New service brings digital music to eBay

A 60-person startup company called PassAlong Networks, believes it discovered a way to encourage fans to legally share digital music: Cut them in for a piece of the action. The company is set to launch a music download service and "sharing network" that will let customers earn free music by referring songs to friends.

Also, online marketplace eBay is set to begin offering PassAlong's collection of 200,000 songs taken from the digital catalogs of a number of major recording industry labels. This will mark the first time that digital titles from the major label titles will be sold via eBay, according to PassAlong.

PassAlong will be participating in a six-month eBay digital music pilot program that was launched in July, eBay said.

Songs will typically be sold at a fixed price of US$0.99 per track rather than auctioned, but customers will be able to bid on certain promotional items, said Dave Jaworski, chief executive officer of PassAlong, based in Franklin, Tennessee. For example, on Thursday, eBay is set to auction two 15-minute calls with singer Avril Lavigne with bids starting at US$1, he said.

Music downloads from independent artists can already be purchased on eBay, thanks to arrangements with companies with iHoopla Inc., based in Morgan Hill, California. And while Warner Music Group currently sells mobile phone ring tones on eBay, with PassAlong, the online marketplace will be now begin offering complete songs from major labels such as Warner, Sony BMG Music Entertainment and Universal Music Group, Jaworski said.

"This is a pilot program to determine whether the eBay community wants to use eBay to buy and sell digital music to each other," said Hani Durzy spokesman for eBay. Though eBay does not typically restrict the sellers who can sell products through its marketplace, it has done so with the digital music pilot program, he said.

The songs will be available in the WMA (Windows Media Audio) format, Jaworski said.

Though PassAlong, whose founders include a mix of technology and recording industry executives, expects to be selling a catalog of over 700,000 titles by October, the company does not see itself strictly as an online music provider akin to Apple Computer's iTunes or Sony's Connect.

PassAlong hopes to license its order processing and customer referral technology to companies like Apple and Sony, Jaworski said. "There will be a Passalong.com site and in that way it would be competitive, but our real focus is on driving people to our partners," he said.

With PassAlong's Internet-based referral system, users will be able to set up playlists and "pass along" 30-second clips of songs to friends using e-mail or instant message services. If their friend then buys a referred track, the user gets PassAlong Points, which can be used to purchase music from PassAlong's catalog.

"To me, what's fascinating is how they're going to be leveraging the instant message channels," said Mike McGuire, research director with Gartner G2, a division of Gartner, in San Jose, California. "That is going to tap into what is going to be an increasingly popular communication channel," he said.

PassAlong will work with instant messenger services from America Online, Microsoft and Yahoo Jaworski said.

In October PassAlong plans to launch a service called Discover My Music, which will allow users to publish lists of the digital music they own, along with commentary. "The opportunity is for you to get involved as a tastemaker ," Jaworski said "If people come and buy from your list, then you'll get (points worth) 10 percent on any purchases made that way."

Though the service could potentially earn PassAlong points for users with illegal copies of digital music on their PCs, it will ensure that when music is shared, it is shared legally, Jaworski said. "We can't assess where you got (your files) from," he said. "What we do is we say from this point forward, when you promote that song, you're going to get a legitimate link... as opposed to getting an illegal file."

"You have no incentive to be a promotion station in the illegal world," Jaworski said. "Here's an opportunity for you to switch to a side where you're now going to benefit other people."

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