__ Memo to the music industry: penalizing the consumer is the wrong answer. It's time to listen to the sound of the future. __
MP3 lets you snag music off the Web in the time it takes to clink a martini glass. But it's doing more than that: MP3 is colliding head-on with antiquated copyright laws - laws that the record execs are clinging to in an attempt to control a future market where music will exist only in bytes.
The loudest voice in Big Music, the Recording Industry Association of America, has spent the last few years ignoring the fact that old laws and outmoded business models will never stop technology, when the industry should have been fast-tracking online delivery formats that cater to the consumer while offering artists a reasonable guarantee that their work won't get ripped off.
The purpose of copyright law is to protect the physical expression of ideas - music, poetry, films, novels, software, screenplays, video, et cetera. Copyright provides a temporary monopoly during which the holder can restrict the right of others to copy his expression (literally the "copy" right) without permission, which typically means without paying for it. But when piracy is as easy as a mouseclick, the 18th-century edifice upon which the legal protection of intellectual property rests threatens to collapse.
Like a billion Xerox machines on steroids, the Net's copy and distribution engines have knocked copyright law on its ear. About 846 million new CDs were sold last year. But at least 17 million MP3 files are downloaded from the Net each day. That adds up to almost 3 billion in the first six months of 1999. And with the introduction of several MP3-compatible desktop players, like RealNetworks' RealJukebox, and myriad new portable devices hitting the market, that figure will soar. The protection of copyrights is still there, but one question nags: Is it worth anything? The answer - which turns recording execs pale - is: Probably not.
The World Intellectual Property Organization, established in 1970 and now representing 171 member states, is charged with protecting the international rights of creators and owners of intellectual property. But with the exponential growth of the online music revolution, WIPO is still playing catch-up.
The Clinton administration tried to help shore up the crumbling battlements of copyright law through the enactment in October 1998 of the Digital Millennium Copyright Act. The act amends the ancien-régime copyright code and sets out legal and criminal penalties for anyone hacking copyright encryption schemes or manufacturing devices designed to do so.
Also in October 1998, the RIAA sought an immediate injunction to stop further production of Diamond Multimedia's newly introduced Rio, a portable solid-state device that could store 60 minutes of MP3 music. Industry advocates alleged that Diamond violated the 1992 Audio Home Recording Act. The RIAA claimed that Diamond ignored a host of provisions by failing to pay royalties on the devices and by not incorporating a mechanism that would prevent serial copying of the Rio's content. The panic (and reality) was that every college kid with a computer would upload tracks of copyrighted music which could be downloaded to Rios throughout their dorm.
In court, Diamond argued that the Audio Home Recording Act deals with recording devices, and thus doesn't apply to the Rio, which can output only to its headphones. Squeezing through the loophole, Diamond claimed the Rio was a storage device, not a recorder. The court refused to grant an injunction, though litigation continues.
The Audio Home Recording Act goes back, in turn, to the introduction of the digital audiotape recorder. In 1990, shortly after DAT recorders hit the market in the US, the RIAA and the National Music Publishers Association moved to block the sale of the device. DAT recorders made near CD-quality copies of music - and that, said the RIAA, would damage the ability of artists, songwriters, and other industry players to profit from pre-recorded CD, cassette-tape, and vinyl sales.
With the passage of the act, the RIAA won copyright protection by requiring that every DAT deck sold in the US be equipped with technology that recognizes the source material, allowing original files to be copied multiple times but not permitting those second-generation files to be duplicated. The act also imposes a 2 percent royalty on the wholesale price of DAT and MiniDisc recorders and a 3 percent sum on blank digital tapes and discs. These royalties, says the RIAA, recognized that both the devices and the medium were being sold to copy music, and attempt to offset the loss in sales.
The RIAA, last December, joined with the Recording Industry Association of Japan, the International Federation of the Phonographic Industry, leaders in the tech industry, and the five major record companies to form the Secure Digital Music Initiative. Its members are developing open standards for digital music distribution. The goal is to convince manufacturers to configure new portable music devices and PCs with a technology that lets consumers rip tracks from CDs - but only for personal use - and prevents uploading to or downloading from pirate sites. Right now, SDMI is working on several schemes for stopping music piracy on the Net, one of which is digital watermarking.
Digital watermarking adds information to a file to identify its owner or origin. But what's nice about watermarking is that it doesn't prevent copying files, which means it respects the consumer's right to fair use.
Shaped by more than a dozen court battles dating back to 1841, when Folsom v. Marsh weighed the consumer's right to information against the creator's need to profit, the fair-use doctrine simply gives courts some flexibility in how they enforce copyright statutes. Legally, duplicating any original copyrighted work - a few lines from a poem, for example - constitutes a violation. But fair use recognizes that these rights are not absolute.
It's not clear what fair use means in the age of MP3, however, and rules about how we can use digital content are still being hammered out in the courts. In the meantime, new watermarking technologies could help broaden the definition of fair use.
For online music, it could go something like this: Download a watermarked song file from MP3.com and email it to your sister in Prague or your cousin in LA. No harm done. But now try downloading that same song to your computer, burning it onto 200 CDs, and selling them on your Web site. Once digital detectives turn up a copy of your CD, they can do a quick search of the Net for the corresponding watermark.
But SDMI's proposed watermarks are just one possibility. Music and technology com-panies are taking their own approaches. Sony's digital music technology, for example, requires an "authorized" device and embedded chips inside a computer to play back encrypted Sony music. And forget about passing some tunes along to a friend - unless they have a Sony-compatible device, songs won't play back. Also, expiration dates are encoded into files, so with Sony's system, even shared songs have a limited life span. While the Sony initiative ignores fair use, it also leaves itself open to hacking: A skilled audiophile could break the encryption and upload the workaround code to the Net.
In April, Microsoft offered up its own copyright-compliant technology, designed to work with its new Windows Media Player. When songs are compressed with MS Audio, they remain locked until a user pays by entering a credit card number, for example, or watching a banner ad. Depending on the client's configuration of the Rights Manager, the file then could be freely copied and distributed, just like any MP3 file, or limited to one playback. This scheme addresses fair use but doesn't guarantee it.
In May, Universal Music Group became the first major record company to announce plans for enabling secure distribution online. Universal is partnering with InterTrust to develop an ecommerce system for selling tunes on the Web. Though it's cagey about the specifics of the technology, Universal's distribution strategy is to package digital music files in a so-called DigiBox that would prevent the recipient from playing the music back without somehow paying for it. Universal's move is an attempt to leap-frog the copyright debate in the courts and use the technology to move directly to the issue of payment - the real right that copyright protects.
But who's to say today's piracy is not tomorrow's legitimate business model? In June, AOL purchased Nullsoft, the maker of Winamp, the premier MP3 software player for Windows, and creator of Shoutcast, a system that lets audiophiles stream MP3 songs from a personal "radio station." Both Winamp and Shoutcast make it pretty easy to violate current copyright laws. However, the move by AOL legitimizes two products that have long been a thorn in the side of Big Music. AOL has done its part by bringing two important digital music apps into the mainstream. Now it's up to the recording industry to shift its strategy - before other technologies do it for them.
