Altnet, Labels Explore Peer-to-peer Opportunities

Although the music industry has staunchly opposed free file sharing, some labels are experimenting with distributing secure promotional and/or commercial downloads via digital trading services.

Label ventures operated by AOL Time Warner and Best Buy are teaming with Altnet, the secure file-swapping service that runs simultaneously with the Kazaa peer-to-peer (P2P) network, to promote their artists. So far, Altnet has deals in place with Maverick Records (which is part of AOL Time Warner-owned Warner Music Group) and Best Buy's Redline Entertainment, as well as agreements with Microsoft and Palm Pictures, Altnet CEO Kevin Bermeister says. (Maverick and Redline executives were not available for comment at press time.)

While a chance to market to an audience the size of that offered by Altnet via Kazaa—which has a reported file-sharing universe of more than 60 million users—is naturally appealing, industry collaborations with the company are nevertheless unconventional, as Kazaa is the target of a copyright infringement lawsuit from the Recording Industry Assn. of America.

But Bermeister is quick to point out that Altnet and Kazaa are separate and distinct companies. Altnet's content is secured by Windows Media digital-rights management technology and offers labels and content partners a sponsorship-driven search-engine system in which companies pay for preferred placement in P2P search results. That means that when a Kazaa user searches for an artist, the paid listings from Altnet appear first. Free listings then appear below the paid options. Free MP3 files are listed further down. The business model is similar to those of online companies like Google.

All music being offered via Altnet—a collection that includes the track "Baby's Got a Temper" by the Prodigy (Maverick); music from the 1 Giant Leap soundtrack (Palm); and Noise Therapy's latest album, Tension (Redline), in its entirety—is promotional. But all the downloads eventually time-out, at which point consumers are offered a chance to purchase the track.

"We are a great pre-radio promotional vehicle," Bermeister says. "We are going to build awareness and build it quickly. The next step for all of the artists we are working with is to sell their music."

Bermeister says that Altnet plans to offer commercial downloads later this year, when its commerce engine is ready to launch. The company says it is developing a system that can process payments on small transactions of less than $5, known as micro-payments. Bermeister says the average track offered via Altnet is expected to cost less than $1. But any purchase offers will be an appeal to the better nature of consumers, who he believes will pay for higher-quality content but have not had the opportunity. All tracks offered for sale will still be available for download as free MP3s.

Meanwhile, Altnet claims interested takers in free content. EMI-distributed 2K Sounds rap duo Madd West has had an overwhelming audience response through TopSearch, with three promo songs receiving more than 1.5 million downloads. Downloads for independent act Johnny Virgil have reportedly exceeded 1 million in only 30 days.