Altnet ad fund on shaky ground

Online digital entertainment distributor Altnet has revealed that legal moves to freeze the assets of executives associated with Kazaa are expected to affect its latest advertising revenue-sharing scheme.The executives have agreed not to disperse or dispose of their private assets following a request made by the record companies to the Federal Court.

Online digital entertainment distributor Altnet has revealed that legal moves to freeze the assets of executives associated with Kazaa are expected to affect its latest advertising revenue-sharing scheme.

The executives have agreed not to disperse or dispose of their private assets following a request made by the record companies to the Federal Court.

Altnet provides Kazaa software provider Sharman Networks with its TopSearch technology which inter-operates with the P2P application making it easy for users to locate, purchase and download files. Both are being sued by Australian record labels for alleged copyright infringement.

Altnet chief executive officer Kevin Bermeister told ZDNet Australia  that although there is no great effect at this point on the advertising fund, the major record labels' tactics "certainly have the potential to do so."

"Essentially, the model relies on its partners like Kazaa. We rely on our partners to work through us to enable new media business models. The business model allows revenue to stream to music labels and P2P providers. In that regard, the freezing is impacting our ability to do our business," Bermeister said.

Under the Altnet business model, independent labels will share the revenue generated from advertising that appears in the user interface of popular P2P applications.

"The model is pointing towards growth and expansion. However, the [music labels'] attempt to block the fund is just unfortunate. We are being targeted for a whole lot of different reasons," Bermeister said.

With the revenue-sharing scheme now in its second month of operation, Bermeister said it is evident that music labels are benefiting from receipt of the funds.

"Some are earning small, some are earning large each month. But most importantly they are exposed to a business model with tremendous growth attached to it. It is delivering aggregate stream and competing with other traditional models," he said.

Altnet announced today that it has secured independent music label V2 to its roster of independent customers, including Koch Media, Artemis, Epitaph / Anti, Side One Dummy, Palm, Simmons/Latham and Digital Rights Agency.

V2's hit UK band Stereophonics has planned to release their latest album through Kazaa and other P2P operators. Customers will be able to purchase licences for the newly released songs at US$0.99 each or the entire album for US$9.99. The video of the first single released from the album, "Dakota," is also available to license for free to Kazaa users.

Exclusive competitions are thrown in for Kazaa users where they can win new albums on vinyl.

Bermeister said the independent labels have been very open with P2P distribution because it has become an "alternative promotional outlet" for them.

"The major record labels have dominated traditional form of channels such as radio. It has always been difficult for independent labels to promote themselves and get their music heard. P2P completely opens that up, the whole nature changes from push to pull demand model," Bermeister said.

With Altnet attracting more than 100 music labels worldwide, Bermeister believes that the current legal action taken against P2P providers does not affect the drawing power of P2P.

"Apparently the case has no effect in drawing the labels in. They see P2P for what it is. Despite the case and the legal issues against Kazaa or Altnet, I think the independent labels see this case for what it is; just an attempt by major record labels to stop competition," he said.

In a statement released today, Beth Appleton, head of new media for V2 said that "online distribution via P2P is the perfect vehicle to reach fans directly and cost effectively."