November 8, 2004 4:00 AM PST
Music sharing that's free and legal
The trick involves marrying peer-to-peer technology with Internet radio. Using that combination, some companies are creating powerful tools that automatically broadcast people's private playlists onto the Web. The output is then pulled together into a searchable database that lets listeners find the music they want, when they want it.
Safeguards are in place to prevent unauthorized downloads, ensuring copyrights are honored. But if the technology behind the networks keeps improving and the number of people using them keeps growing, the services could one day turn into something akin to free, on-demand request radio.
Few companies have staked out this territory yet. A handful of pioneers--including Apple Computer, Virgin Digital and upstarts Mercora and Live 365--are just beginning to see demand.
Apple lets users of its iTunes music jukebox software share playlists that are streamed them over a local area network. By contrast, Mercora runs a Web-based network of roughly 8,000 broadcasters worldwide. Those broadcasters devise their own playlists, which are served up to 175,000 to 200,000 listeners connected over the Internet.
Mercora's software also automatically streams music from an individual's hard drive, making each member of the network a broadcaster.
"We're doing for music what Google did for the Web," Mercora CEO Srivats Sampath said.
Peer-to-peer radio is the latest step in a long line of efforts to turn the Web into an on-demand jukebox without running afoul of copyright law. In the past, such projects have caused tension with record industry executives, who turned to the courts to shut down Napster and are now bringing lawsuits against individual file swappers.
Those legal worries have been less evident in the Net radio sphere. Still, the music industry has taken steps to rein in interactive services that might sap CD and digital download sales.
During the dot-com boom, companies such as Launch Media and Musicmatch (both now owned by Yahoo) and MTVi all vied to create interactive radio services. These provided substantial listener control, which ultimately lead to legal fights with the record industry.
New copyright fight?
Most interactive Net radio services are now subscription-based, which allows a different set of legal rules to be observed. Leading examples of these services include RealNetworks-owned Rhapsody and Napster's all-you-can-eat streaming service.
Newer software lets people listen to what others are broadcasting from their hard drives, locally or internationally, thereby increasing variety.
Initially, Mercora said it expected to sell music via a download service resembling that of Apple's iTunes Music Store. The switch to an Internet broadcast network allowed the company to take advantage of the distinct manner in which the law treats music streamed on the Internet.
Broadcasting fees are set by the U.S. Copyright Office rather than by the record labels and are relatively cheap--they come to about 1/7th of a penny per listener, or about $1,429 per million people. As a result, Mercora says it can afford to pay the fee on behalf of the broadcasters on its network, with the cost offset through advertising sales.
"The big nut we had to crack is how to do this legally," Sampath said. "The law says you can broadcast as long as you pay. Fine, we will pay you."
In the end, this creates a beneficial symbiotic relationship between all the parties. Home broadcasters get a creative outlet, but they don't personally incur any broadcasting fees. For its part, Mercora can function like a broadcaster or cable network, with future revenue coming from selling ad space and subscription services. But it doesn't have to buy or maintain a content library, unlike a regular media network. It does, however, have to spend money on maintaining a bank of servers.
The benefit for listeners is access to music at no cost. Right now, users only have to download the software to join the network and can
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