• by Ross Fadner , October 14, 2004

Intent MediaWorks, an Atlanta-based distributor of content over peer-to-peer file-sharing networks, believes that consumers shouldn't have to either pay or face legal trouble for the music and video content they download over peer-to-peer networks. So the technology company presented some major labels with a radical proposal: Let consumers download their clients' music for free, in exchange for receiving ads targeted by their file-sharing behavior.

So far, at least one major record label is in "advanced talks" with Intent MediaWorks, said Les Ottolenghi, Intent's president and CEO. He said that Intent hopes to one day have distribution agreements with all of the major record labels, adding that "the missing ingredient in enabling all of this--until now--was relevant advertising."

Even without major labels, Intent MediaWorks has managed to sign about 500 musicians, videographers, and independent record labels, who have agreed to make their music or videos available for download over peer-to-peer networks, including Grokster and KaZaa. When users request a track by one of Intent MediaWorks' artists, they are prompted by a screen requesting that they either pay for the track or agree to accept sponsored ads.

The program, which started this week, came about after New York-based technology provider Almondnet gave Intent MediaWorks the means to offer peer- to-peer users the choice between paying for ads and accepting targeted advertisements. After users download tracks from Intent's pool of music, Almondnet shows them ads based on their behavior within Intent's peer-to-peer software network. Data is gleaned from user searches and user content downloads only--Almondnet does not install any software of its own on users' computers. It remains to be seen whether RIAA will encourage its more established members to participate, but Ottolenghi is hopeful that both RIAA and consumers will think that ads are a good exchange for free downloads--especially because so many people continue to download illegally. He reasons that RIAA would rather have music fans see an ad than not pay in any form, and that users would rather agree to view ads than risk prosecution for copyright infringement.

In the last 12 months, the number of households with a member using peer-to-peer to download free music has ranged from 4.7 million to 6.4 million per month, with generally higher levels of activity since March 2004, according to the music industry research firm The NPD Group.

Conversely, the number of consumers paying for downloads reached a peak of 1.3 million in April 2004, and have since fallen. Russ Crupnick, vice president of The NPD Group, said that while the industry had expected steadily increasing demand for paid music services, the number of downloads has now diminished to around one million downloads per month.

"Our research suggests that at this stage of the business, it's not so much about building share as it is about creating demand for paid downloads universally," Crupnick said of the individual paid music service vendors.

RIAA did not respond to requests for comment.