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P2P webcasting company Mercora has won a vote of confidence from investors, snagging $5m from VC company Norwest Venture Partners. Mercora was formally launched in May 2003 and began to gather a following last summer.

The 'IM Radio' service allows you to crossplay your music collection to anyone else on the network, legally. Mercora pays all rights holders, including the RIAA's digital collection arm, SoundExchange, and also reduces the massive amount of paperwork required to run a legitimate webcast. There are some caveats: users must not tell people what they're going to play in advance, play the same three songs in a three-hour period, or four from the same album in the same period. Apart from that, it's a free for all.

Srivats Sampath, CEO and co-founder, describes Mercora as "Radio managed by 300,000 people. It's a 100 per cent end-user contributed network, just like Google or eBay."

Some 300,000 listeners contribute around 15 million songs, although not everyone is online at once. Built around the simple crossplay is chat and other community features such as collaborative filtering.

Back-end systems at Mercora use the files' MP3 tags to keep track of who's playing what. Near misses and partial entries are matched up to a database of albums information.

Sampath admits that there's little to stop people announcing their shows in advance, via some other means, but says that this is tolerated as long as it's not explicit. The recording industry at the end of the day is simply glad to collect some money.

"SoundExchange have been good to us because we've been writing them checks from the day we launched the beta, and they worked with us," Sampath told us. "We've also written cheques to all the other rights' agencies, such as ASCAP and BMI."

The business challenge now, with so many users, is monetizing the network without pricing away users. Sampath says Mercora hasn't decided on what the premium fee will be, but he wants "to keep it nominal" and deliver real features for the privilege, such as "lean forward", or look-ahead searches.

"The onus is on us to give something so people want to pay. But there will always be a free component to it," he said.

As for the future, Sampath wants the industry to head in the direction of flat fees, or compulsory licenses, but said rights holders would resist having just one price predetermined for the music. Closer to the present, he believes the 99 cents per song model isn't sustainable and that the market will settle down at $4 or $5 for "renting" or $10 to $15 for all you can eat.

As Cherry Lane's Jim Griffin points out, US consumers have only at most spent $5 per month for music. At $10 that gives everyone a chance to prosper. ®

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