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Rdio snubs 'second rate' Indies

Kazaa founders now in bed with majors

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Exclusive So much for the rebels socking it to The Man. The would-be "Spotify-killer" music service unveiled yesterday by former Kazaa founders Niklas Zennstrom and Janus Friis is happy to be owned by major labels. But Rdio won't extend the same offer to the Indie sector, The Register has learned.

As with Spotify, the majors (Universal, Sony, Warners and EMI) were offered equity in the music startup. But Rdio has refused independent representative Merlin the same courtesy of an equity stake - even though the label negotiates on behalf of a significant share of the market, effectively declaring that it considers indie music 'second rate'.

Individual indie labels can still negotiate licenses with Rdio, but Merlin was created as a "fifth major" to negotiate collectively on their behalf.

Labels take equity in music startups when they're leery about their ability to make money. Which is most of the time. The tech company typically gets preferential royalties from the deal. But it's a mixed blessing for the startup, and some have overpaid and seen most of their equity swallowed up by fees to majors. And managers and individual artists aren't happy about the transparency - since there isn't really any.

But by excluding independents from such deals, the four majors risk accusations that they're acting as a cartel, and closer regulatory scrutiny. The Big Four snubbed eMusic for years because the service insisted upon selling DRM-free downloads. Three of the four still do.

Zennstrom and Friis aren't short of a bob or two. They personally pocketed $510m after selling Skype to eBay, but were then able to buy back a stake in the company last year, after eBay finally decided to get shot.

Merlin hadn't responded to our request for comment in time for publication; if they do we'll let you know. ®

Bootnote

Yesterday we described Kazaa as a poor clone of the Gnutella code released in 2000 by Justin Frankel of Winamp fame. There was one good thing to come out of Kazaa, though. Anthony Rose joined Project Cartel as CTO earlier this year.

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