The independent label customers include V2, Artemis, Epitaph/Anti, Side One Dummy and Palm, Simmons/Latham, and Koch Media. Under the business model, the independent labels will share the revenue generated from advertising that appears in the user interface of popular P2P applications.
"Developing an effective revenue-sharing strategy where the P2P community as well as the record labels benefit has always been the primary objective for Altnet," Altnet president Lee Jaffe said in a statement.
"Through this advertising fund, top-tier indie entities and P2P forces have created a working group who, together with Altnet, Kazaa and other P2P application providers, will raise the value of the media being sold inside P2P applications and allow revenues to be shared back to labels through the Altnet pool," he said.
Altnet licensors will share in the initial pool. The fund will be split proportionately based on content licenses issued whether the music content is offered for sale, trial or for free.
Jaffe said the fund will initially serve as a catalyst to develop a business model for P2P resembling radio that is based upon audience segmentation and media performance.
Altnet is expecting the fund to grow considerably larger through participation of advertisers and labels who are seeking "innovative marketing for bands and brands using techniques and technologies offered via the Internet".
Kevin Bermeister, Altnet chief executive officer, said the business model will provide a partnership between music labels and the advertisers of p2p applications such as Kazaa and eDonkey to segment target demographics that each advertiser is seeking.
"Altnet's been promoting the advertising model for some time now. Altnet's key capacity is really to bridge the content transaction of end user with that of the advertisers. This model can help the advertising media reach end users that the advertiser is seeking. The end user is always seeking a piece of content be it games, film, band etc. Typically, contents are segmented into different demographics. When a user is seeking a type of content, essentially the advertiser knows the profile of that user.
"There is value in an advertiser being able to target a certain user demographic. The revenue essential makes its way back in part to the label and content provider and the end user also benefits. Although not yet apparent at this point, the [end user benefits] will quickly become apparent because there will be a reduction of the price on the content that is being offered to the end users. That's the way see it later on," he said.
Burmeister added that this business model can be applied globally, even with independent labels and local artists in Australia. Although the Australian major record labels are welcome to participate, Burmeister said they haven't had much luck with them.
"Altnet has had a long hard battle trying to attract music labels to work with us. We really haven't had much luck with them because of our relationship with p2p applications. We are hoping in time they will see through the wisdom of their ways and we will end up doing business with them.
"This is a precursor to that happening. Essentially, one of the reasons for this business model is to convince them. Independent labels are doing extremely well with us. Progressively, they are seeing the benefits of p2p, with this fund being one of them," Burmeister said.
Altnet is currently building relationships with advertisers in Australia as part of the new business model.