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In one of the most significant digital music announcements of the year, Sony BMG has partnered with British digital music outfit Playlouder MSP to make its music catalog available online. Subscribers will be able to exchange licensed music freely, in any bitrate they want, since a portion of the subscription fee goes to a digital pool which is divided amongst Sony and other artists. Playlouder MSP will supply the broadband connection itself, and attempt to monitor leakages.

In essence, it's a privatized attempt to create a "digital pool" of revenue to compensate artists - a time-tested idea applied to radio, public broadcasting and other technologies. Privately, many rights holders accept the idea as inevitable, although they're loathe to voice support for a mandatory compulsory license in public. Or at least, not until they've demonstrated that technical and legal countermeasures to control music sharing have been tried and failed.

"PLMSP's unique position as the world's only licensed music ISP allows it to control the flow of music files over its network ensuring that all file-sharing traffic stays within its 'walled-garden'," the company said in a statement. "By controlling the network on which the music flows, PLMSP is able to effectively and accurately track and monitor the distribution of digital music through a sophisticated method of audio fingerprinting and return the appropriate share of revenues back to the rights owners."

PLMSP will deploy watermarks and "deep packet searches" software on the network in an attempt to stem leakage. In an FAQ, Playlouder's Paul Sanders says, "We aim to prevent close to 100% of P2P traffic from going outside the MSP 'walled garden'.

The British company says it has more deals with licensees to unveil. Playlouder says launch is scheduled for next month and will go live in the UK only. However similar services are expected to launch soon using similar watermarking and counting technology such as Shawn Fanning's Snocap, and Audible Magic, which PLMSP uses. Snocap opened a digital registry to artists and labels back in June, and participants include the 800lb gorilla Universal, BMG and digital rights middleman IODA.

Had such a flat fee, "digital pool" or "alternative compensation system" (ACS) been implemented in the aftermath of Napster, millions of dollars would have flowed to songwriters and rights holders. Indeed in 2000, Senator Orrin Hatch threatened RIAA members with a compulsory license scheme. However, weighed down by their libertarian baggage, digital rights advocates were slow to warm to the idea: the EFF only accepting the notion in February 2004 - and then only in a voluntary framework.

Freenet's Ian Clarke may have helped focus the record industry on the urgency of the situation. He's promised that next generation P2P, undetectable darknets, will be in active use by the end of the year. As these look to an ISP or snooper just like any other secured SSL tunnel, they'll provide the anonymity that Napster, Grokster and BitTorrent have failed to provide music sharers.

We'll be following up with more analysis and an interview with the key participants. ®

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