Recording Industry Blames It on Rio

What the battle over MP3--the hot audio compression technology--means to you.

Yael Li-Ron, PC World

The compression technology is MPEG Level 3, known as MP3, which allows for unprecedented 12:1 audio compression. A typical track on an audio CD may take up 50MB of space. When compressed, that file can be as small as 4.5MB, making it feasible as a download. Since MP3 is an open standard, there are already dozens of software encoders (compression tools) and players available on the Internet, and users by the millions are downloading them.

The problem is, this free-for-all has resulted in a flood of Web sites offering MP3 versions of bootlegged popular audio tracks. Not all MP3 downloads are pirated, some are provided by independent artists; but the bulk of them are illegal, especially on individual Web sites and on the 130-odd music newsgroups, all of which are impossible to police.

MP3 tracks need MP3 players, and the most popular one is WinAmp, a shareware offering. More than 5 million copies of WinAmp have been downloaded to date, according to Mark Hardie, a senior analyst with Forrester Research. And there are no figures regarding MacAmp, its Mac flavor. But that's not all. Windows 98's Media Player supports MP3, so the potential number of MP3 users exceeds 10 million.

The music industry isn't thrilled with these figures, but short of going after each small Web page and newsgroup posting offering pirated tracks, its hands are tied.

But a much-anticipated handheld player from Diamond Multimedia has given the Recording Industry Association of America some legal leverage.

Rio: Villain or Scapegoat?
The RIAA claims that the Diamond Rio, which can play up to 60 minutes of MP3 tracks, violates the Audio Home Recording Act. On October 16, the RIAA won a temporary restraining order against shipment of the Rio to consumers.

Diamond Multimedia has issued a statement calling the RIAA's move "oppressive practices," and declaring that it "does not support in any way the unauthorized distribution of unlicensed music and has taken steps to clearly support antipiracy publicly and in promotional material."

The Audio Home Recording Act "grants manufacturers of recording devices limited immunity from copyright liability," responded Steve Fabrizio, senior vice president for the RIAA. "In exchange, it requires that the device be registered with the Copyright Office and [its manufacturers] should pay modest royalty. It also requires [the implementation of] a serial copy management system--a rule of copying that prevents second-generation copies," said Fabrizio.

The Rio doesn't comply with those rules. Diamond Multimedia says the law doesn't apply to the Rio, which is only a playback device, not an encoder.

Fabrizio emphasized that MP3 per se isn't the issue, but the piracy based on that technology is.

Boon for Starving Artists?
MP3.Com, a site dedicated to this technology, sees an average of 100,000 unique visitors and 2 million downloads monthly. Its president, Michael Robertson, said that what's at stake is the professional future of the thousands of aspiring musicians who can't--or won't--get a contract with a record label.

In an industry where typical royalties amount to $1-to-$2 per sold CD, and recording artists need to come up with steep initial costs, those who "make it" need to sell upwards of 300,00 to 400,000 copies just to break even, said Robertson. The only way these independent artists can get exposure, claims Robertson, is via digital distribution, and MP3.Com offers them that service for a nominal fee.

In addition, Robertson said, his site has already signed up more than 1000 artists and about 100 record labels, including a couple of major ones (Hollywood Records, owned by Disney, and Grand Royale, which carries the Beastie Boys), which illustrates the legitimacy of the technology and its applications.

"There's no simple solution," said Hardie of Forrester Research. "It'll take at least five years before the [music industry's current] business model changes to accommodate the need for digital distribution."

Until then, Hardie expects that the current black market will continue to flourish. Consumers clearly like the promise of MP3, and since the record industry offers them no legal alternative, they'll continue going to the black market alternatives. Hundreds of thousands of music-hungry college students have made MP3 their favorite music format. And about 3 to 5 percent of all current music (approximately 300,000 titles) is available online, Hardie estimated.