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A tug-of-war over intellectual property

The music industry continues to struggle against the pull of changing distribution trends. What’s next? Online music feature hed: A tug-of-war over intellectual property dek: the music industry continues to struggle against the pull of changing distribution trends. what’s next? dek: users will treat copyright laws like speed limits-as guidelines. dek: when all is said and done, only the labels can create an online music boom.

By the time you read this, Napster–one of the most significant software applications of the past 10 years–might be boarded up like a Prohibition-era speakeasy. Or it may continue to thrive as lawyers and judges ponder its fate. Or, most likely, it will exist in a radically different state, maybe even as a fee-based service.

The fact that such disparate scenarios are all in the realm of possibility says a lot about the current state of online music. The revolutionary concept of posting music files on the Internet has resulted in a firestorm of squabbling over fair use and intellectual property–in other words, money. And long after the dispute is settled in a court of law, the jury of public opinion will still be out. With that in mind, our purpose here isn’t to rehash the past or report the present state of online music. The latest doings on the issue are probably as close as your newspaper. We thought it would be far more productive to look at some of the ways this drama might play itself out, with the help of some experts in the field.

A radical shift

To gain perspective on why online music is debated so intensely, it’s important to understand what a departure it is from the distribution paradigms that existed before in the music industry. For virtually the entire 20th century, the agreement between the record industry and music lovers was as follows: You’ll buy what we feel like selling you, and you’ll like it.

Record companies controlled not only distribution, but publishing, promotion, and every other aspect of selling music. As a result, draconian contracts with recording artists and inflated prices for consumers were the rule. But with the emergence of the file-compression technology that culminated in MP3, both artists and music lovers threw down their shackles. Suddenly, artists controlled how their music reached an audience, and listeners enjoyed a degree of musical selection and access that they previously could only have dreamed about.

But this new frontier created a sense of lawlessness that copyright owners are trying to tame, even as others try to maintain the online free-for-all. The fact that the debate over how to control online music exists–and that it’s argued so vociferously–indicates how completely ill-prepared the record industry was to deal with this new distribution model.

But many observers believe that the big record labels haven’t completely missed the boat. “It is not too late for the major labels to establish a viable and lucrative online presence,” says Michael McCue, an intellectual-property attorney with the Las Vegas-based law firm Quirk & Tratos. “As the owners of the vast majority of copyrights in sound recordings, the major labels can control distribution and sale. We may see them develop their own online music distribution services or partner with an online distribution provider, such as EMusic.com, which offers downloading of licensed music. The ability to reduce manufacturing and distribution costs will drive major labels to offer online distribution of music.”

At the moment, virtually all of the major labels have plans afoot to develop subscription services for online music sales. While BMG might have gotten in on the ground floor by allying with Napster, other music giants have followed suit. EMI, Sony, and Universal all have online-distribution schemes in place (EMI’s should be up and running by the time you read this), and AOL Time Warner has hush-hush plans to tap its 27 million-member subscription base as a way to sell music.

“[Labels] have a viable presence online right now,” says Bruce Haring, author of “Beyond The Charts: MP3 and the Digital Music Revolution,” a history of online music. “They’ve heavily invested in any number of start-ups. It’s just a matter of focus-too much attention has been paid to Napster, and not enough to the growth of the companies that are building an online presence–Launch, ArtistDirect, MP3.com, and others that are engaged in creating the medium.”

There oughta be a law

The state of rapid flux in which this issue exists is illustrated by the fact that legislation meant to control digital copyrights–the Digital Millennium Copyright Act of 1998–has already proven inadequate. The act, among other things, makes it a crime to circumvent antipiracy measures built into most commercial software; outlaws the manufacture, sale, or distribution of code-cracking devices used to illegally copy software; limits Internet service providers from copyright infringement liability for simply transmitting information over the Internet; and requires Webcasters to pay licensing fees to record companies. There’s virtually nothing in the act that anticipated in any specific way Napster’s effect on listening habits.

Largely at the behest of the record industry, Congress has slowly moved toward imposing order. One such initiative is to update the Audio Home Recording Act of 1992, which was passed to protect the music industry from the counterfeit potential of the digital audio tape (DAT) recorder, which can make digitally perfect copies of compact discs. Anti-counterfeiting parties are trying to get the act updated to specifically include all MPEG-related technologies.

More important might be a Senate Judiciary Committee hearing on entertainment and copyright law, scheduled for April 3, that was to give Napster fans a forum for demanding access to music. Napster advocates, naturally, feel that Congress should let the record industry and courts sort out how copyright law applies to digital products and act only when consumer harm is demonstrated; intellectual-property advocates feel that line has already been crossed.

House Energy and Commerce Committee Chairman Billy Tauzin, R-La., whose panel oversees telecommunications policy, foresees new legislation that would resolve disputes between content owners and Internet sites that want to distribute songs, books, and videos. That will likely reopen another debate that existed during the days of home taping: Once an audiophile buys a CD, can’t she do what she wants with it, short of mass-producing pirated copies?

Prof. Steve Jones, head of the communications department at the University of Illinois-Chicago, has closely followed the issues related to online music. “A lot of the pending legislation takes the side of the record companies in the debate about licensing versus owning music,” he says. “It’s absurd that somebody thinks that once you buy a CD, you don’t own it and you can’t do anything more with it other than listen to it.”

No jaywalking

The more important issue might be whether legislation can have any real effect at all. As Napster has grown in prominence, consumers have developed a sense of entitlement that could be hard to erase. Even if strict laws are put into place, consumers might treat them like speed limits-as guidelines, not absolutes. McCue is blunt about how much respect users will show any new laws: “Changing the scope of what constitutes fair use won’t have any impact on the music file-sharing by the end-users. [They] are not likely to even consider whether their activity constitutes fair use.”

“I don’t think any legislation can put the genie back in the bottle,” agrees Roy Kamen, president of New York-based Kamen Entertainment Group.

Others fear that restricting copyright-sensitive technologies could have a chilling effect on future developments in this growing field. “The focus on copyright is delaying development of new technology,” Jones says. “It’s forcing people with a mind for innovation to keep one eye on copyright laws, which slows development of new technologies.”

The more likely scenario is that copyright owners will take the law into their own hands via such measures as file encryption–building anti-counterfeiting technology into new CDs. “An effective encryption technology could substantially diminish file swapping of copyrighted sound recordings,” McCue says. “However, encryption and watermarking only affect music files on a forward-going basis. Companies such as Canatametrix [developer of a technology called MusicDNA that uniquely identifies digital music files] have indicated that they have developed a technology that will track usage of music files that are already in circulation, which could substantially curtail file swapping.”

Napster users on the loose

One area of the online-music controversy that has found almost no consensus is the issue of who will inherit those millions of file-hungry music swappers if and when Napster is out of the picture. Even if major labels establish an online presence, will that be enough to satisfy the appetites of millions of users who have gotten used to getting something for nothing from Napster?

Nobody seems to know whether there will–or can–be another Napster. The vast majority of applications scrambling to fill the void are strictly peer-to-peer programs (bypassing the convenience–and potential legal liability–of a central server) such as Gnutella. Meanwhile, Napster isn’t the only prominent service in flux. MP3.com and Scour.com, two Web sites that also have drawn the ire of record labels, have changed the scope of their services drastically to reflect growing allegiance to existing copyright law.

But Napster users have to go somewhere. A few of the more promising contenders to the throne are BearShare, Napigator, CuteFTP, and Aimster.

“I think there will be something that comes along and makes Napster look pretty small, but I don’t know what it will be,” Jones says. “I can’t see any current technology becoming a verb. I can’t see people saying, ‘I’m going to Gnutella this file over to you.'”

While the debate has focused on file-swapping systems, a part of online music’s future that can’t be completely ignored is “uncatchable” technologies such as streaming audio and Web casting. Many listeners turn up their noses at these technologies because of doubts about aural fidelity and the inability of the listener to “own” what they’re hearing. Some observers are far more bullish on these developing technologies than others. “Sound quality will not be an issue as high-bandwidth Web access expands,” Kamen says. “I think streaming music on demand will be big.”

“The real inhibitors are the technological glitches for the end-user, the cost of doing the service for the Web casters, and the weirdly fragmented landscape for these kind of services,” Haring says. “All of these factors have slowed growth, but the potential of the medium is too great to languish forever.”

Still, the undeniable fact that streaming audio is so transient could prove to be a fatal turn-off for consumers if the technology isn’t promoted within its limitations. “I’m a fan of streaming audio as an alternative form of radio,” says Jones “but not as a way of getting and keeping music.”

Now what?

But when the hue and cry has diminished, the owners of music copyrights will be the ones that can make the online-music movement boom or bust. Labels will have to strike a balance between providing a selection of music that rivals that of Napster and its brethren, charging a fee that consumers find palatable, and–job number one–making money at it.

“The [industry] is more preoccupied with what it can’t do than what it can achieve,” Haring says. “Consumers love music, particularly the Net community. They will come around to the idea of using these sites. Piracy has always been with the recording industry, and the [Recording Industry Association of America] stops a mere bucket of it in the real world. They’ll learn to live with what they can’t control online as well, and then the focus will begin to shift into the real areas of concern: marketing, promotion, and tweaking the technology to make the user experience more pleasurable.”

Of course, the possibility exists that a nation of freeloading Napster junkies will turn out to be a dry vein when it comes time to establish online music as a legitimate industry.

“It’s all business,” Kamen says. “No cash in means no business. And no one wants to pay for something they can get for free.”

Dan Heilman is senior managing editor of ComputerUser.

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