Napster's ghost rises
The creator of Napster and the former president of Grokster are ready to rescue the music labels from Steve Jobs and iTunes.
By Robert Levine, FORTUNE

(FORTUNE Magazine) - Steve Jobs helped save the music biz from file sharers like Shawn Fanning and Wayne Rosso. Now Fanning and Rosso--the creator of Napster and former president of Grokster, respectively--want to save the labels from Jobs. Apple's (Research) iTunes store practically created the music-downloads business, and according to NPD controls 70% of online sales. Says Rosso: "Steve Jobs has them by the balls."

Rosso now heads a file-sharing service called Mashboxx, which bought Grokster's assets and plans to start selling authorized downloads by summer. It has deals with Universal Music and Sony BMG and is negotiating with EMI and Warner Music. The service will be powered by Snocap, a system Fanning designed that lets peer-to-peer networks filter out "stolen" files.

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Rosso, 57, an almost cartoonishly outspoken former publicist, is spoiling for a fight. "Steve Jobs and Apple are going to be toast," he says. "There's going to be a completely different landscape." Toast, maybe not--but the game may well change, if only because of two other entrants: MTV and Amazon.com. The former will launch Urge, an online store that sells music in Windows Media format, by summer. And Amazon (Research) will reportedly start a service that could include its own music player.

The labels are rooting for all three --and not just to lessen iTunes' leverage. The new services could be more lucrative: Mashboxx will let labels vary wholesale prices the way they do for retail stores; Urge and Amazon are expected to sell subscriptions that offer unlimited music for a flat fee, probably around $15. Subscriptions, already used by Rhapsody, could give labels the kind of annuity enjoyed by cable providers.

All this is good news for the music biz, which badly needs some: CD sales, which account for 95% of revenues, fell 8% last year. "The subscription model is going to change the game," says Michael Nash, senior VP at Warner. He insists it's too early to anoint iTunes the winner: "The race is far from run." Top of page

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