How label-backed P2P was born

A look at how top record label and P2P execs worked for a cease-fire--and wound up with a new kind of digital music service.

Andrew Lack wasn't like the other record label honchos, file-swapping maverick Wayne Rosso thought as he left Lack's swank office in a midtown Manhattan skyscraper.

That Lack, the chief executive of Sony BMG Music Entertainment, was even talking to Rosso showed he was more open-minded than most industry executives. That he was talking up the benefits of working together--even schmoozing with the man who used to run controversial peer-to-peer service Grokster--was downright amazing. "'I'm going to make you a millionaire,'" Rosso remembers Lack telling him.

"So I told him, 'I'm all ears.'"

There was no more an unlikely pair in the music and technology business in early 2004. But behind the scenes, their growing camaraderie became one of the most important bridges between the warring recording industry and peer-to-peer companies.

Their relationship led to the creation of Mashboxx, a new kind of peer-to-peer company that's expected to go live in mid-September. Mashboxx is one of several avowedly law-abiding, peer-to-peer companies trying to thrive in the wake of June's

At the time of their meeting, Lack's label was suing Rosso's former employer, Grokster. And record industry executives commonly viewed file swappers as renegades who had helped destabilize their industry.

Rosso, 56, was certainly no peacemaker, either. At the time, he was running a Spanish peer-to-peer software company called Optisoft and was fond of comparing label executives to the iron-fisted dictator Josef Stalin.

Mashboxx and the other label-friendly companies--which include Napster creator Shawn Fanning among their executive ranks--hope to meld traditional file-swapping technology with copyright-friendly filters that will replace unauthorized downloads with copies of songs that must be purchased in order to be played.

None of their ambitious plans has been tested in the marketplace. And skeptics predict that file-swap aficionados will avoid filtered services like Mashboxx and stick with competitors. Law-abiding music downloaders, on the other hand, may simply stick to Apple Computer's iTunes.

Wayne Rosso
Credit: Mashboxx
Wayne Rosso
Mashboxx CEO

But that this new generation of cleaned-up peer-to-peer companies exists at all shows how, despite a still-toxic legal environment and uncertainty in the courts, record labels and tech start-ups are finding increasing room for experimentation and collaboration.

"We said for a long time, and no one believed us, that we were serious that peer to peer could play a role in the distribution of music," said Mitch Bainwol, chief executive officer of the Recording Industry Association of America. "Our beef was not with the technology but with the people who wanted to use our products as start-up capital."

The loudmouth and the TV guy
By the time Lack, 58, suggested his idea for a filtered network in early 2004, Rosso had been meeting with him on and off for almost a year--long before the Grokster case made it to the Supreme Court.

Rosso, a heavyset, bearded former music publicity agent, was the president of Grokster when they first met in early 2003, and was widely known as the man with the biggest mouth in the peer-to-peer software business. He started his career sweeping floors in the United Artists warehouse in 1970, ultimately working his way up over 25 years to represent acts ranging from the Beach Boys to Branford Marsalis.

In the mid-1990s, Rosso found his way into a series of Internet start-ups and eventually landed at Grokster in 2002. A natural headline-grabber, he delighted in thumbing his nose at the record industry, calling its top executives lunatics, even dubbing labels' lawsuits against individual file swappers the "death rattle" of a dying business.

Andrew Lack
Credit: Sony BMG
Andrew Lack

Lack was more insider than maverick, even if his experience was outside the music business. A former actor in television commercials, he moved behind the camera in the mid-1970s, landing a producer's role at "60 Minutes" and ultimately creating in 1985 "West 57th," a CBS news magazine show controversial for adding show-biz glitz to news. In 1993, he was tapped to lead NBC's news division and was instrumental in shaping the MSNBC and CNBC cable channels before leaving to head Sony Music in early 2003.

He hadn't personally lived the scorched-earth warfare between file swappers and record labels and could call his own shots. That made him a perfect person to pitch, Rosso thought.

When Rosso cold-called Lack in early 2003, the record executive surprisingly called back and suggested they meet. A month later, they sat in a conference room on the 32nd floor of Sony's office and, over twin Styrofoam bowls of popcorn, chatted.

"I told him, 'I shoot my mouth off in the press, but it's all marketing.' He did the same thing, taking a certain stance in public," Rosso said. He has been fiercely loyal to the executive since that meeting, often

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