US Report: Net music will change

With a single stroke, the music industry may have dealt itself back into the Internet game.
Written by ZDNet Staff, Contributor

On Tuesday, the Recording Industry Association of America (RIAA), whose members sell more than 90 percent of the recorded music in the US, along with the five biggest recording companies, unveiled an initiative to create a secure format that will enable songs to be sold and distributed over the Internet.

Observers applauded the move. "This will put adult supervision in to what has been the Wild, Wild West of music distribution," said Richard Doherty, director of marketing at new media watcher Envisioneering Group in Seaford N.Y. Doherty said the music industry needed to do something to avoid losing its power over the music business' distribution channel. "A year from now, instead of the Big Five, it could be Steve Case and Bill Gates as the new music moguls," said Doherty, underlining the fast pace of change the Internet has brought to the music industry.

The top five music production companies -- Sony Music Entertainment, Warner Music Group, BMG Entertainment, EMI Recorded Music and Universal Music Group -- were out in force to support the Secure Digital Music Initiative (SDMI). Other supporters make up a virtual who's who of tech industry companies, among them AT&T Corp., America Online Inc., IBM Corp. and Microsoft Corp.

Such widespread backing of the SDMI reassured some. "The industry has finally recognised that the Internet is a viable business," said Bill Woods, director of marketing communications for music software maker Liquid Audio Inc. in California. "Now they want to make it a legally responsible one, as well." Liquid Audio also supports the SDMI.

The coalition intends to have the new format in products by Christmas 1999. But many observers say this is impossible. Still, that the big companies are moving should help them gain control over Internet music distribution.

Another supporter is the company that had become the music industry's villain: Diamond Multimedia Systems Inc. Last month, to the consternation of the RIAA, Diamond released its RIO PMP300, a device the size of a cigarette pack that plays music in the MP3 format. MP3 has no security and is widely used by music pirates.

The RIAA showed its displeasure by slapping Diamond with a suit that attempted to prevent it from shipping the device. It won a 10-day restraining order, but was ultimately unable to stop shipment. "Before today, it was dubious whether the Big Five thought digital distribution was a good thing," said Ken Wirt, vice president of corporate marketing at Diamond in California. Diamond announced it would join the initiative. "We want the Rio to work with any format the industry decides on," he said.

Despite the show of corporate support, there are two key groups missing, said Gene Hoffman, president and CEO of Internet music seller GoodNoise Corp. in Palo Alto, California. "Where are the artists? Where are the customers?" he asked. "Until there are customers, we will stay with MP3."

GoodNoise, and companion Web site MP3.com, are two of the loudest proponents for the digital distribution of music over the Internet, using the open but copy-protection-free format MP3. GoodNoise has already signed on as the Internet distributor for independent label spinART. "If you are a customer right now, MP3 is the only safe solution," said Hoffman, who is also a founder of encryption firm Pretty Good Privacy Inc.

While not against copy-protected music, he thinks that published media is nearly impossible to make secure. "This is really about the five record companies keeping control of the distribution channels," he said. "Security gives them that control."

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