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
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
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
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
"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
"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.