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Last week saw the closure of hugely popular site Megaupload.com that functioned as a file-sharing site for individuals. That was the intention, but many used it to share illegal files as well. It has been publicly stated, that due to the fact that the service held so much pirated material – the FBI and New Zealand police arrested Kim Dotcom (previously Kim Schmitz). Kim Schmitz is actually half German, half Finn which qualifies him for coverage on ArcticStartup.

The news has already attracted a lot of attention, due to the fact that Kim Dotcom locked himself up in his $30 million rented mansion in New Zealand as agents tried to enter his house. Once under arrest, the officers found 18 cars on the property (worth more than $6 million), as well as $175 million in cash in addition to other luxury items.

It has been thought that Kim Dotcom and his partners made some $175 million from Megaupload.com in the past few years. Needless to say, copyright owners are furious.

However, record labels could also be furious due to the fact that Kim Dotcom was allegedly working on a new service called Megabox.com, which could have endangered their positions in the market even more than piracy. This new service would allow people to legally download music tracks and it would pay music creators 90% royalties.

Digital Music News covered the new service in December last year. The service had already partnered with 7digital, Gracenote, Rovi, and Amazon MP3.

“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,” MegaUpload founder Kim ‘Dotcom’ Schmitz told Torrentfreak

This may sound far fetched and most likely Megabox was not the reason FBI and the New Zealand police went after Kim Dotcom, but it certainly could have speeded up the time of the arrest.

Go and figure. The turn of events are beginning to look like a good script for a movie.

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