A VC

Saul Hansell has a long front page business section story this morning in the New York Times on Snocap, Mashboxx, and the idea of a legit peer to peer music service.

I must say that I have been a fan of this concept ever since I heard about it a couple years ago.  The idea is pretty simple.  Snocap creates an index (they call it a registry) of all the files it finds on the peer to peer networks, no matter what it is.  It creates a digital signature of the file so that it can be reconciled against a content owner's catalog. This allows Neil Young to find all of his music that is out on the peer to peer networks by simply giving Snocap his catalog. Snocap does the reconciliation.

Then Snocap allows the content owner (ie Neil Young) to register (or claim) its content in the registry and set rules and prices for it.

The key to this model is the participation of the peer to peer networks.  If a peer to peer network participates in the Snocap model, they will check Snocap's registry before allowing a file to be pulled off the network.  If the file has been registered (claimed) then the rules that the content owner has imposed will be enforced.

The reason I have been a fan of this model is that I believe peer to peer networks are better than closed systems like iTunes. They include most, if not all, of the music that is available online because the users are the ones creating the network (peer production).  Peer to peer networks include bootlegs, mashups, and most anything you'd ever want to find.  So the peer to peer networks are comprehensive whereas iTunes is not.  Further, peer to peer networks are efficient in the distribution of the files.  They scale much faster and are extremely reliable.

Of course, the peer to peer networks have also been free which is certainly the biggest reason why 10 times more music is consumed on the peer to peer networks than music stores like iTunes.

As I said, the key to this model is the participation of the peer to peer networks.  To date, they have not embraced Snocap's model.  But that is changing.  Enter Mashboxx, the legit peer to peer network formed out of the ashes of Grokster and with the endorsement of Sony Music.  Mashboxx has agreed to use Snocap's system and so if you use Mashboxx as your peer to peer client, you will be asked to pay for content that has been claimed by its owner.

I use peer to peer networks all the time to get music that isn't available on iTunes or some other legit online music store.  I'd be happy to pay for the privledge, but have never been asked to do so.  I suppose that makes me a thief, but I suggest that it makes me a lost customer instead.

So when Mashboxx launches, I will gladly use it and pay for the music I am finding on peer to peer networks that is not on iTunes.

But I have two and half big issues with this model that I cannot wrap my head around and that is why I am not more enthusiastic about Snocap and Mashboxx.

First, and most important, are the intentions of the content owners.  We have learned that we cannot trust them to understand the value of online distribution.  The last line in this paragraph in Saul Hansell's article is what concerns me:

Then they will enter into the registry the terms on which those files can be traded. It could be just like iTunes - pay 99 cents, and you own it - or it could be trickier: listen to it five times free, then buy it if you like it. Or it could be beneficent: listen to it free forever and (hopefully) buy tickets to the artist's next concert. Of course, the rights holders could also play tough: this is not for sale or for trading, and you can't have it.

If that's the approach they take, I'll just keep using Limewire.  Content I can't have isn't an acceptable answer in my book.  I understand that there are rights issues.  But I don't really care about them.  If its available online, I'll get it one way or another and you can't sue all of america just because you've made some stupid deals on the rights to your content.

My second issue is that I don't want to pay everytime I consume music.  That's why I like music dial tone (ie Rhapsody, Yahoo Music Unlimited, etc).  I want to pay a set monthly fee, $15, $10, $5, I honestly don't care as long as its reasonable.  And then I want to consume as much music as I want without having to whip out the credit card every time.

And pricing by the song is tricky territory as Joel Spolsky describes in this insightful post about pricing entertainment and the signal it sends to the consumer.

If Mashboxx or some other service can make an "unlimited" deal with the content owners, then they will be on to something really big.  Until then, a legit peer to peer network is still a stop gap measure in my mind.

My "half issue" is the consumer reaction.  Will the dogs eat the dog food?  We have trained a ton of music consumers that the content is free.  Will they start paying if we make it easy to pay, price it fairly, and provide a comprehensive set of online music?  In theory, yes.  But in practice, it may not work out that way.

I hope this works out at least well enough to encourage the content creators and the content owners to continue to move in the direction of peer to peer networks, open and comprehensive catalogs, and easy payment mechanisms.

It's a step in the right direction and potentially a big step.  But I have been trained by the lessons of the online music disaster to be skeptical and I remain so.