April 24, 1999
Pirate-Proof Music on Web? So Far, That Does Not Compute
By NEIL STRAUSS
OS ANGELES -- The recording industry and electronics
manufacturers are trying to hammer out a universal, pirate-proof
technology for distributing commercial music to a new generation of
portable digital music players. But the two sides are at such
loggerheads that it may not be possible for manufacturers to meet
the record industry's goal of getting authorized players onto store
shelves for the Christmas season.
That could be a losing proposition for the recording industry.
Several electronics manufacturers said they would ship players
anyway, without safeguards against illegal copying. And analysts
predict that with or without a secure standard, American consumers
will buy about 1 million of the devices, which enable users to
record music off their computers, largely from the Internet.
As powerful computers and high-speed Internet connections become
common among consumers, the recording industry has seen direct
electronic distribution as a potent new market. But as with the
emergence of earlier products -- the video cassette recorder, audio
cassette decks and digital audiotape -- the entertainment industry
is concerned about losing sales because of unauthorized copying.
Its fears have been realized with the emergence of a technology
called MP3, which packs a great deal of music into a relatively
small computer file but offers no protection against unauthorized
copying. Quickly spreading from college campuses to a broad base of
Internet users, MP3 has become something of a de facto standard for
distributing music, legally or otherwise, on the Internet. That
makes it the bane of the recording industry, which fears that
increasing numbers of computer users will copy their favorite CDs
to MP3 files and pass them out free online or transfer them to MP3
players that are already on the market.
It was that fear that prompted the Recording Industry
Association of America, which represents the major music labels, to
launch a counteroffensive. Its Secure Digital Music Initiative is a
consortium of computer companies, electronics manufacturers and
major record labels formed to create a secure way to deliver music
over the Internet.
That is turning out to be a tricky quest. At a meeting last week
in Los Angeles, several participants said, it became clear that
consumer electronics companies were bent on developing a class of
portable music devices that would be free of restrictions and easy
to use, while the recording industry wanted a player that one
participant from the online industry described as a digital Fort
Knox.
The goal of the music consortium is to have these secure,
approved portable players in stores by Christmas, which means
giving electronics manufacturers specifications by June 30. Last
week, after their third meeting with record company
representatives, some manufacturers were already expressing
frustration.
A number of issues divide the two industries, participants said.
Among the most contentious was whether the new devices should be
able to play not just music recorded with a new secure standard but
also recordings made with the MP3 format.
While participants from both sides were interviewed for this
article, most refused to allow their names to be used, saying the
industry association has pressured them to keep details of the
negotiations from leaking.
One consumer electronics industry executive involved in the
negotiations, alluding to the fee participants must pay the
industry association to be a part of the consortium, said: "They
said, 'Pay us $50,000 and present your proposal, and we'll get back
to you with something.' This isn't a democratic standards
organization. This is the music industry acting out of fear."
The major labels deny that they are running scared and insist
that negotiations are running smoothly. Still, they find themselves
in uncharted territory as they struggle to restrict or supplant
MP3, which is already available to a mass market.
The music industry has substantial leverage in the form of what
both sides refer to as "content" -- vast archives of music by most
of the century's best-known artists.
Electronics manufacturers say they assume that once the major
record labels agree to release their music on the Internet, the
nascent market for digitally distributed music will increase
exponentially. By joining the consortium, they are hoping to temper
the music business' more restrictive proposals and come up with a
compromise that will be easy to sell to consumers. But at the same
time, they are impatient with what they see as an overly cautious
recording industry terrified of losing its lock on distribution.
For example, Creative Labs, whose SoundBlaster card became a de
facto standard for computer audio in the early 1990s, is a
consortium member, but it is not sitting around waiting for a green
light from the recording industry. The company is well into
development of its own portable MP3 player, the Nomad, which it
plans to begin selling this summer. As for releasing a player by
Christmas that is compliant with the digital music initiative, the
company now says it is undecided.
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The recording industry fears that retail record and CD sales will suffer. | |
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"We're definitely interested," said Hock Leow, vice president
of Creative Labs' multimedia division. "But it depends on how
difficult it is to implement their specification. If it's very hard
for consumers to use, or cost prohibitive, I don't think we'll
manufacture it."
There are areas where both sides feel compromise may be
possible. For example, on the MP3 front, one proposal is a sunset
model, which would result in players that would initially play
unprotected MP3 files but would stop playing them after some
agreed-upon time, perhaps 18 months. This plan assumes that future
formats -- with the wrapper of the new security standard around them
-- will supplant MP3.
Another contentious issue is that the recording industry wants a
prohibition on microphone inputs. By connecting the audio output of
one digital device to the microphone input of another, commercial
recordings could be copied just as they are copied to cassette
tapes now, except that the digital copies would be closer in
quality to the originals.
Another issue in the negotiations is whether there should be
restrictions on computer users' access to the software that will
enable them to digitally encode, or record, music using the new
standard. Such software for the MP3 standard is freely available
and widely used.
And in the end, many members in both industries wonder aloud
whether anyone will comply with a secure standard if the rules for
using it are too restrictive.
After all, the digital music consortium, as an initiative of the
Recording Industry Association of America, is supported by the
major labels, but it does not control them. If a standard is
released, it does not necessarily follow that every major label
will comply. Those attending the meetings said that the most active
voice in the negotiations was Universal Seagram. The company is
expected to announce, in partnership with the BMG label and the
rights management company Intertrust, its own secure digital
distribution system, which could become an essential component of
the new standard. BMG is a unit of Bertelsmann.
In contrast, Sony has maintained a greater distance from the
talks, working with IBM on a separate digital music distribution
model. But unlike the owners of other major labels, Sony is also
one of the world's largest consumer electronics manufacturers and
holds lucrative patents on CD technology. The two other major
labels -- Time Warner and, particularly, EMI -- have been involved
more as onlookers.
None of the labels would agree to provide a spokesman for this
article. For music consumers already familiar with the free MP3
format and the portable MP3 players already in stores, buying a
restricted player -- which could be more expensive than MP3 players
because of the additional security technology required -- might not
be a popular holiday choice.
"Is the recording industry comfortable having a portable player
that's SDMI compliant yet can play an MP3 file that is not
secured?" asked David Watkins, a consortium member and the Diamond
Multimedia executive who oversaw development of the Rio, the first
portable MP3 player. "In an ideal world, no. Our belief is that
we'll come up with something that gives content owners a sense that
their rights are being protected, and labels will get their
compensation, yet consumers will be able to operate it without
requiring a Ph.D. But there's a long way to go before substantial
consensus is reached."
Though Diamond Multimedia is a friendly member of the music
initiative process, it has been enmeshed in a lawsuit filed by the
Recording Industry Association of America claiming that Diamond's
Rio is illegal because it violates copyright laws and encourages
music piracy. Last Thursday, a California appeals court heard the
industry association's appeal of a judge's refusal to issue a
preliminary injunction banning the Rio.
In the meantime, members of the consumer electronics industry
say that the industry association's legal argument undermines the
digital music initiative process by asserting that all portable
players that extract music from computers are in violation of the
Audio Home Recording Act, a 1992 federal law enacted as digital
audiotape, or DAT recorders, were introduced to consumers.
In the past, when the cassette and DAT were introduced, the
industry embarked on similar antipiracy campaigns and initiatives.
The difference this time is that piracy is not the issue so much as
losing control over the distribution of music.
"Everybody in the SDMI arena says you should be able to take a
CD, put it in your computer in an SDMI-protected file format and
transfer it into a portable player," said Ron Moore, a lawyer for
Diamond Multimedia, referring to the digital music initiative. But
in the recording industry association's lawsuit, "they say that
making a copy to your hard drive and then putting it into your
portable player is prohibited."
A spokeswoman for the industry association responded, "It's not
about selective enforcement of the law, it's about trying to move
forward together on voluntary standards that are consistent with
copyright protection principles but also fair to the technology
industry."
