Wippit, the UK-based peer-to-peer music service that is on track to launch this autumn, is poised to announce important deals with at least two major record labels.
Paul Myers, the company's chief executive, told ZDNet News that Wippit has been successful in persuading several record companies to allow their songs to be shared online by Wippit users. In return, the labels will receive a royalty whenever their material is swapped, creating a legal service.
Wippit is expected to announce details of the deals in the first week of September. "We've had interest from a huge number of labels, including a couple of the majors," said Myers.
The success or failure of Wippit's service will depend on how much content it can offer. Users may not be impressed if they can't download songs from their favourite band because its record label has decided not to make a deal.
Wippit is rumoured to be close to making a deal with the Association of Independent Musicians (AIM), which represents thousands of small labels. A deal with AIM would give it access to songs from big-name musicians such as Stereophonics, Paul Oakenfold and Belle and Sebastian. Users will be charged a flat rate subscription of £50 a year.
Napster yesterday admitted that it would have to delay its relaunch as a legal service until the end of this year, rather than this summer as previously planned. This means that Wippit will be the first legal MP3 sharing service to go live.
"It would have been nice to let someone else go first, so we could learn from their mistakes, but we're certainly not unhappy to be first," said Myers.
Although Wippit will allow users to swap files between each other, there will be strict limits on what can be exchanged. When a user submits a search request the Wippit database will check whether the relevant record label has agreed that the song in question can be shared on Wippit. If a song does not appear on Wippit's "White list", then the search request will not be successful.
Wippit also uses "cantametric music DNA" technology to ensure that the music files on a user's hard drive really are what they claim to be. This prevents a subscriber from renaming copies of material to which Wippit does not have rights, so it can be shared.
Myers hopes that the once-per-year £50 fee will prevent people from downloading large amounts of music and then cancelling their subscription, as could happen with a monthly charge. It also makes the billing cheaper.
The royalties paid to participating record companies will come from the revenue collected from subscribers.
Myers suggested that £25 of each annual fee would go into this pool, as would 70 percent of the advertising revenue. "A label will get a proportion of that pot, depending on how many of the total number of songs shared it owned the copyright of. They won't get a fixed fee per download."
This means that Wippit will not suffer financially even if every user downloads massive amounts of copyright music. But it will make it harder for the company to make deals with record labels: if a relatively small number of users sign up to Wippit and all download thousands of songs from each other, the royalty paid for one download would be tiny.
Wippit faces other obstacles too. The big five record labels -- Warner Music Group, Bertelsmann, Sony Music, Vivendi Universal and EMI -- were slow to recognise the potential of the Internet, allowing underground services such as Napster to take off. Having used legal action to force Napster to move to a fee-paying business model, and crushed Scour, another peer-to-peer service, they are now making efforts to make songs available online, but still appear to be wary of independent efforts -- even those that promise royalties. "We'd love to get all five major labels signed up, but we know that's not going to happen," said Myers, adding that one of the five major labels, which he declined to name, was particularly unwilling to enter into discussions.
Warner, Bertelsmann and EMI have teamed up with RealNetworks to create MusicNet, which plans to give subscribers access to songs from their catalogue. Sony and Vivendi have formed a similar alliance, called Duet.
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