another P2P business model

Filed in archive Entrepreneurship on October 4, 2003

Bombay-born serial entrepreneur Srivats Sampath has unveiled plans to launch yet another digital music service. Mercora has a good timing but enters the marketplace with coming fierce competition and an unproven business model.

"By the end of this year, more than half-a-dozen competitors (Amazon, Sony) are expected to be selling 99 cent songs online -- with more on the way. Musicmatch launched its Microsoft Windows-based service earlier this week..."

The innovation in his business model comes from the peer-to-peer distribution, according to Sampath.

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Songs bought through the service will all be wrapped tightly in Microsoft copy-protection technology, but people may be able to download them from each other's computers in order to save on bandwidth costs and download times, he said."

Given the decreasing costs of bandwidth it might be no real advantage outsourcing the download costs to users. Most broadband users have ADSL so upload is often challenging slow and unreliable. Most download services offer the ability to get songs in different qualities. Difficult if there is just somebody sharing files on the other side.

"Sampath said the software -- which bears a striking resemblance to iTunes -- will show people songs and music choices based on what other people in their listening groups are tapping into that day."

While this perfectly makes sense, an intelligent music match is just a feature, no real USP. last.fm has started a new round of personalized digital radio some months back. The advantage for them is, they work with smaller independent labels. Most of the labels are unknown for the "normal" user and music matching creates real value as it presents songs, you would have been never aware of.

"The marketplace model is also designed to let anyone sell music through the service, he added. Record labels or individual artists will be able to add songs to the service and will get paid when listeners find and download the files. Individual users will be able to offer used CDs or concert tickets through another transaction feature."

The ability for users for selling music to each other without the labels is much more interesting. The 'ebayity' is something scalable and might be an USP. But the question remains how far labels will restrict such a feature, as DRM might be difficult to enforce in such an environment.