Yet Another Outlet for Digital Music
October 2, 2003
By Cade Metz

September was not a good month for peer-to-peer file sharing services like Kazaa and Morpheus. On September 8, the Recording Industry Association of America (RIAA) sued 261 ordinary American computer users, accusing them of using such services to illegally distribute and download copyrighted music over the Internet. Two weeks later, BMG Music, one of the RIAA's member companies, released a music CD with copy protection, preventing users from uploading the CD to peer-to-peer services.

And then this past Monday, September 29, Srivats Sampath, former president and CEO of McAfee.com, announced a new alternative to services like Kazaa and Morpheus. Mercora, due to launch early next year, will be an online marketplace where individual Internet users and businesses can come together to buy and sell digital songs. Much like Apple's iTunes and RealNetwork's Rhapsody, online services where you can purchase songs for a small fee, Mercora will let you download music without sparking the ire of the RIAA.

The difference between Mercora and existing for-pay online music services is subtle. With iTunes and Rhapsody, the operators license songs from record labels and independent artists and then sell those songs to individual users. Mercora, by contrast, will simply provide the technological means by which labels and artists can themselves sell digital songs to individual Internet users.

Services like iTunes are the Amazon.coms of the online music world. They're just e-tailers that distribute music, says Sampath. The closet analogy I can make with Mercora is that we're trying to be the eBay of online music, bringing together buyers and sellers in a frictionless online environment.

Why would a major record label go to the trouble of selling songs over Mercora rather than simply licensing them to iTunes or Rhapsody? They also get a very targeted online marketing framework, continues Sampath. If Universal is coming out with a new Sting album, [it] can have Mercora send a message about the album to every user on the network who has ever downloaded a Sting song or a Police song.

Individual sellers will also be able to use the marketplace. You, as an individual, won't be able to sell digital songs (this would run afoul of the law; you don't own the copyrights). But you will be able to sell used CDs, concert tickets, and the like.

Will Mercora eat into the 60-million-person audience currently commanded by the peer-to-peer file sharing services? That remains to be seen.

According to Internet research firm Nielsen//NetRatings, when the RIAA first announced in June that it would be suing individual file sharers, traffic on services like Kazaa and Morpheus dropped by 15 percent over the following week. And a survey performed by market research company Music Forecasting after the September lawsuits claimed that sixty 60 percent of people who have previously downloaded music say they will be downloading fewer free songs from now on.

The peer-to-peer services continue to fight the RIAA in court and in Congress, but most industry pundits agree that many average users will gravitate from the peer-to-peer services to alternatives like iTunes or Mercora over the coming months.




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