PEER-TO-PEER
What do you get when you strip Napster of its legal problems and add a business model built on sales?
The answer, says Napster cofounder Bill Bales, is Flycode - a recently launched peer-to-peer file-swapping service for which he serves as interim CEO. Instead of music, Flycode deals in Hollywood trailers, short films, made-for-Internet movies, sports clips, and music videos. And Flycode files can be accessed only with the copyright owner's permission.
"We're creating a company that partners with content owners instead of fighting with them," says Bales, who left an executive post at Napster last December to start Flycode with investor Adrian Scott. The San Francisco-based company (which recently changed its name from AppleSoup after Apple Computer threatened to sue) has a roster of high-profile investors, including Frank Biondi of WaterView Advisors and early Yahoo! investor Fred Gibbons.
The heart of the Flycode service is a digital-rights manager that allows participating content owners - movie studios and filmmakers - to control and track how their digital wares are distributed.
"If we can double the number of people who see a movie trailer and can validate the data, we'll have a huge business," says Bales. Studios spend about $4 billion annually - which works out to roughly $25 million per film - to promote new movies. Unlike music-sharing services that have no visible means of support, Flycode plans to generate revenue from media sponsors who pay to embed ads in trailers - think of the ads in home video rentals - and from sales of subscription packages for premium services. Flycode will track the content that's shared along with who shares it, and will sell that info to studios as market research.
Recent history suggests there could be a huge market for a service that allows users legit Net access to Hollywood previews. Star Wars enthusiasts - looking for a sneak peek at the next Lucas blockbuster - downloaded 8 million copies of the The Phantom Menace 's trailer in its first five weeks online.
One of the advantages of using peer-to-peer technology for handling these content feeding frenzies is its ability to scale on a dime. Witness Napster's history-making rise to 25 million users in less than a year with fewer than 30 employees.
Nevertheless, Flycode will need to convince content providers - many of whom are still shell-shocked post-Napster explosion - that P2P can still give them control over their intellectual property.
That may take a while, says Biondi, a Flycode adviser, ex-CEO of HBOand Viacom, and former chair of Universal Studios: "Hollywood still believes there's never a penalty for being a slow adopter."
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