Sharing Music, Legally

The record industry's public enemy No. 1 has become its new best friend. Shawn Fanning, the teenage techie turned Internet icon who at 18 began designing Napster in his Northeastern college dorm room--firing the opening salvo in what would become a revolution in the music industry--has launched a company to, of all things, protect intellectual property. Snocap aims to solve the very problem that file-sharing service Napster helped create, by identifying copyrighted music and preventing it from being swapped unless the user pays. And get this: 27% of Snocap's employees are Napster veterans; chief operating officer Ali Aydar was Napster's first employee. "I don't see it as moving from one side to another," says Fanning, a reggae enthusiast. "I've always had the same vision--creating a world where more music is available to more people. I created Napster ... to build a community among music fans. I had no idea where it would go."

Fanning incorporated Snocap two weeks after the Supreme Court forced Napster into bankruptcy in September 2002 for facilitating copyright infringement. (Roxio bought the Napster name, and Fanning is no longer affiliated with it.) The June Supreme Court decision holding companies liable for illegal file sharing by their users suddenly gave the recording industry more negotiating leverage with illegal file-sharing services. And with more listeners eager to find legal ways to download music, Snocap offers a viable alternative.

Snocap's challenge is to help music providers offer file swapping without the viruses prevalent on illegal sites, so customers would pay. Compared with online music stores, peer-to-peer services still attract the most users--by some accounts, 60 million people in the U.S. "That's about the number who voted for George Bush!" said Sam Yagan, president of MetaMachine Inc., the company behind eDonkey, a free peer-to-peer site.

Unlike iTunes, which sells songs, Snocap is really a digital middleman, monitoring audio files as they are downloaded over music services that use Snocap's system. Its main tool is a registry that stores music and acts as a global clearinghouse to identify tracks. Snocap is working with Mashboxx, headed by another veteran of the file-sharing wars, former Grokster president and outspoken recording industry critic Wayne Rosso; his company offers users legal file-sharing software. When a music fan locates a song on another computer in the network, Snocap checks to see if it is registered in its database. If it is, the song can be purchased or listened to five times for free. If the song isn't registered, Mashboxx lets the user have it at no charge. File-sharing services will be plugging into Snocap within the year, and in June the company opened its registry, allowing artists and labels to submit songs. So far, three of the four major labels--Universal Music Group, Sony BMG and EMI (Snocap is still in talks with Warner Music)--as well as many independent ones have agreed to participate in the database, already half a million songs large. Because of copy protection, the tracks aren't iPod compatible. Snocap and providers are hoping restrictions will loosen.