E-commerce company Wurld Media signed an agreement with three major record labels last week in order to offer licensed media content over the Internet using a peer-to-peer distribution system.

Sony BMG Music Entertainment, Universal Music Group and Warner Music Group have agreed to allow access to their music catalogs for the service called Peer Impact. The service is designed to offer its members a legal means of sharing music, videos and a variety of digital content, according to a press release.

Peer Impact is different from other online music distribution services, such as Apple Computer’s iTunes, Napster and Rhapsody, because it uses a file-sharing technology called peer-to-peer distribution. According to the press release, this lowers the cost to the distributor.

Peer Impact creators said they are hoping to generate a file- sharing network in which users can exchange copy-protected material within the boundaries of closed networks.

“The online media market is presently split between authorized legal paid-download services and unauthorized free services,” said Greg Kerber, Wurld Media chairman and chief executive officer.

“The consumer is stuck somewhere in the middle, and that’s where Peer Impact comes in,” Kerber said.

Peer Impact is currently concluding internal beta testing and is scheduled to launch publicly in the first quarter of 2005.

University student James Bischoff said he thinks the service could be successful, but probably not until illegal file swapping is controlled.

“As long as there’s free ones, students will still use them,” Bischoff said.

University student Jeremy Eggerth said he does not download music illegally because of copyright laws. He said he does not think the service will be able to compete against existing file-sharing services but thinks it’ll be able to find its own niche market with people like him.