IQ News: Analysis

The Song Remains the Same The record industry battles online music piracy. When the Recording Industry Association of America, the music biz watchdog group, announced last December the Secure Distribution of Music Initiative (an attempt to stem the growing tide of online music piracy and copyright infringement), the effort seemed to some critics like a classic case of too little too late. After all, the rapid proliferation of Web sites offering free, unauthorized downloads of music files in a format called MP3--a near CD-quality audio format that's both super-compressed and easily transmittable--had practically turned an entire generation of do-it-yourself Web publishers--especially tech-savvy college students--into online music pirates, virtually overnight. Skeptics likened RIAA's SDMI proposal to asking music labels to stick their proverbial fingers into the proverbial crack in the dike. The only problem was, the dam had long since burst open and the deluge was already in progress. No amount of standardization, critics scoffed, could mop up the tidal wave of illegally distributed MP3 files, both from a technical and regulatory perspective, as SDMI aims to do. So why did MP3 suddenly seem to burst on the scene? "MP3 wasn't originally designed for transmitting music over the Internet," explains Arnold Brown, president and CEO of San Francisco's Audio Explosion, which this week will launch MJuice, the first encrypted security system for delivering MP3 files over the Web. "But it's amazing what consumers will do to get what they want." But the RIAA is trying to pick up its pace to catch up with the MP3 juggernaut. On February 26, two months after the announcement of the SDMI, the RIAA convened a meeting in Los Angeles to create the committee that would spearhead the SDMI and outline its goals for the coming year. The roll call for the closed-door, seven-hour session included 200 top suits from the worlds of music and high tech. By the time it was over, Italian media guru Dr. Leonardo Chiariglione--ironically, one of the fathers of the MPEG video and audio compression format, of which MP3 is the most infamous offspring--was named executive director of the committee. Not only did Chiariglione found the committee that once upon a time set the standards for MPEG-1 and MP3, it is also doing so for the latest MPEG-7 format, which will feature some form of digital encryption. "I think Chiariglione's appointment was a clear signal that [the RIAA] wanted to get this thing done," says Brown. "If he's in charge of determining the standard, it's a pretty good bet that it's going to happen." As if to prove the point, Chiariglione surprised many in attendance by setting an aggressive and ambitious time table for the standardization and implementation of secure online music delivery, with a June deadline for the initial draft of standards. Certainly, to some, Chiarig-lione's enlistment by the RIAA was comparable to hiring Dr. Frankenstein to reign in the monster that he created. And like Dr. Frankenstein's monster, MP3 had been demonized and vilified by the press, by music labels and, to some extent, by the RIAA. Was the whole thing blown out of proportion? "Hysteria is one way to characterize it," says Larry Miller, CEO of encrypted music solution company a2b music, New York, a unit of AT&T that is supporting the SDMI initiative. "Breathless is another." Brown attributes the breathlessness to the fact that, "There's a public face to what's going on and there's a private face. I think the public face is expressing a lot of alarm and the private face is trying to figure out how to take advantage of it." As the record labels see it, there is much for potential online music pirates to take advantage of, if the record industry doesn't figure out a way to take some of what is rightfully theirs for themselves. According to the RIAA, the global music business generates nearly $40 billion annually, with the Internet-penetrated U.S. representing a third of the market. Little wonder that music labels and tech companies are scrambling to find solutions for the MP3 problem, hopefully before the pirates take too big a chunk out of the pie. The specter of broadband also increases the urgency because of its implications for even faster delivery of files and its impact on e-commerce. Imagine if record labels, online music retailers or pirates could deliver full CDs to consumers effortlessly in a matter of seconds. So, working alongside the SDMI are a number of players, a2b music among them, who are trying to find ways to send music securely over the Internet. "Everything that we have done, by and large, since we launched a2b music, has included a retail effort typically integrating online and offline retail," says Miller. "We're not here to disintermediate the people that occupy today's music business. In fact, I would say the opposite. We're here to help." Seattle-based Liquid Audio is another leading developer in the music encryption industry. While both companies' preferred file format is MPEG-AAC, a higher fidelity cousin of MP3, their market strategies differ. While a2b music's technology controls and limits copy and playback of downloaded files, Liquid Audio's encryption code binds specific files to specific users. Both systems utilize a proprietary player that functions as a key to decode the files. But even their creators admit that no one solution is hack proof, which is why the SDMI comes at such a critical time. "I don't know about other companies, but we're not going to sit here and tell you that anything is going to stamp out piracy," says Bill Wood, vice president of marketing at Liquid Audio. "But we've tried to build a system that thwarts piracy." Audio Explosion, a2b music and Liquid Audio are all participating in the SDMI and predict a favorable outcome for themselves, music labels and consumers. Says Brown, "I would expect technologies from many of the companies in the space will be included in the overall standard." Miller adds that music labels may be unduly distracted by technology hype. "Record labels and music publishers were not put on earth to make little technology companies successful," he says. "Their job is to sell shiny little things that spin. Music [companies] are not networking and technology companies. But we know a lot about that." Meanwhile, as companies scramble to standardize online delivery of music, for music fans, it comes down to whether or not they can find the music they want. "At the end of the day, the only thing music lovers care about is the music," says Miller. "They don't care about technology."

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