"So what have you torrented lately?" It's a question that usually implies illegal goings-on, from illicit copies of "Sweeney Todd" already online, to episodes of Doctor Who that fans considering themselves "borrowing from the future." The entertainment industry has spent the last couple of years trying to catch up with the pirates, by catching them and by providing the same products legally. Legal online downloads are a major term of contention between the Writers Guild of America and the American Motion Pictures and Television Association (briefly: the writers would like to be paid when their work is downloaded; the producers don't want to agree to a per-download fee until they know people will download the things they've already been downloading). Netflix, the biggest name in home video these days, includes streaming videos as a part of their service, and even Wal-Mart got into the fray with a video download service.

It's a legal downloader's paradise out there. Please ignore the volcano behind the curtain. That rumbling is just a bit of thunder. No need to be alarmed.

Wal-Mart has just ended their downloading business. It doesn't come as a huge surprise, since the response to the service thus far appears to be lackluster, although the official reason for dropping the service is labeled as lack of infrastructure support from Hewlett-Packard.

In a statement, HP said, "The market for paid video downloads has not performed as expected, and the broader Internet video space continues to remain highly dynamic and uncertain."

One reason why the Wal-Mart downloads have shown less than stellar performance might be due in part to their DRM (digital rights management) system, which prevented Wal-Mart-acquired downloads from being played on popular platforms like Apple's video iPod, or even on additional home computers owned by the buyer. It was the ease of transport between players of the original MP3 files which really allowed the downloading boom in the first place. Removing that portability, while in theory helping to preserve the copyright protections, also removed a major bonus of downloads.

Wal-Mart isn't the only company changing their downloading policies. AOL recently dropped its pay-for-download service, signing a deal with Amazon instead.

Fred McIntyre, senior vice president of AOL Video, said, "It's really about focus. AOL, as a company, is in the process of shifting our focus for our primary business and everything we do towards an advertising business." The former online giant follows Google's footsteps, which stopped pay-for-play after the acquisition of YouTube. AOL Video is still going strong in the ad-supported video model; though it's far behind YouTube in terms of users and videos, that also means the service has less of a problem with pirated material showing up and opening the site to lawsuits.

AOL sib Warner Music will be selling their catalogue of music via Amazon's DRM-free downloads. Warner Music Chairman and Chief Executive Officer Edgar Bronfman Jr., originally a heel-dragger in the no DRM world, released a memo to Warner employees on Thursday, in which he said, "By removing a barrier to the sale and enjoyment of audio downloads, we bring an energy-sapping debate to a close and allow ourselves to refocus on opportunities and products that will benefit not only WMG, but our artists and our consumers as well." The new deal with Amazon will bring to legal download such artists as Led Zeppelin, Aretha Franklin and Sean Paul, among many others.

Amazon itself is sitting pretty with its Unbox system. New and old films can be rented for $0.99 (or even free), or purchased for about $1.99 per episode of television or about $14.99 per movie. The movies can either be uploaded to TiVo or viewed on Amazon's proprietary software. Whereas this accessibility problem hurt Wal-Mart's sales, the alliance with a name-brand like TiVo seems to have helped boost Amazon. Meanwhile, Amazon's MP3 downloads for songs is starting to rival iTunes, with over two million songs currently available from Universal and EMI, many priced ten cents below iTunes' standard $0.99, but still playable on an iPod or any other MP3 device.

Of course, the big story right now is with the original go-to place for legal downloads. The Wall Street Journal reports that Apple is in the process of inking a deal with 20th Century Fox for Fox's library of films. While the video iPod has been a success, Apple TV has been slow to catch on. No studios had previously allowed Apple to use their libraries, leaving a limited supply of films to rent for download (about 500). The studios have been leery of Apple CEO Steve Jobs' strict price control system. With Fox behind them, this could be the shot in the arm Apple needs to retake its hold on the legal downloads market. Add to this Apple's decision this year to sell DRM-free music (for an additional $0.30 fee) and 2008 will be a very interesting year for downloads. By the end of the year, we should either end up with two giants or one winner.

Just as a guess, that winner won't have DRM tagging along.

(Sources: The Wall Street Journal, The New York Times, U.S. News and World Report, Macworld)