Having read this, I came up with the following.
The biggest reason why P2P networks have become so popular is NOT that they're free. It's because they're simple and effective.
I believe that the best option for an online music reseller (and the RIAA), would be to do the following:
Set up a music download service like the *original* Napster. Give it a bunch of very high-bandwidth hosts. Give it a slick, non-bloat interface. And make it work just like a P2P program. Let different software vendors develop their own interfaces to the same network.
You can search for audio files just like on Napster or any of the others, in a variety of encoding formats. The high-bandwidth "official" hosts would be like iTMS or Napster 2.0... with high-quality, full featured files available. You should also be able to share and search more obscure content.
The idea is to create an RIAA-sponsored P2P network with a powerful back-end. Do NOT use DRM or anything of the sort. Make these files just as useable as what you'd get from a P2P network. Use good codecs like WM9 VBR.
Then, make it a subscription service. $20/month or something reasonable like that.
Offer premium services with stuff you can't get on P2P... Music videos, live concert broadcasts, lossless compression, etc.
Make music more like cable TV. Make it a Conditional Access system.
-The only security practice you might try in this system is a type of watermark… Just something for the music that was encoded by the provider (ie. not on all the music that traffics the network, just the music that originates from the network provider).
That way, you can track the Darknet "problem" more effectively.
-If material originally from the "Official P2P" system shows up on a Darknet, you'll be able to see it. You won't know who put it there, or stop it from being transferred... but you'll be able to ask the person hosting it to stop. Or even legally force the creators of the Darknet software to block transfers of that content.
The ideas in those last two paragraphs about watermarking would be mostly unnecessary and probably undesireable/unsuccessful.
The Legal Alternative to P2P networks doesn't have to be free like P2P networks. It just has to be more useful, faster, more effective. And it needs to be *reasonably* priced.
Clearly, the same distribution model could work for movies and TV shows. But that's less of a priority *for now*.
Additionally, I thought of a comparison to online video games...
P2P networks are like playing online with a PS2. You don't pay a subscription fee to Sony, and the service ranges from poor to adequate. But it does get you what you want (online console gaming).
A legal Music Service *SHOULD* be like Xbox Live. You pay a reasonable fee (in this case, $50 a year), but you get service far and beyond what's offered on the free competiton. Penny Arcade detailed the differences so well. They more specifically compared EA's proprietary system (for their PS2 games) to Xbox Live.
So the problem for the RIAA isn't that P2P networks are free. It's that they're free AND THEY'RE BETTER than the rather expensive alternative. THAT is what needs to be fixed.