Kazaa owners surprisingly naive about new subscription service

Earlier this week, the former P2P service Kazaa announced it was launching a music subscription service with content supplied by all of the majors. One million tracks are available for US$20 per month. So far the service is available in the US and there are no plans as yet to extend it anywhere else. Surprisingly, the tracks contain DRM and can only be played on nominated PCs. They also cannot be transferred to a portable device.

The shift to legitimacy is a popular theme at the moment. A few weeks ago the BitTorrent tracker service The Pirate Bay was snapped up by the Swedish software company Global Gaming Factory (GGF) X AB for SEK60 million (US$7.8 million). GGF is intending to launch new business models that provide compensation to content providers and copyright owners. It is also to take immediate action against illegal downloading.

Unfortunately for Kazaa’s parent company Altnet and GGF, the attempts by illegal file-sharing services to launch legitimate alternatives have largely proved unsuccessful. Napster is the most high profile brand name to have survived closure through legal action, but the brand name is all that can be associated with the P2P service that operated at the turn of the century. Attempts to utilize the popularity of the brand failed and the company was acquired by the consumer electronics retailer Best Buy for US$121 million last year. P2P service Soribada in South Korea, often described as the “Korean Napster”, has had some success. It operates a legitimate download service following the closure of its unlicensed P2P service by the Seoul High Court. All of the majors supply content.

Traditionally, the closure of the most popular file-sharing operator of the day by legal action has been followed by the emergence of a new illegal service. More legal action then forces the new service to close, and so on. At the same time, the closure of an illegal service by the courts is often followed by a pronouncement that the service will be launching a legitimate store. This was the case for eDonkey, Bearshare and Grokster, all of which were forced to settle copyright-infringement claims made by the major international record companies. All have since either ceased operations or now offer limited subscription services.

The last remaining significant P2P service is LimeWire. It uses the BitTorrent protocol and the Gnutella network and says it has 70 million unique monthly users. It has made the most progress toward legitimacy, having launched an online store early last year selling MP3 downloads from several partners, including the Orchard, IODA, Redeye Distribution, Nettwerk Music Group and IRIS. It does not offer major-label content, however.

The attraction of P2P services for users is simply that they offer access to music at no cost. The launch of a legal alternative takes away the main attraction of a service, while at the same time putting it in competition with the likes of iTunes and other services backed by cash-rich telecoms firms. Even though many of these telecoms-backed offerings have licensing deals with all the majors, most continue to struggle to close the gap with market leader iTunes. Kazaa may have led the way for a year or so, but it is naïve to think that users will return in their millions to a service that has already failed under several other brand names. Bizarrely, when Kazaa was at its most successful, the rest of the music world was backing DRM. There’s a lesson in there somewhere.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.