Napster Founder Forms New Company: AppleSoup

Napster founder and investors, Bill Bales and Adrian Scott, are the spark behind the new San Francisco company that will offer digital downloads of books, films and videos, but with the copyright holders' approval. The 7-month-old, 30-employee company made its public debut Monday and plans to begin beta testing its file-sharing technology within six to eight weeks.

Applesoup will distribute content owner's digital materials by allowing users to access the owner's hard drive in a peer-to-peer network. That approach is aimed at giving content owners control of distribution and will pay them royalties. Applesoup will connect member's hard drives to a virtual content library.

"We are creating a copyright friendly (environment), where we help the content owners deliver it in a safe way," Bales said.

The peer-to-peer network operates somewhat like online music distributor Napster. Although Napster doesn't require approval from content owners before allowing access to copyrighted material, Applesoup, will enable access only to files approved for sharing. A wave of interest in the not-so-new technology has spawned the heavy distribution of MP3 and other multimedia files, but also has brought Napster legal turmoil because of the copyright issue.

AppleSoup's technology will allow content creators to develop the rules of how they are compensated for their files. Those who want access to the content will know in advance the pricing of the material they seek to download, Bales said.

This sets up the question of whether file distribution in the future should be available through an open sharing system, such as Napster's, or obtained with a fee for file system like AppleSoup's technology.

Napster has found extreme popularity with online users who like to download MP3 files through the company's site. The San Diego-based company, however, has won few fans in the music recording industry, with lawsuits alleging copyright infringement filed against Napster. The heavy-metal band Metallica, for instance, has taken on Napster.

One wrinkle in AppleSoup' plans is that it will stay away from the distribution of music clips, Bales said. He said Napster is the dominate player in that market, but the potential exists for the two companies to work together in the future.

"Napster proved that people will share resources over the Internet," Bales said. "This is a surprise to many people. It proved that people want to use their desktop computers for entertainment. We are going to try to go into other verticals."

Bales left Napster in January to help start Applesoup. He said Monday that he had achieved his goals at Napster and wanted to explore new opportunities and vertical markets.

AppleSoup officials have received US$2.5 million in initial funding from the likes of former 3Com Inc. President Bill Krause and his firm LWK Ventures and former Home Box Office (HBO) Frank Biondi's Waterview Advisors, LLC.

Bales said AppleSoup is beginning its series B financing and expects to complete it in the next month.

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