only by an explosion in piracy, but also by artists and authors who are looking to break away from their labels and publishers.
Content producers who go independent are poised for a huge windfall as distribution slips away from major publishers. In an unprecedented transfer of revenues, musicians will gain $1 billion and authors $1.3 billion, the report said.
Movies and Video Games Spared
Companies in the movie and video game industries will not take such a heavy hit, the study predicted, because consumer demand for their products differs significantly from those for music and books.
"The urge to collect and flexibly organize music, make custom playlists and CDs, and play my favorite songs thousands of times is a large part of the appeal of Napster," said the report, "but this urge doesn't hold for films."
In order to avoid losing control over their content, the study advises film and video game companies to adopt video-on-demand services within the next few years.
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