Sype founders plan to launch Rdio Music utility

They turned the entertainment world upside-down with KaZaA, revolutionized voice communications with Skype and eventually gave up on their web TV ambitions through Joost.

Now serial entrepreneurs and investors Niklas Zennstrom of Sweden and Janus Friis of Denmark are trying again to disrupt the music business. They have funded and are launching a new subscription music service dubbed Rdio, funded by Atomico Ventures.

NYT reveals the “secretive startup”, has offices in LA and San Francisco, “is hoping to introduce a music subscription service by early next year that offers seamless access to music from both PCs and cell phones”. Rdio is seeking label deals and even has a CEO, Drew Larner, who notes the disdain with which the labels regarded the once-renegade P2P app KaZaA in yesteryear: “The ironies are very interesting.”

No word on whether Rdio will re-deploy the same kind of P2P network that has made Zennstrom and Friis famous. The pair first developed the Global Index distribution system for KaZaA, then used a variant to underpin Skype’s communication backbone. Then they thought their could make online video delivery more efficient using Global Index, so started Joost under the codename The Venice Project.

But Global Index is currently the center of an acrimonious and complex legal dispute involving Zennstrom, Friis and Skype, now owned by eBay (NSDQ: EBAY), which licenses the distribution mechanism, which is key to Skype’s functioning, from the pair’s Joltid holding company. They accuse former Joost CEO Mike Volpi of pilfering the system’s intellectual property when he left Joost for Index Ventures, the VC house that is now becoming a part-owner of Skype in eBay’s sell-off.

Even if Rdio relies on Global Index, the legal mess won’t necessarily hold up the startup’s development. In fact, given that 90 percent of digital music consumption is illegal, Rdio may do well to embrace P2P even further, offering the service as paid access to a KaZaA- or Pirate Bay-like distributed file repository, in the same way the company behind the failed Bay buyout attempt had optimistically hoped.

Either way, with momentum amongst music labels clearly swinging behind the monthly subscription model, Rdio will find the space already populated by Pandora (which doesn’t offer on-demand), Napster and, most significantly, Sweden’s well-thought-of Spotify, which was planning a Q3 or Q4 U.S. launch and itself uses a form of P2P distribution.

Gasta News: Google’s Music Search in China Goes Live

Google has launched its free music search engine in China, in a sector which has seen its fair share of controversies. The users can search for songs by singer, song or album title on Google’s search page and then download licensed music files for free…this will only be accessible to users in China. Some details to this effect were leaked earlier in the year. Back then, Universal Music was on board, and EMI and Sony (NYSE: SNE) were in talks..but Google didn’t announce any label partners with today’s launch.

Google is working with Chinese music company called Top100.cn for this service, and will split the ad revenues three ways with music labels and Top100. Watermarking would be used to track downloads and for stats in selling ads. Interestingly, Top100 is backed by Chinese NBA star Yao Ming.

Other search sites like Baidu (NSDQ: BIDU) have been sued successfully by the major music labels, for linking to illegal download sites in their search results. Unlike these sites, Google has tied up with music labels to prevent these issues. Of course Baidu has a 70 percent market share of China, compared to Google’s 20 percent….those illegal music links may explain some part of the disparity…reports says Baidu’s MP3 searches currently generate around 30 percent of its total traffic.

Updated: Google has also invested in Top100, as part of this partnership, reports Sina (NSDQ: SINA), though exact amount is not known. This is the second round for Top100.cn, coming after a rumored first round, speculated to have occurred in 2005, of $3 million from NBA star Yao Ming and others, this story says.

In related Chinese digital music news, Independent Online Distribution Alliance (IODA), the big indie music distributor, has tied up with Chinese digital music distribution firm R2G, and will provide its catalog of over one million recordings to R2G, which will then offer it as paid downloads on its Wawawa music story. LAT has more details on the significance of this deal.

For more on the digital music space, join us for EconMusic in London on Sept. 23.