Listen's Scour deal still faces scrub test

Meta Group says that recent deals, such as Bertelsmann's investment in Napster and Listen.com's offer to buy Scour's assets, indicate that the music industry and Web distributors are waking up and facing the Internet music. see commentary

The company, which provides simple Web links and editorial recommendationsfor consumers looking for music on the Internet, is viewed as highlyrespectful of intellectual property rights. All Big Five recordlabels--Bertelsmann's BMG Entertainment, Warner Music Group, Seagram'sUniversal Music Group, Sony Music Entertainment and EMI Recorded Music--ownstakes in Listen.com's online music directory service.

But these same companies are largely responsible for dragging Scour into bankruptcythrough a lawsuit this summer.Analysts say they're likely to keep close watch on any new manifestation ofthe file-swapping company's technology.

"I think Listen.com's biggest challenge is going to be reconciling theirrelationship with the labels with the bad (reputation) of the technologythat they are acquiring," Jupiter Media Metrix senior analyst Aram Sinnreich said.

Scour's Exchange software lets people trade videos, images and other files aswell as MP3s for free, much like Napster. The record labels will certainlywatch carefully to make sure that no such unrestricted service arises inits place.

Listen.com chief executive Rob Reid said in an interview that he does notintend to offer the same kind of unregulated file-swapping service boostedby Napster and the original Scour. That could help mollify Listen.com'smajor-label investors.

"That would seem like a dangerous path for us," Reid said.

Still, Sinnreich said that mating the "bad boy" of the industry with the"goody two-shoes" will likely be a difficult task at best. The company willface the same problems that Scour and Napster have in balancing consumers'demands with the interests of investors and the music industry, and itrisks being thrown off course.

"I think it's going to be pretty difficult for Listen.com to integrateScour's technology without upsetting the labels, investors and partners," Sinnreich said. "There's nothing being solved here except highlighting thefundamental tension between pleasing rights holders and pleasing customers."

On the technical and business side, Listen.com must decide exactly what itwants to do with Scour's Web search and peer-to-peer technologies.

The two companies have maintained different technical portfolios, althougheach has ostensibly served as a gateway to music content. Listen.com hasbuilt its business and technology on creating a directory and taxonomyof music and on licensing this to other customers. Scour is built around aWeb search engine and a peer-to-peer software program along the same linesas Napster's service.

All of this is contingent on the sale actually going through. The deal hasyet to be accepted by the bankruptcy court, and Scour creditors and othercompanies could potentially step in with higher bids of their own.

If the offer is approved, analysts suggest that Listen.com could mimic thearrangement being set up between Napster and Bertelsmann, whereby peoplewill pay monthly subscription fees for the rights to tap into and downloadpools of MP3 files.

Reid said he is looking closely at using the peer-to-peer technology tohelp distribute music offered by Listen.com's long list of partners but hasnot made any decisions yet.

"This is a big, big business puzzle, but there is a lot to be gained for allparties," Reid said.