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InternetNews.com: Upstarts Gunning for Napster

Jul 30, 2000, 16:50 (3 Talkback[s])
(Other stories by Clint Boulton)

By Clint Boulton, InternetNews.com

Napster learned Wednesday what happens when a company tangos with the Recording Industry Association of America and the Big 5 record labels.

The file-swapping king was told it had to shut its doors by U.S. District Judge Marilyn Hall Patel .

Scour Inc., too, may eventually know Napster's fate as the Motion Picture Association of America and the National Music Publishers Association forged a triple-pronged attack on the Michael Ovitz-backed multimedia search site last week.

In a 25-page brief filed in US District Court, these organizations heaped reason upon reason as to why Scour is Public Enemy No. 2 behind Napster for its file-exchange offering, Scour Exchange, which enables consumers to snap up movies and music.

But what makes these particular cases interesting is that it shows that the plaintiff parties are going after anyone and everyone who exchanges intellectual property -- and doesn't exchange money to use it.

This ongoing brouhaha has led a few companies to step up with business models that monetize, or give content owners control, over digital content. In fact, Napster co-founder Bill Bales and early Napster investor Adrian Scott last week launched AppleSoup, which will allow content-owners to distribute "anything digital" online.

Anything that is, ironically, except music. Though Bales wouldn't divulge exactly what AppleSoup's machinations would be just yet, he told internetnews.com the business model revolved around "protecting copyrights and partnering with content-owners and content-creators."

While those embroiled in the mounting legal battles might be grinding their collective teeth in exasperation, firms are taking advantage of the arguments being made by the plaintiffs; they're setting up exchanges, but paying the labels or artists to use the content.

Digital Payloads Inc. is one such firm. Launched two weeks ago with the brazen announcement that it was dropping a "bombshell on Internet music wars," the start-up is a digital media promotions company that embeds record label or advertiser promotions and links, called "Payloads," into licensed music files.

This technology provides artists and record labels with revenue and other promotional benefits. Jon Brewer, co-founder of the new firm, said the business model seemed like a logical move in light of the file-swapping trauma.

"There exists a great chasm between free music and music that is paid for," Brewer told internetnews.com recently. "Digital Payloads tries to bridge the gap. It seemed like a simple solution to go to."

With this service, listeners download an MP3 file for free and view promotions from firms signed on with Digital Payloads. Listeners are also linked to artist or label/advertiser Web sites. Payloads work with MP3 players, including WinAmp, MusicMatch, Sonique and Windows Media Player. The firm also offers the technical assembly service of creating Payloads, as well as the distribution service that delivers Payloads to users.

EverAd Inc. is another firm that looks to monetize digital content. It, too, has a solution to digital music distribution; PlayJ.com

Brian Gonick, vice president of corporate and business development at EverAd, said he was firm in his resolve that advertising on digital content is one way to allay labels' and artists' fears of piracy.

Like Digital Payloads, PlayJ.com displays ads when users go to download music, but, Gonick pointed out a difference.

"I like what Digital Payloads is doing, but we refresh our ads," Gonick explained to internetnews.com. "It gets irritating seeing the same ads over and over again."

PlayJ.com features a "JSpace" window in which ads are shown and refreshed regularly by the company, along with 65,000 songs to choose from. Like Digital Payloads, the service is free, and labels and artists are paid through the advertising. Gonick said EverAd also compiles regional data to see if certain concerts or other performances are playing; the company would offer advance notice and promotions about upcoming album releases or events.

Sounds like a wonderful plan, doesn't it? Not every one is buying it, however.

Cyber Dialogue Vice President Peter Clemente isn't so sure that advertising is the best solution.

"Who wants to listen to, or watch an ad before they play music?" Clemente said in response to Digital Payloads' and EverAd's business models. "If I want to listen to music I want to put it on right away -- not wait for a 30 second or one-minute ad to flash across the screen."

Clemente said the companies plans to monetize digital content is a step in the direction of keeping in the good graces of the RIAA and the Big 5, but that ultimately a better business model should be employed.

"Consumers might buy a single and deal with the ad, but not an entire album with ads," Clemente said. "It's Internet commoditization -- people who are tired of being bombarded by ads want to see less info -- not more ads. So, we should seeing some new business models developed that are more consumer oriented."

Noting that music sales hiked up 8 percent in 1999, Clemente insisted that people will pay for music online, if only a great library of content were created.

Michael Downs, vice president of business development at digital commerce service provider Magex Inc., said the advertising model was intriguing. He also said he understood why Clemente was bearish on the advertising revenue model for exchanging digital content.

"From the consumer's point of view, you'd have to wonder how it would work," Downs told InternetNews.com. "But it makes sense from the business' standpoint."

"I don't know that their business models flies in the face of other advertising-based models," Downs said. "We would have to see if it achieves scale."

Magex has been concerned with digital rights management since its launch in 1998 by National Westminster Bank. The unit was spun off three months ago and has since raised $80 million in financing led by Goldman Sachs.

Magex offers free music downloads as well. It allows content providers to wrap digital content in an encrypted envelope called the DigiBox container, letting them transmit and protect their intellectual property and content.

Content is accessed using Player software supplied by Magex and by third party vendors. When users open the envelope, they can access and use the content according to a number of pre-defined rules, set by the content provider.

For example, users may be able to play one track from an album free of charge, pay $4 to hold the music digitally on their PC, and $10 to download the music to another machine or player.

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