The Hot Seat: Kevin Bermeister

Published in The Music Network


Kazaa is mounting a serious comeback, only this time it is playing by the rules. Once the scourge of the recorded music industry, Kazaa has gone legit. Kevin Bermeister, chief executive of its Australian-based parent company Altnet, is banking on an innovative billing system to turn free-loaders into legitimate downloaders.

In the United States, the company has launched a U.S.$20-per-month subscription service that gives users the option to roll their monthly payments into their mobile phone bill. The four majors are on board as content partners, and an Australian service is in the works. Should the new version of Kazaa find its place in the nascent digital music space, it will have achieved an extraordinary comeback for a one-time rogue P2P application brought to task by the people it now calls friends.

The service has done its time offline and paid for its crime – Altnet and its subsidiary Sharman Networks in 2006 agreed to pay upwards of $100 million in damages to labels. The rebirth will be complete when Bermeister addresses the record industry with a keynote speech at the August 20-22 AustralAsian Music Business Conference in Sydney.


You’re coming back to the music business as one of the good guys. How does that feel?

It feels like part of the journey, because we were caught up in an important litigation for the music industry. We always intended to monetize copyright in peer-to-peer networks. And that’s what we’re still doing.

So where is Kazaa heading?

Since we settled with the industry, we’ve been in a planning process designed to launch this. It’s a fairly daunting task for anyone to launch a new music service in this marketplace. We really ended up spending a lot of time in the early days looking at alternative billing platforms, like mobile-carrier billing or local exchange carrier billing. Getting out a credit card and dealing with the hassle of payments is just not something that has been inducing for users to move across to a paid model. Not everybody has a credit card, not everybody has credit. We felt that we could really target 90% of customers who to this day aren’t paying for music. And that’s really where we are going. We’re really working hard to convert that unpaid customer.

How do you plan to lure these kids away from free?

After 2006, we took the best part of a year to decide what our business model might be. In that timeframe we negotiated licenses with labels. We took another year to begin building the platform and testing consumers. For nine months, now we’ve been running under the radar with more than 10,000 paying customers. They’ve proven our position correct in that we were able to convert them to a paid model, because we’re making billing platforms easy.  What we’ll be focusing on in the future is ISP billing where we can engage with ISPs to enable the billing of music. There are various complexities to that model, it’s not a walk in the park. It needs the cooperation of the ISPs and the copyright owners. But we think we can achieve the result. We’re working with labels right now in Australia and hope to launch it here in the next six months. We’re talking with the independents, we’ve got about 1 million tracks right now.

Gaze into your crystal ball for a moment, and tell me how you see the digital business unfolding in the near future.

In the next three years we’ll see a significant improvement and shift in consumer attitudes. Customers will progressively buy into the digital economy. The Internet is an enormously efficient beast, and trends move towards efficiency. Although we may be in various states of change at any given point in time, it’s always moving towards the more efficient place. Copyright owners will see ISPs as a partner in business who enable the market of users to pay for copyright.