WeedShare Music Model

Good Morning Silicon Valley posted a terrific response to the Great Recording Industry Business Model Contest from Weedshare:

“Our new music sharing service, which went “live” less than 3 weeks ago, doesn’t sue people who share files. It pays them. Rather than try to punish people who don’t respect copyrights, we reward people who do.

We have developed a proprietary variation on the Windows Media file format which allows us to track the distribution and redistribution of files. We call our format “Weed” (as in “spreads like a…”).

We encode files for content owners and send them back to the owner. The owner may then distribute these Weed files in any way they see fit: download site, peer-to-peer network, email, CD, we don’t care.

Anybody who receives a Weed file from anywhere can listen to it 3 times for free (using Windows Media Player). After that, a message pops up encouraging them to buy it, which they do by clicking the “Buy” button. The song’s price, which is set by the owner, is deducted from the listener’s Weed account. Once you buy the song, you can play it on up to 3 computers, burn it to CD, and download it to a portable player.

Here’s the twist: once you’ve bought the song, you’re encouraged to share it. Say you send it to your friend Al. If Al buys it, you get 20% of the sale (and the content owner, as always, gets 50%). If Al sends it to Becky and she buys it, you get 10% and Al gets 20%. If Becky sends it to Chuck and he buys it, you get 5%, Al gets 10%, and Becky gets 20%. After that, you’re out of the loop, but the content owner is happy because their material has been exposed to a lot of people, and they get 50% of every sale. The money they would have spent on promoters and payola goes instead to the fans, who provide the best kind of promotion there is: word of mouth.

If you do the math, you’ll see that if every recipient finds 2 more buyers, he or she winds up earning 120% of whatever the file cost. With 3 new buyers at each level, sharers earn almost 3 times the file’s cost.

Casual users can reduce or eliminate their cost of purchasing music. More active users can develop a hobby business that’s fun and modestly profitable (typically by creating a personal web page offering downloads of their favorite music to friends, classmates, etc.). Record labels can realize significant revenue from their catalogs, and the sharing incentives provide a fantastic way to spread the word about new artists, new CD releases, etc.

Our service is especially attractive to unsigned artists who have no practical way to distribute their material and get paid. We offer them do-it-yourself, pay-as-you-go distribution and promotion, with zero up-front cost.

That’s a really creative and interesting idea — wrapping a multi-level marketing model around a DRM issue. I like it — but have a few very minor quibbles:

1) Windows Media Player? It sucks. I’d rather see a cross platform, open architecture. But hey, that’s DRM for ya. (They say they’ll have other platform versions soon).

2) Hack-arounds. Can the Weed/WMP DRM system be broken? If so, than it kinda defeats the purpose. (although those looking to download for free will download MP3s, not Weeds)

3) RIAA: Will the goons be able to distinguish between the sharers of these products? Will I be inviting a lawsuit from the Music Police if I share weed products?

All told, its a way cool idea that has some promise . . .