From the central Dutch city Utrecht, five students of information science run one of the most popular websites in the world, Mininova.org. About 45 million visitors come to their site looking for the latest movies and music albums each month.

Managing director Erik Dubbelboer (25) is not some obscure web pirate, but a serious student also running his own business. However, his education has taken second place lately, as Mininova started yielding serious money - 1 to 2 million euro a year - in advertising revenues.

If you pay us

Mininova has recently come under fire from Brein, a lobby group for the rights of the entertainment industry in the Netherlands. The foundation took Mininova to court. It is demanding that the company check all the links - currently 1.2 million - on its site before they are made accessible to the public, and pay 1,000 euros per link that refers to a file in breach of copyright. The students say they are willing to check the links, if the entertainment industry pays them for it. A legal ruling in the case scheduled for this week has been postponed until August 26.

Dubbelboer: "All we do is supply the technology. We don't know what the links our users send us refer to." He pointed to a link to a torrent file titled Angels & Demons - in theatres now - and said it is not necessarily an illegal copy of the movie. "Someone could have posted a different film with another title. We don't know," he said.

File sharing over the internet is popular all over the world, around 60 percent of all internet traffic is related to filesharing, and especially so in the Netherlands. According to a January report by research institute TNO, 1 in 3 Dutch people regularly download videos and mp3-files. The Netherlands has made a name for itself when it comes to torrent sites - sites offering links suitable for transferring large files. Amsterdam, with over 30 data centres and fast connections to all continents, is one of the most advanced internet hubs anywhere and attracts data traffic from all over the world.

File-sharing revolution

Under Dutch law, downloading games and software is illegal, but sharing copied films and music is not. The Dutch copyright law allows consumers to make a copy of CD's and DVD's they own, and to store those copies as files on their personal computers.

Since 1999, when the peer-to-peer network Napster started the file sharing revolution, turnover in the music business in the Netherlands has almost halved from 500 million to 270 million. According to IFPI, the international organisation for the recording industry, worldwide music sales were down from 30,9 billion dollar in 2000 to 18,4 billion in 2008.

The entertainment industry says file sharing is the greatest threat to its revenues, even if it has recently let go of the idea that every download means one fewer CD sold.

But TNO concluded that people who download still buy CDs and go to the movies - more so in fact than people who don't share files. TNO says the music business probably would have suffered even without the internet, as young people spend more money on games and cell phones.

Old ways

Many complain that the industry itself lacks the innovative power to take advantage of the internet. Instead of embracing new technologies, the record companies went on the defence by putting - poorly functioning - copy protection on their products. Paul Rutten, a professor of digital media at Leiden University who co-wrote the TNO report, said: "Record companies have been busy protecting their old way of working, rather than adjust to the changing behaviour of consumers."

The professor said it shouldn't be hard to compete with free download sites, because those are full of spam and fake files. "Consumers are willing to pay for a site they can trust," said Rutten.

Apple's iTunes Store seems to be that kind of website. It is responsible for 90 percent of all legal downloads worldwide. "But nobody is making any money from it," said Wouter Rutten (no relation), a representative of the entertainment industry in the Netherlands. He said that, after taxes, Apple's fee and the cost of processing the transaction, no more that 2 eurocents in profit are made per song for which the client pays 99 cents. "Apple isn't making a profit either, but they are running this store to boost the sale of their iPhones and iPods," said Rutten.

In the Netherlands, only six percent of the turnover for the music business is generated through downloads, while the percentage worldwide is 21. It seems it is just not done to pay for movies and music, said Wouter Rutten. "Here, you are considered a loser if you don't manage to get it for free."

Advertising model

Offering content for free while earning money through advertising - the way Mininova operates - has proved difficult. It has been tried. The online video service Joost.com, launched with much fanfare in 2007, recently discontinued its services to consumers. Last.fm, a popular online radio station with 30 million listeners, recently decided to start charging its subscribers. YouTube, the world's largest video sharing site, books a 470 million dollar loss per year, according to estimates by the Crédit Suisse bank.

There are some encouraging new initiatives. Nokia plans to sell cell phones with unlimited access to its music store and British cable company Virgin and Universal Music record company are offering unlimited downloads for a fixed monthly fee. Wouter Rutten is taken with the concept: "If this means that people would pay 100 to 120 euros for music each year, we will be making more money than we do on the few CD's they buy now."

Tim Kuik, director of the Brein foundation, is the face of the anti-piracy movement in the Netherlands. He has been working on copyright issues for 27 years now. "Things were more manageable before. We knew there was a group of about 40 people causing most of the trouble. These days, it's a lot easier to start a site."

Not sexy

Kuik doesn't go after individuals like American Jammie Thomas-Rasset who was fined 1.9 million US dollars for exchanging 24 songs on the website Kazaa. Kuik's fight is with businesses like Mininova.

But individual users are not off the hook yet. An Irish provider has started disconnecting clients who share music and movies. French president Nicolas Sarkozy wanted to implement a system whereby a newly-formed internet authority could ban illegal downloaders from the internet for up to a year after three offences. But Sarkozy's proposal, like a similar one in Britain, was struck down as unconstitutional. The French senate has since adopted a watered-down version of the law: third-time offenders will now be referred to a judge, who can hand down either an internet ban, a fine euros or even a jail sentence.

Kuik is not in favour of completely disconnecting people. "But you could limit offenders' bandwhith so that they can't share files."

Viviane Reding, the European Commissioner for the information society and media, has said the industry itself needs to change before stricter regulations make sense. "Of course we have to teach our children that downloading is not sexy," Reding said. But she is annoyed by the movie industry, which is maintaining separate copyrights for each country. "How does that benefit the consumer? Every country has different rules for the films you see on television."

That is not the way the single market European Union wants it. "It is absurd that the entertainment industry is trying to impose the rules of the old world on the new world," Reding said.