Music industry considers Rio strategy

Even though the Internet jam session has begun, the music industry's Big 5 have just started tuning their strategy. "We need to come up with a co-ordinated solution to protect content," said Cary Sherman, senior executive vice president and general counsel for the Recording Industry Association of America (RIAA). "Something needs to be done, or all the e-commerce promises will be illusionary."

The RIAA is fighting for the luxury of changing at its own pace. When Diamond Multimedia Systems Inc. announced plans to release its Rio PMP300 digital music player in October, the RIAA struck back. RIAA, which includes music giants Sony, BMG, EMI, Warner-Electra-Atlantic, and the recent merger of Universal and Polygram, filed suit against Diamond. An initial success was short-lived. While the suit delayed the Rio's release by 10 days, the RIAA lost its attempt to put the player on indefinite hold.

Just in case, Diamond has set-up a rainy-day fund, socking away $2 (£1.21) and change for each player in case RIAA wins its suit and the court orders the company to pay royalties. "If the court determines we are covered by the law, we will pay," said Diamond's vice president of corporate marketing Ken Wirt.

Despite the assurances, the RIAA only hears sour notes. "This allows anyone to become a world-wide publisher of any song on a [copyrighted] CD," said Sherman. The Rio increases that danger by liberating the music from the PC, making it portable, he said. "That's the danger -- legitimate commerce cannot compete with free products that are the same."

Yet, other companies preparing for the Internet music market -- which Forrester Research predicts will hit $4bn (£2.4bn) in 2002 -- see no sinister intentions in Diamond's release of the Rio. "Diamond's goal is not to snub the industry," said Bill Woods, vice president of marketing for MP3 rival format maker Liquid Audio Inc. "But to get involved in what is going to be an enormous business." Liquid Audio and Diamond banded together in early November to search for a way to support more secure implementations of downloadable music.

RIAA has given its blessing to Liquid Audio's music format because it adds a great deal of security to music distributed over the Internet. Liquid Audio uses encryption to lock files and add what is in effect a digital watermark to clearly identify copyrighted music, even when the music is converted to an analogue format. Yet, beyond the endorsement, the industry organisation has done little to actively support Liquid Audio's technology in the market. "Music over the Internet works," said Woods. "The majors are only just figuring that out."

The delay could be fatal, said GoodNoise's Hoffman, as the music industry is going online regardless of RIAA position on the issue. "The Internet always enables the masses and not the central powers," he said. "One of the beauties of the Web is that everyone has the same volume."

The artists agree. "I'm just a 40-year-old guy playing a 30-year-old guitar to a room full of drunks," said musician Reid Paley. "Some people don't like me; to the folksy crowd, I'm a scary biker. But put my music on the Internet, and anyone can have access to it."

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