File-Sharing Pioneers Now Selling Music
In the music business, they would call it a comeback.
Almost a decade ago, Niklas Zennstrom and Janus Friis, European technology entrepreneurs, unleashed the Napster-like file-sharing program Kazaa on the Web, allowing millions of users3 bll to freely download songs, movies and TV shows.
Now Mr. Zennstrom and Mr. Friis are returning to their musical roots.
Their new start-up, Rdio, will unveil itself on Thursday amid what is suddenly becoming a crowded market for Internet music services, a field still largely dominated by iTunes from Apple.
Rdio will charge $5 to $10 a month for unlimited access to a large music catalog, including songs from the major record labels. This is a similar approach to that of other subscription music services that have not fared well, including the newly independent Rhapsody and Napster, a division of Best Buy.
Rdio customers paying the full amount will be able to stream and store songs on a range of mobile devices, beginning with the BlackBerry and iPhone, and soon, phones running the Android operating system from Google. The company is backed through the founders’ Atomico Ventures, a venture-capital firm based in London.
“Kazaa exploded and was used by an extreme number of people,” Mr. Friis said. “We tried to negotiate some of the things we are doing now with Rdio, but it was obviously way too early.”
Mr. Friis said that during the years spent in courtrooms and across negotiation tables, he and Mr. Zennstrom developed good relations with music industry executives. “You gain a certain respect for each other, through a good fight, so to speak,” he said.
Michael Nash, an executive vice president for digital strategy at the Warner Music Group, which has licensed its catalog to Rdio, said the duo’s history creating free file-sharing tools had been forgiven amid the industry’s search for a business model, as CD sales continued to decline.
“We resolved the past,” Mr. Nash said. “These guys are focused on the future.”
Rdio, which has headquarters in San Francisco and 22 employees, will open this week in an invitation-only preview period and will become more widely available later this year. Its chief operating officer is Carter Adamson, an original programmer at Skype. Its chief executive officer is Drew Larner, once an executive at the film studio Spyglass Entertainment, who still looks to Hollywood for clues about the future of the music business.
“The sale of DVDs once drove the movie business, but a lot of people don’t care about owning DVDs anymore,” Mr. Larner said. “We think that is going to apply directly to music.”
Despite the recent emergence of companies like Rdio and a similar subscription service, Mog All Access, subscription Internet music has not yet captured mainstream consumers. Rhapsody, introduced in 2001 and spun out of the digital media software maker RealNetworks in April, has lost money and still has about 650,000 subscribers. Napster has declined to release membership numbers since Best Buy bought it in 2008. Steven P. Jobs, Apple’s chief executive, has repeatedly said Apple is not interested in offering a subscription service.
Also, the major music labels have so far rejected a United States version of Spotify, a popular European subscription service. Music executives object to the fact that music can be played free on Spotify, along with ads.
A person briefed on Spotify’s plans said the company, based in Sweden, was still aiming for a United States introduction this fall, though elements of the service here could be altered.
Some industry analysts say companies like Rdio and Spotify can exploit technological changes that have improved the viability of subscription music by allowing people to more easily and cheaply listen to Internet music on a wide range of devices. They point to the proliferation of smartphones, the emergence of broadband wireless networks and the expanding ecosystem of applications allowing complex software to run on mobile devices.
At the same time, music labels have become more flexible on licensing terms and no longer wrap individual songs in so-called digital rights management software, which often created technical problems for customers trying to get music services to work on various mobile devices.
But one problem is that many of these new subscription music services are nearly identical. Rdio is betting in part on its social elements — the ability to follow friends on the site, see what they are listening to and see a list of the most popular music among people you know. But such features may not make much of a difference to casual users.
Survival might ultimately come down to which music start-up has the largest bankroll, and which service can ally itself with big companies like cable providers and wireless carriers that might want to wrap subscription music into their more comprehensive monthly plans.
Rdio executives say they are looking at that possibility. They also say they could link up with Skype, the free Internet calling serviced used by 560 million people around the world. Last year, Mr. Zennstrom and Mr. Friis joined an investment group that bought Skype back from eBay — another example of their returning to their roots.
“We obviously will be doing distribution deals,” Mr. Friis said. “And Skype is definitely one of the companies where there could be a compelling fit.”