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Snocap COO Q&A: Enemy No More

Napster creator Shawn Fanning wants his fledgling Snocap cash clearinghouse to be the system by which P2P music goes legit--Ali Aydar, his right-hand man, says it's in the cards.

Snocap wants to serve as the cash clearinghouse of sorts between P2P and other music-download services and the people who want to get paid for their content--record labels, indepedent artists, and other copyright holders.

The system would use a massive database of "registered" songs to track the sharing of music files. Snocap wouldn't set the terms of the sale, leaving that to the content owners and music services themselves. It simply would be the accountant and traffic cop.

Four of the five major record labels have all signed on, and a deal with the fifth, Warner Music, is in the works.

And in trying to twist the arms of the P2P renegades, Snocap has big brother on its side. Since the US Supreme Court determined in June in MGM versus Grokster that P2P services can be sued for inducing copyright infringement taken in the course of marketing file-sharing, the RIAA has sent cease-and-desist letters to a number of file-sharing services.

The tactic has worked. WinMX has shut down, and eDonkey has said it is "throwing in the towel"--meaning it plans to shut down as well or go legit using a system like Snocap.

MP3.com sat down with Snocap COO Ali Aydar, Fanning's right-hand man and employee number one at the original Napster, to talk about Snocap's prospects and what it's like to go from being the enemy to the accountant in just a few short years.

MP3: So you were employee number one at Napster, right?

Ali Aydar: That is correct.

MP3: Is it fair to say you've spent a great deal of time in the past year or so negotiating with the record labels to get them to sign on to the Snocap system?

AA: That's fair, yes.

MP3: What was it like to walk into a room full of label executives, knowing that some of those folks were probably cursing your name just a few years ago?

AA: Well, it was pretty weird at first, to be honest. But those guys never gave us any sense that they held a grudge or anything like that. It was more of, "Here's where we are now, let's take this business forward" kind of a thing.

MP3: So they looked at it in a very matter of fact way, not from a, "you made my life hell for a couple of years" way?

AA: Yeah, there was absolutely none of that. And it's a testament actually to Shawn's personality. He's a very likable person, he's a good guy. He's not out to harm anybody or cause any trouble. It just, you know, the thing that he created just spun out of control.

MP3: Let's hear the pitch you made to the labels in those negotiations.

AA: Well, at the highest levels, the pitch was a solution to facilitate the existence of a legitimate peer-to-peer system that respects the wishes of the content owners. Some content owners want to make sure that when content gets distributed, that they be compensated for it. Some want to make sure it's available in certain formats, and some want it to be available for free. The desires of content owners run the gamut, and we want to operate systems that allow them to do what they want with the content that they rightfully own.

MP3: Right. And get paid for it.

AA: And get paid for it.

MP3: How about the pitch to the various peer-to-peer services?

AA: Well, since the Grokster decision, that pitch has been, "Now, you guys have to find a way to satisfy the courts, and the industry. You have to legitimize. This is your path to do so. And we built the system with you in mind."

MP3: Right.

AA: The system has components that are specifically meant for P2Ps to plug in and easily become legitimate services.

MP3: You've mentioned in recent months, specifically before the Senate Judiciary Committee in September, that it's clear to you now that consumers were ready for digital music long before the recording industry was ready. Do you truly feel like the industry is ready now?

AA: I do. Absolutely. The labels are taking steps to make sure they distribute content in as many ways as possible, as you're seeing announcements all the time now where labels are signing distribution deals.

MP3: If Snocap is successful in its bid to get both music services and music-rights holders on board, will it ever mean the end of free music and free digital content through P2P services?

AA: No. If people really want to consume music in that way, they will go out of their way to do it. But at some point it's really about offering compelling legitimate services, and once the services are compelling enough, [they will] discourage people from using the unauthorized services--DarkNets or whatever. The problem thus far, though, has been bringing that back in--bringing that into balance. Right now, the unauthorized P2P offers so much more in terms of content.

MP3: There's this whole other movement working in your favor, with the RIAA sending out cease-and-desist orders and the federal government hinting at the possibility of stepping in. How would you prefer that file-sharing services go legit? Through market forces, government regulation, or legal means, or all of the above?

AA: Ideally, market forces. Once you get legal things or the government involved, that adds additional layers of overhead, making it more and more difficult to make it happen.

MP3: Let's talk about one of those P2Ps--eDonkey. Just a few weeks ago, eDonkey founder Sam Yagan testified before the judiciary committee and said that he was throwing in the towel. How big of a move was that for a service like Snocap, whether or not eDonkey goes legit through Snocap or someone else or just shuts down?

AA: Well, we don't like to put all of our eggs into one basket. I mean, would eDonkey being a part of Snocap help Snocap and the rest of the industry? Of course! The world needs legitimate peer-to-peer services. Consumers want it. The industry wants to facilitate it. It's something that's going to happen anyway.

MP3: About the mechanics of the Snocap system. Let's just make sure we understand a few things. So when it comes to files that are registered within Snocap's system, Snocap logs the transaction when a file is "shared" and will get paid a per-transaction fee and, in turn, pay out the licensing fees to the appropriate rights holders. Correct?

AA: That is correct.

MP3: And when it comes to unregistered files being shared on P2P networks that are part of Snocap, it's up to that service to decide if it wants to send the file if it's requested. But then Snocap can alert the rights holder if that's happening. True?

AA: That's exactly right.

MP3: In the context of your short- and long-term goals, I know that you guys want to eventually become a clearinghouse for all sorts of digital content--not just music--for movies and TV shows to recipes or books or whatever. Can that evolution to other digital content happen smoothly, and what is the timeline for that to happen? Obviously, music is your primary focus for right now, correct?

AA: Well, our short-term goal is music, without a doubt. And we need to get services that are launched that are selling music. But it's a natural extension of our system to support other forms of media. It fits right into the architecture very well.

MP3: And it's not a huge leap?

AA: It's not a huge leap at all. That evolution is part of a longer-range plan.

MP3: So in terms of the music business, walk us through the next year or so. When do you think there will be a music service up and running using the Snocap system?

AA: Success for us over the next year is having multiple distribution channels that are using Snocap. So our focus is getting distribution channels up and out there, getting consumers using those channels, having rights holders receiving payments for content distributed to those channels. That is 100 percent of our focus.

MP3: Is anything on the service front imminent or is it probably more likely sometime next year?

AA: By the end of the year or early next year. But really the goal is multiple distribution channels by the middle of 2006.

MP3: Thanks for your time, Ali.

AA: You're welcome.