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Music companies strike back
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December 15, 1998: 8:50 p.m. ET
Global recording industry teams with tech giants to fight electronic song piracy
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NEW YORK (CNNfn) - Some of the biggest labels in the music industry announced plans Tuesday to team up with leading technology firms to combat a growing threat to their business - music piracy.
Officials from Bertelsmann AG's (FBTG) BMG Entertainment; EMI Group Plc's (EMI) EMI Recorded Music, Sony Corp.'s (SNE) Sony Music Entertainment, Seagram Co. Ltd.'s (VO) Universal Music Group; and Time Warner Inc.'s (TWX) Warner Bros. and Warner Music Group joined forces with technology giants America Online Inc. (AOL), AT&T (T), International Business Machines Corp. (IBM) Lucent Technologies (LU), Microsoft Corp. (MSFT), RealNetworks (RNWK) and others to come up with a standard that would ensure royalties are paid on music delivered online.
The coalition, to be called the Secure Digital Music Initiative, will begin operations in early 1999 to come up with an open specification to protect copyrighted music online.
The group hopes to have a standard that would allow conforming products to be available for the 1999 holiday season, according to the Recording Industry Association of America, a trade group for the $12 billion U.S. record industry.
"This initiative is about the technology community developing an open security system that promotes compatible products in a competitive marketplace," Hilary Rosen, president of the Recording Industry Association of America, said.
"It's not about the recording industry imposing a standard on technology companies. We'll simply provide guidance on the needs of our industry and its customers," she said.
No executive would say just how much money is lost to Internet pirates, but the music industry is just awakening from a prolonged slump and every copied CD or song is considered a lost sale.
"Piracy is not a way to encourage artistry," said Strauss Zelnick, chief executive at BMG Entertainment. "People create and they have to be compensated for their creation. Right now, the music available on the Web is largely pirated."
The open specification will protect copyrighted music in all existing and emerging digital formats and through all delivery channels, Rosen said.
The initiative comes as a legal battle rages between the industry's giant conglomerates and Diamond Multimedia Systems Inc. over a device called the Rio PMP300, which uses a controversial new format called MP3 to allow computer users to download free CD-quality songs quickly from the Internet.
In many cases, music companies have argued, the technology is used to make pirate copies of CDs.
On Tuesday, however, Diamond Multimedia said it would participate in the security initiative.
Critics of the plan say the industry is trying to control a fast growing medium that can expose artists to a wider audience.
But music executives say they aren't shy about reaching new ears so long as they get their piece of the business.
"Practically everyone we know, especially our artists, are very enthusiastic about the prospects and what we have to look forward to in opening a wide range of audience around the world, providing of course the proper protection can be provided," said Thomas Mottola, chief executive of Sony Music Entertainment.
-- From staff and wire reports
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