Was Megaupload Shutdown Over Upcoming iTunes-Killer Music Service?

When we brought you the story of potentially shady file sharing community MegaUpload being shutdown by the feds, accusations the site lead to over $500 million in lost revenue from pirated content was enough to land the execs on trial for various piracy related charges, racketeering, and money laundering.

While the company’s plans to launch a new music service known as “MegaBox” in 2012 are more than likely on hold, some are claiming it, and not piracy, lead to the ultimate demise of the site under the watch of Universal Music Group.

The theory posted by a Google+ user (via TechCrunch) seems to be based on a statement given by Megaupload founder Kim Dotcom regrading the new MegaBox service late last year. Kim originally told Torrentfreak the following about the new service’s potential to compete in the digital music industry:

“UMG knows that we are going to compete with them via our own music venture called Megabox.com, a site that will soon allow artists to sell their creations directly to consumers while allowing artists to keep 90 percent of earnings. We have a solution called the Megakey that will allow artists to earn income from users who download music for free. Yes that’s right, we will pay artists even for free downloads. The Megakey business model has been tested with over a million users and it works.”

The theory suggests labels like Universal Music Group and the US government were encouraged to crack down on Megaupload with the copyright infringement and racketeering charges as a preemptive strike to block a potentially competitive and disruptive new music service prior to its launch.

The MegaBox service would essentially be an iTunes competitor, allowing user’s to sell music while completely bypassing labels, the RIAA, and the music industry in general.

It would also offer Megaupload’s 180 million registered users the ability to sell music while only giving up 10% of revenues, that’s in comparison to the industry standard 30% set by Apple for iTunes and most others. A promo site for the service listed Amazon and handful of others as partners.  

Many of the company’s top execs are currently awaiting trial.

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