The US music collecting society BMI
announced on Tuesday
that it has reached a licensing agreement with Qtrax, a service of Hong
Kong-based Singwell International, that will result in a copyright-respecting
P2P music service to be launched later this year. The service, based on
the open-source Gnutella peer-to-peer network model, will feature free music
downloads. Royalties will be paid through revenue from targeted ads.
New York and Melbourne, Australia-based LTDnetwork will contribute currently
unspecified DRM technology as well as its own Xpeer technology for matching ads
with specific musical genres or artists. Qtrax had been operating as an
unauthorized file-sharing network but has suspended its operations until the new
service launches.
This is another of the growing number of examples of how DRM and file-sharing
technologies can peacefully coexist. It also is quite possibly the first
attempt to create a legitimate revenue stream for downloaded music that, like
revenue from radio broadcasting, is independent of actual downloads or music
usage.
Technologists often have a misconception about the media industry: that media
companies make their money by getting consumers to pay for content. A
truer statement is that content providers make their money by finding someone
with incentive to pay for users to see or hear it, and that someone may not be
an end-user him- or herself. Just ask Van Halen, Bob Seger, or any of the
many musical artists that have made large amounts of money by licensing their
material for use within commercials (or Bruce Springsteen, who famously
refused to do so).
Targeting ads to online users based on the style of the music downloaded is
indeed a clever idea, despite the financial risks of the business model.
Another risk in Qtrax's plan is that BMI is by no means the only royalty stream
that must be paid, and failure to secure the other necessary licensing deals
could lead to a service with a limited selection of music.
An even bigger risk is the idea that users will be willing to view ads in
order to avoid paying for music. (Users who want to burn tracks onto CDs
or copy them onto portable devices -- two venues where ads would be unviewable
-- will have to pay fees.) The companies involved in this venture should
remember that the NetZero model, of providing free PCs and Internet access in
exchange for devoting part of the PCs' screens to advertising, was one of the
bigger casualties of the dot-com bubble.
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