Staff Writer, CNET News.com
With $10 million in venture funding and the backing of at least one major record label, Napster founder Shawn Fanning will officially unveil his new peer-to-peer music company on Monday.
As previously reported, his new company, dubbed Snocap, is a far cry from the anarchic service that opened the file-trading flood gates in 1999. This time around he has created tools that he and his co-founders hope will allow other file-swapping services to operate with the blessing of record labels, with artists getting paid for downloads.
After more than a year of silence, Fanning himself is now outlining his vision for a new generation of file-swapping services that might rival the huge breadth of content available on the original Napster, without the attendant legal hassles.
"The last five years of peer to peer have enabled consumers to explore music that was otherwise inaccessible," said Fanning, who serves as chief strategy officer of the new venture. "It's going to be very hard to expect the majority of them to turn back."
If the company is successful, it could help transform peer-to-peer networks into an authorized distribution channel for music—and ultimately even movies, games and software—the same way that Apple Computer's iTunes has popularized download stores.
At the core of Snocap's offering is audio "fingerprinting" technology licensed from Philips Royal Labs and used to identify songs being traded on a network by their unique audio characteristics. Labels then provide Snocap with a set of rules to be associated with each fingerprint—for example, a song might only be allowed to be traded if it is wrapped in Windows Media digital rights management, which can be unlocked with a 99-cent payment.
Snocap won't be a music distributor itself. The company believes its main function is to help other digital music retailers, peer to peer or otherwise, gain rights to distribute record companies' content. Universal Music Group, for example, is already putting its entire catalog into Snocap's databases, along with associated rules on how the songs can be used or sold. Snocap said it's still in discussions with other labels.
Much of the material could come directly from the labels, and Snocap will maintain a "seeding" server that will fill networks with content that people aren't offering. But Fanning says he expects that users will provide their own content, such as the live shows, bootlegs and out-of-print recordings that made Napster such a hit. Snocap will help content owners identify their works among these, and potentially start making money on this side as well, he said.
"This is an important step for the labels and other content owners," said Mike McGuire, an analyst at GartnerG2. "If they realize they can put some basic controls around this and try to replicate the benefits of the original peer-to-peer networks, they could benefit."
Fanning said Snocap's seeds were planted in the last days of Napster, when that song-swapping service was struggling under court order to block trades of copyrighted content through its network.
Under those conditions, marred by suspicion from the record labels and complaints by users, it quickly became clear that some third party needed to maintain the song identification and blocking tools if they were to work, he said. Otherwise, each side—both the record labels and the file-swapping service itself—had too much incentive to skew the databases in their own favor. Snocap was designed to be this third party, sitting as an unbiased data source between file swappers and the labels, he said.
At least one new file-swapping service is already planning to use the technology. Mashboxx, a project founded by former Grokster President Wayne Rosso, has said it plans to use Snocap's tools as the foundation of an authorized file-trading service.
The trick will be to attract people who are already using either a traditional download store like iTunes or one of the free but legally risky services such as Kazaa and eDonkey. Operators of some of the biggest file-swapping services today have been skeptical of the idea, although they say they want the ability to sell authorized content through their networks.
Snocap "seems like a step backwards, technologywise, going back to a central server and a fingerprint filter," said Michael Weiss, chief executive officer of StreamCast Networks, which distributes the Morpheus software. "If the major labels are willing to experiment with things like Snocap, I think they should also start making content available though networks like Morpheus."
The new round of funding, Snocap's first publicly announced venture capital, comes from WaldenVC and Morgenthaler Ventures.