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CHALK UP ANOTHER HOLLOW victory for the entertainment industry in its crusade against piracy. This week, the major music and movie companies reached a legal settlement with longtime nemesis Grokster Ltd., ending a four-year court battle. But the industry's quest to choke off the supply of digital bootlegs remains as difficult as ever, and it's unlikely to succeed until it recognizes how the demand for music and movies has changed.

Grokster's software lets users tap into one another's computers over the Internet, enabling them to search through an ocean of digital files and make free copies of whatever they like. Although that sort of sharing isn't necessarily illegal, much of the activity on Grokster was -- in particular, the copying of copyrighted songs, movies and games.

As part of the settlement, Grokster agreed to stop distributing the program and pay $50 million in damages. The company also announced plans to offer a new file-sharing service that does not violate copyright laws. The deal, however, won't have much affect on the people using Grokster software. Like angry words that can't be taken back, the software cannot be recalled or shut off.

Meanwhile, users have plenty of other sources for free downloads. It's true that the ranks of commercial file-sharing companies have been thinning since June, when the Supreme Court ruled that they could be sued for promoting piracy. But plenty of file-sharing networks remain, including noncommercial ones that could prove impossible to stop in court.

As long as there is a powerful demand for free downloads, the entertainment industry cannot hope to curb piracy by shuttering file-sharing companies one by one. Nor has it made much of a dent in online piracy by suing thousands of people on file-sharing networks for allegedly violating copyrights.

Instead, the industry needs to offer the millions of people on file-sharing networks something that's both legal and more compelling than Grokster. Apple's iTunes Music Store may have sold more than half a billion downloadable songs in the last year and a half, and RealNetworks may have signed up more than a million people for its subscription music services, but they're not converting the masses. Doing so will require more choices, and especially ones that look and feel like the most popular sources of free music on the Net.

One emerging alternative is file-sharing companies offering filtered networks that let users sample songs for free, then charge them for tracks they can burn onto CDs or transfer to a portable device. It's an idea that has promise, but the industry needs to do more than just change the way music is delivered. It has to change what it charges for that music and how it lets customers listen to it.

The enormous number of songs downloaded on file-sharing networks shows that the industry, with its slumping CD sales, isn't satisfying the demand for music. Cutting down the supply of free file-sharing software isn't as important as meeting the new generation of demand.