Artemis Records to License Songs to Altnet

In the music industry’s most significant endorsement to date of online file sharing, independent label Artemis Records has agreed to make its albums available for purchase on Kazaa, Grokster and two other peer-to-peer networks.

New York-based Artemis, home to well-known artists such as Steve Earle, the Pretenders and the late Warren Zevon, is the most notable label to license its songs to Altnet Inc., a Woodland Hills company that uses file sharing to deliver digital goods.

Artemis is run by Danny Goldberg, former head of Mercury Records Group, Atlantic Records and Warner Bros. Records. Formed in 1999, Artemis was named the top-selling independent label in 2000 and 2001 by Billboard magazine.

The five major record companies have declined to strike deals with Altnet, choosing instead to sue Kazaa, Grokster and hundreds of their users for copyright infringement. The labels don’t want to offer authorized versions of their songs through networks like Kazaa that also let users download them illegally for free. But Jordan Flaste, head of new media for Artemis, said illegal file sharing is precisely why he signed up with Altnet.

“You have to go through every means necessary to reeducate the consumer that there are legal alternatives,” Flaste said.

Artemis also is selling its songs through legitimate online services such as Apple Computer Inc.’s iTunes Music Store, RealNetworks Inc.’s Rhapsody and Roxio Inc.’s Napster. But what Altnet can do, Flaste said, is give file sharers an alternative source of legal downloads within the programs they’re already using.

For example, he said, when a Kazaa user does a search on the network for Warren Zevon, the first results displayed will be authorized copies from Altnet. Those will be available for 99 cents per song or $9.99 for the entire album.

“Some users are annoyed because they were expecting it for free. But it retrains so many people to look at it as, you have an opportunity to purchase it, via a system that you’re already very familiar with,” Flaste said.

Artemis’ move came just as the major record companies were ramping up their attack on the company behind Kazaa -- Sharman Networks Ltd.

Last week the major record companies’ Australian subsidiaries started a new lawsuit against Sharman in that country. Representatives of the companies raided not only Sharman’s headquarters in the Sydney suburb of Cremorne, but also the Sydney offices of Altnet parent Brilliant Digital Entertainment Inc. and the homes of top Sharman and Brilliant executives.

Some advocates of file sharing say the big five are attacking the technology because it threatens their domination over the music market. A growing number of independent labels are signing with Altnet, although the vast majority remain on the sidelines, neither suing nor partnering.

The company has signed 30 independent labels since last summer, said Christian von Burkleo, senior vice president of business development. Altnet also distributes video games, software, videos and some X-rated material.

Financial terms of the deal with Artemis were not disclosed.