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Warner settles with Imeem

Warner Music has reached a settlement with music-sharing service Imeem. Could legal music-sharing services finally be poised to take off?

Online community Imeem launched in August 2005, and although I wasn't familiar with the service at the time, it sounds like a blend of several popular features: social networking, instant messaging, blogging and photo sharing. At some point, the company added a feature that would let users create playlists from their personal music collections, then stream these playlists to other users. By spring 2007, the service claimed 16 million active users.

The concept was a bit like, and like that site, Imeem eventually drew a copyright infringement lawsuit from a major record label--Warner Music Group, in this case.

Imeem quickly responded by licensing more than 3 million tracks from various independent labels and publishers, and signing a deal with Snocap to help run a new ad-funded service.

Created by original Napster founder Shawn Fanning, Snocap provides a technology platform to track usage of particular songs so that the owners of those songs can be fairly compensated. It's a nuts-and-bolts kind of business, which is a good place to be in the music industry today: nobody knows exactly how the next-generation music business is going to look, but most agree that it'll involve digital files being exchanged over some kind of network, and somebody needs to track all those exchanges if there's going to be any music industry, rather than a billion independent artists all trying to chase their own narrow slice of action.

A couple of days ago, Warner agreed to drop its lawsuit against Imeem and offer its catalog in exchange for a cut of advertising revenues.

Could this be the model that finally causes legal content-sharing sites to take off? It's not enough for the record industry to build yet another file-sharing network, then wait for customers to show up.

To compete with the "darknet," new services have to offer something singularly interesting, such as ease of use, attractive social-networking features, or integration with existing products and services (which seems to be an approach that's working for iLike). If that's the case, these services will build an userbase until they finally cross the threshold where one or more major content owners recognize them, at which point they'll have to take the necessary steps to get legal. Sort of a completion-backward principle for online music.