Fanning's Snocap Builds Bridge Between Labels and P2P

Shawn Fanning's latest peer-to-peer (P2P) venture, Snocap, may have a long way to go to prove its success in the current online music landscape. The practice of file sharing, which has grown on free services such as Kazaa and Morpheus inspired by Fanning's earlier Napster venture, has also gone legitimate with a variety of licensed online music services from Apple (Nasdaq: AAPL), Sony (NYSE: SNE) and many others.

Earlier this week, however, Snocap announced that its service is supported by Universal Music Group -- one of the biggest music copyright holders. This marks the first time a record label has not approached P2P as the enemy, said GartnerG2 research director Mike McGuire.

"At least one of the labels will look at P2P as something other than threats," McGuire said. "The labels are facing the reality and realizing [they've] got to figure out a way to incorporate [P2P] into their business structure."

One Stop Copyright

Founded by Fanning, Jordan Mendelson and Ron Conway, Snocap aims to make content from labels such as Universal available on both P2P and so-called "legitimate" networks, enabling users to access authorized content while also allowing content owners to reach consumers.

Snocap plans to enable content owners, including labels and artists, to register music and copyright information in a Snocap database that will serve as the basis of distribution. Rights holders can manage online distribution of all of their content through Snocap's "copyright management interface," described by the new company as a one-stop way to manage rights and distributions through various online retail and P2P services, which, they say, will cut costs while increasing revenue.

"By giving record labels and artists what they need to deliver their music over any digital platform, including peer-to-peer networks, we are finally realizing the full potential of the Internet as a source of music for fans everywhere," Fanning said in a statement.

Performance, Reliability

GartnerG2's McGuire said the idea of a large, central warehouse that transforms P2P use into legitimate listening will face the same difficulty as the legitimate services: snaring users who have been getting it for free.

In addition, Snocap must compete with the legitimate services, which have all grown large libraries, advanced features and loyal customers, in spite of ever-growing free P2P use.

"That's going to be, of course, a test," McGuire said. "This system is going to have to compete for performance and reliability."

McGuire, who tied Snocap's success to the addition of other record labels, added that support from the popular P2Ps may also be a big factor.

"There are a bunch of alternatives," he said. "It will be an interesting challenge to see how the P2Ps react to this."

The Good and the Bad

McGuire also indicated it will be a challenge for Snocap, and other services that try to compete in the mix of online music, to take the good aspects of P2P -- sharing and discovering -- without the bad aspects of today's online music, including spyware and adware, incompatible formats and user restrictions.

"If it proves restrictive or onerous, it may be very, very difficult [to succeed]," McGuire said. "Now, [companies] have to figure out what attracted all those consumers to the [P2P] networks. Was it free stuff? Was it a huge catalog and the ability to search it? I think there's definitely going to be a shakeout."

All or None

Yankee Group senior analyst Mike Goodman said the Snocap solution seemed to be a layer in the P2P framework aimed at digital rights management.

"I'd argue it's a DRM wrap," he told TechNewsWorld. "It's not different than a half dozen other products out there."

Goodman said that while other DRM companies would be capable of providing the same centralized digital rights control as Snocap apparently has, the support of Universal was a significant change of course for a music label, all of which have been aggressively -- and unsuccessfully -- trying to stomp out P2P.

"It is a definite recognition from a content owner, and it signals some acceptance [of P2P]," Goodman said.

He said that all of the labels would have to sign on and the service would have to grant more control to users if it was to succeed.

"My expectation is that it is not more restrictive," Goodman said. "If it is, that would just be dead in the water."