SNOCAP's Indie Spirit

SNOCAP's still at it, at least in terms of symbolizing the disruptive influences rippling through the music industry. This time, it hit headlines with a deal with an entity called Merlin -- and the idea of magic for indie labels.

According to a press release from Merlin, a licensing agency for independent labels, its agreement with SNOCAP will allow musical content from "potentially thousands" of independent labels worldwide to be distributed through MySpace, as well as other sites that allow html to be edited. Merlin claims such independents represent 30% of overall music market share and 80% of new releases. (And of course, while Merlin says that it wants to function as "the fifth major" in the industry, according to a Reuters article, one might wonder at what point -- and to what degree -- bands will start going on their own.)

In November 2005, I identified SNOCAP as an interesting private entity to keep an eye on, not least because it was headed up by Napster (Nasdaq: NAPS  ) creator Shawn Fanning. SNOCAP's technology allows sites to sell music directly to fans. Although it took a while, last September it announced that it was going to be a part of MySpace's bid to become a music retailer, which was significant, since MySpace has been a big success with young people and music was arguably one of the drivers of its popularity.

SNOCAP provides digital licensing and copyright management tools. MySpace's SNOCAP MyStore is live, and sells unprotected MP3 files which, importantly, are compatible with Apple's (Nasdaq: AAPL  ) iPod music players.

Merlin says it represents and seeks to license Web 2.0 new media. According to Reuters, it secures licensing deals with emerging media such as that found on MySpace and Google's (Nasdaq: GOOG  ) YouTube.

Giving indie labels a better form of distribution is as significant as allowing artists to sell directly to fans, another possible effect if MySpace's music commerce initiative really takes off. It's interesting in the sense that it could take some of the shine out of Apple's iTunes, which has been the pioneer in paid digital music downloads. But it also poses an interesting question for the major record labels, Sony's (NYSE: SNE  ) Sony BMG, Vivendi's (NYSE: V  ) Universal Music, Warner Music Group (NYSE: WMG  ) , and EMI.

I've long wondered whether the days where major music labels and other old-school media concerns function as middlemen and tastemakers are drawing to a close; at the very least, it seems they face serious challenges. After all, the Internet eases distribution, and consumers today can easily find entertainment without relying on the majors -- word of mouth, recommendations engines, and similar community-driven Net innovations are just a few ways, with many of these falling into the Web 2.0 arena.

It remains to be seen how well MySpace's music store will resonate with users, but it doesn't seem difficult to imagine that it will be a success, given the site's popularity and history of musical overtones. Overall, music seems to be taking an interesting turn these days, making this Fool wonder whether labels will eventually become an anachronism if artists can just as easily communicate directly with -- and sell to -- their fans.

For related Foolishness, see the following articles:

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Alyce Lomax does not own shares of any of the companies mentioned.


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