P2P start-up gets record label deals

Peer Impact gets blessing from big record companies to allow 99-cent file-swapping.

A small peer-to-peer start-up has won rights from three of the four major record labels to distribute their music online.

The deals with , a new division of online marketing company Wurld Media, continues the labels' gradual warming trend toward peer-to-peer services. Top label executives have increasingly said they are willing to support file-swapping networks, as long as no pirated songs appear alongside authorized works.

For now, Peer Impact's partners include Universal Music, Sony BMG and the Warner Music Group. The company remains in negotiations with EMI Music and plans to launch the file-swapping service in early 2005.

Songs will cost 99 cents, as they do at Apple Computer's iTunes and other download stores, and they'll be wrapped in copyp-protection technology. But executives say the file-swapping technology can help build relationships between customers in a way ordinary Net music stores can't.

"Consumers like the concept of community," said Wurld Media Chief Executive Officer Greg Kerber. "We have seen that when successful companies like eBay build large communities, and people share in that, there is power in that for the consumer."

Peer Impact is one of a handful of emerging companies that are hoping to take advantage of the technical benefits of file-trading--primarily low distribution and bandwidth costs--while avoiding the legal headaches of allowing unrestricted trading.

Former Grokster executive Wayne Rosso is planning an authorized file-swapping service called Mashboxx, also slated to launch next year. In Britain, a company called Wippit is already running a peer-to-peer service with music from BMG and EMI.

Although these companies have helped build bridges between record labels and the peer-to-peer technology that was once deeply feared by music executives, it's less clear whether they can attract the mass audiences found on the anarchic file-trading networks such as eDonkey or Kazaa.

Today's services are competing not only with the unauthorized networks where pirated content remains free, if legally risky, but with download stores from powerhouses such as Apple, Microsoft and VirginDigital. All these stores, like the peer-to-peer services, will be offering a similar range of content at the same 99 cents per song price point.

Peer Impact's technology is built on a formerly open-source file-swapping technology called FurtherNet. That service still exists, but its creator, Jamie Addessi, now works for Peer Impact.

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