Can free music survive in an age of pay for play?

ITworld.com –

No amount of popularity or disclaimers will protect Internet companies facilitating the sharing of copyrighted digital files on the Internet. The music labels have made that clear in their bloody fight against embattled music-swapping Web site Napster Inc.

So it's strange timing that a number of Napster alternatives are joining the party with new free-music services just when that party threatens to end. One of those alternatives, a crude Web site cluttered with disclaimers and warnings called MusicCity.com Inc., is preparing to take its service to the mainstream any day now.

With 30 servers for storing files scattered around the country, accessible through a number of popular file-searching programs, MusicCity.com bills itself as a bigger and better Napster. But how and why the company is entering the file-sharing market now is yet to be determined.

"We're not ready to make a statement," said Steve Griffin, the long-time music industry executive who founded MusicCity.com. "We'll have some announcements in the next week or so."

But in the next week or so, the market for sharing copyrighted files freely, whether they be music, video or other content, may be history. With legal maneuvers threatening to end the popular peer-to-peer trend trumpeted by Napster and its users -- while a host of major announcements were made this week by the big five record labels and "legitimate" digital music business -- there may be no room for MusicCity.com to execute its service, whatever that turns out to be.

For now, people close to the company will only say that MusicCity.com has "every intention" of being a legal service. Borrowing from the argument of its early industry explorers, MusicCity.com notes on its Web site that it "will not be liable to any party for direct, indirect, special or other consequential or incidental damages arising directly or indirectly from the use of this web site or its Network."

Liability may be inherently difficult to avoid for the company if copyrighted files do end up in its system. Similar to Napster, the bulk of MusicCity.com's business involves its central servers, which act as storage points for lists of the thousands of files that pass between the computers of the service's users. While MusicCity.com warns its users that sharing copyrighted files is illegal, such disclaimers have proven ineffective on other sites.

With a word-of-mouth marketing campaign, MusicCity.com is creeping up the ranks with its vast database of listed files. The site doesn't offer a way to search those files, rather it is part of the popular OpenNap network, and users can navigate MusicCity.com's stored files through Napigator, Aimster and other search software.

Moving beyond that model, to a business that actual brings in revenue, is the hurdle that MusicCity.com and its counterparts must leap. Under current pressure from industry giants, including Sony Music Entertainment Inc., Warner Brothers Music Group Inc., EMI Group PLC and Universal Music Group Inc., the only way to bring in dollars will be to win the support of the industry and team with the labels that own the rights to the copyrighted files traded online.

"Online music distribution has clearly become a major legitimate business," Jean-Marie Messier, chairman and chief executive of Vivendi Universal, said in a conference call Thursday, after his company announced its partnership to supply part of its music library electronically with Yahoo Inc.

An alliance between Yahoo and Duet, the subscription music service provider developed through a joint venture between Universal Music Group and Sony Music Entertainment, is clearly becoming the industry standard for the next generation of digital music distribution.

The past week makes that clear. RioPort Inc. became the first music application service provider to sign content deals with all five major music labels on Wednesday. The company has also teamed with MTVi Group Inc., the digital music arm of the pop media giant owned by Viacom Inc., to sell music downloads from a library of more than 8,000 songs.

Also Wednesday, software giant Microsoft Corp. threw its hat into the ring, announcing it would launch a digital radio station on MSN that will evolve into a subscription music service. And earlier this week RealNetworks Inc. and three major music companies announced a joint venture to license music to other sites, including RealNetworks and America Online Time Warner Inc.

"Music companies you can say have heard and understand the cries of the consumers," Howard Stringer, chairman and chief executive of Sony Corporation of America, said in Thursday's conference call regarding Duet's music deal with Yahoo. "This is the start of a brave new world."

Make that a fee-based world.

Amidst the industry alignment and legal debate, the free file-sharing phenomenon has only grown. Web traffic to Napster's site surged in the final week of March to 593 million songs swapped, up more than 25 percent from the previous week, according to Internet music research firm Webnoize.

The traffic spike comes amid the latest squabble between Napster and the Recording Industry of America Inc. (RIAA), which continues to argue the music company isn't doing enough to comply with the March 5 injunction that forced Napster to block copyrighted songs from passing through its system. Despite the battle the interest in free music remains.

As for the communities of tech-savvy music traders who continue to buck the system through services: "There will always be an underground and there will always be some copyright infringement," said P.J. McNealy, an analyst with research firm Gartner Group Inc. "Napster was underground until it reached 63 million downloads, then it's no longer an underground service."

The question now is: Will MusicCity.com and others such as Gnutella and Freenet make it to the mainstream before being toppled? With Napster's once-heralded service crumbling in the courtroom and migrating toward a pay-for-play service, the RIAA is likely to turn its troop of legal henchmen on other services.

"They [RIAA] will go after a few sites and make examples of them." said McNealy, who declined to guess who the next target may be. "It's just a question of how and when."

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