AppleSoup: Revolutionizing the Napster Revolution?

Napster co-founder Bill Bales and early Napster investor Adrian Scott want to usher in a new paradigm for digital media based on the peer-to-peer network model originated by Napster. And their new company, AppleSoup, uses a buzzword that has the Internet money men salivating: Content-owner-friendly.

That not only means protecting copyrights; it means putting cold, hard cash in the hands of the people that own them.

“We’re working with a set of technologies that let content-owners control their assets,” said Scott, AppleSoup chairman and vice president of engineering.

Bales, AppleSoup president and chief executive officer, added, “It’s all about protecting copyrights and partnering with content-owners and content-creators.”

Bales and Scott between them certainly have impressive credentials. Before AppleSoup, Bales co-founded, which was later sold to Lycos. He went on to found ON24, the streaming news site for online investors. And of course, he incubated and invested in Napster, serving as vice president of Business Development until his departure in December. Meanwhile, Scott earned his Ph.D. at Rensselaer Polytechnic Institute by the age of 20. He went on to consult for Charles Schwab, Hewlett-Parckard and Bank of America before becoming an angel investor and advisor to start-ups.

The advantage they see in peer-to-peer networks is that their “viral nature” make content distribution more efficient and cost effective. AppleSoup will give consumers broad access to material not currently available on the Internet by technically assigning rights management rules and procedures to copyrighted content. AppleSoup said these technical advances will allow content-owners to control, distribute and even sell their content via its scalable peer-to-peer network.

“In the old days you had to set up this whole centralized infrastructure and pay a lot of money for it,” Scott said. “In this new environment it doesn’t really matter which computer the file is on.

He explained that with AppleSoup’s technology a file can exist on a user’s hard drive but the content-owner will still have control over how, or even if, the file is distributed.

“It really affects the whole way we think of ownership,” Scott said. “It’s like inverting physical reality. It’s really mind blowing.”

Details on how AppleSoup’s techology will work are scarce. Scott said the company will probably announce its product in six to eight weeks. But one thing is for certain: Although AppleSoup said its technology will allow content-owners to distribute “anything digital” online, it will not be touching music.

“There are a lot of other things that can be done besides music,” Scott said. “Things like books, video and whatnot. There are all sorts of media that can be digitized and put online.”

“Napster has 20 million users,” Bales added, noting that Napster lawsuits are piling up. “I think moving into other items digital gives us a chance to work from a fresh start.”

But while Napster’s troubles continue to mount, the success of the peer-to-peer model it created has investors seeing green.

“I’ve been following the peer-to-peer story since its infancy,” said Joon Yun of Palo Alto Investors, the institutional money management firm founded by Will Edwards. Palo Alto was one of the participants in AppleSoup’s $2.5 million seed round.

“I’ve been very interested in this space. I see Napster as a great behavioral laboratory for what the peer-to-peer business base is. When Bill left to found AppleSoup, I was immediately interested. I want to see them balance the incentives between the content-owners and the users; reward both users and content-owners. That to me is a much more viable business model.”

Some of Silicon Valley’s and Hollywood’s elit

e agree with Yun. Among the other participants in AppleSoup’s seed round are:

  • Bill Krause, president of LWK Ventures. Krause, a member of AppleSoup’s board of directors, was a founder and former president and CEO of 3Com Corp.;
  • Fred Gibbons, partner, Venture-Concept. Gibbons, also on the board, was the founder and CEO of Software Publishing Corp., and an early investor in Yahoo!, Junglee, Vicinity, MIPS, Trading Dynamics, and Fogdog;
  • Frank Biondi’s Waterview Advisors LLC. Biondi is former chairman and CEO of HBO, president and CEO of Coca-Cola Television, president and CEO of Viacom Inc. and chairman of Universal Studios Inc.;
  • John Valenti, co-founder of Creative Planet, a business-to-business Internet service resource for the entertainment industry. Valenti’s father, Jack, runs the Motion Picture Association of America;
  • Allen DeBevoise, chairman and CEO of Creative Planet;
  • Brian Pinkerton, chief science officer at [email protected] and inventor of WebCrawler, the Internet’s first search engine;
  • Yosi Amram, CEO of Valicert, chairman of ON24 and former founder and CEO of Individual Inc; and,
  • Kim Polese, CEO of Marimba.

Scott thinks AppleSoup, with its 30 employees, will be only the first in a long line of companies that will leverage peer-to-peer networks and change the way the Web is used.

“I think we’re going to see a whole category of new gorillas leveraging this technology,” he said. “We’re going to see a lot of different approaches. This is a really revolutionary way of doing things and its going to affect all the industries that are on the Web.”

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