General

This Network Sings — continued

"Anything that touches on file sharing has to be treated very carefully," Hitchman says. "They don't want to send out the wrong signals."

Audible Magic
PlayLouder has apparently bested the first of the record companies' concerns—the technology works. Audible Magic CEO and co-founder Vance Ikezoye says his firm has been working with the big labels for some time and has their confidence that the technology works. "The content owners all recognize our technology and have trust in its ability to support what PlayLouder is doing," Ikezoye says.

The solution includes an appliance that monitors network traffic offline and does "deep packet analysis" to identify P2P transmissions by their tell-tale protocol signatures. It filters out the P2P header information, captures less than 30 seconds of the file being transmitted and compresses it to create an "audio fingerprint"—about 200 numbers in all. It then compares this fingerprint to a database of fingerprints. Audible Magic has five million tracks in its database.

"We can identify a track with about 99.99 percent accuracy," Ikezoye says. "[The system] can tell the difference between the same Pearl Jam song recorded at different times and locations. It can tell the difference between studio and live versions."

The Audible Magic appliance then takes action on the transmission according to a set of business rules established by the operator. In PlayLouder's case, if the file being downloaded matches a track licensed from one of its music industry partners and it's being downloaded by another PlayLouder subscriber, the appliance allows the transmission to continue and logs it for royalty accounting. If the file is being downloaded from a subscriber's computer by a non-subscriber, Audible Magic halts the transmission.

Hitchman says PlayLouder hasn't worked out all the business rules yet. Will it block all incoming P2P traffic or block only problem files such as spoofs? If a subscriber is downloading a track from a non-subscriber and it's one that's in the PlayLouder database, will the network block the download, or log it for royalty purposes? Some of this has yet to be decided, and some of it will depend on what the copyright holder wants to do.

The Audible Magic technology was not developed with the PlayLouder business model in mind. It's designed to be used by a variety of different industry players, including conventional ISPs. They can use parts of the solution to simply reduce P2P traffic and thus costs, and also to ensure it's staying on the right side of the law on downloading.

Audible Magic has other ISPs testing the technology. "A lot of ISPs now are interested in becoming trusted sales channels for content owners," Ikezoye says. "So they're going to have to build up trust with those content providers." Using the Audible Magic technology to block illegal downloads is one way to do that, he says.

Implementing the Audible Management solution costs about $2 to $3 per subscriber in capex costs for hardware—industry standard Intel servers—and less than $10 per subscriber for software licensing.

Could another ISP buy the solution and copy what PlayLouder is doing? "Our technology fits perfectly into their business model," Ikezoye concedes. "But the part we don't have that they do is that they've really engaged the content owners to educate them on the business model and get licenses, like they did with BMG. We can help with the back end, but the business side is what PlayLouder brings."

The more money song
We think the business side is still not proven, but Hitchman makes an interesting point about how the online music business—a potential gold mine—might sift out over time.

He believes the iTunes model is vastly overrated in terms of revenue potential for the music companies and that the PlayLouder model will ultimately deliver greater revenues. The PlayLouder model is also, he says, "more compatible" with physical merchandise. Research suggests that at least some music lovers use file sharing to find new artists and are more likely to then buy the CD. Whereas iTunes buyers, having invested in a couple of tracks, are much less likely to buy the CD.

This is one reason why PlayLouder will almost certainly be selling CDs at its site, if only through a fulfillment partner such as Amazon. It's an interesting notion: could ISPs in turning themselves into MSPs, also become successful music retailers?

—End

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