IBM Develops System to Allow Legal Swapping of Music
Armonk, New York, Jan. 22 (Bloomberg) -- International Business Machines Corp., the world's largest seller of computers and related services, said it developed a system that allows Internet users to legally pass on digital music to their friends.
The new software lets consumers who download music over the Internet pass the music on with conditions set by the record label, said Scott Burnett, IBM content distribution development executive. The system may be used to exchange books, movies or video games as well.
AOL Time Warner Inc., Sony Corp. and other music companies stand to lose $3.1 billion in potential profit by 2005 because of online piracy and digital distribution systems, according to a report by Forrester Research Inc.
``This allows a way for the artist to be paid, but also for the digital word of mouth to flourish much like what MP3 provides for the industry,'' Burnett said.
IBM has held talks with all five major music companies about using the system, which will be available in the first quarter, Burnett said. Armonk, New York-based IBM expects the system will be used to distribute music over cell phones and other wireless devices.
`Level of Comfort'
Record labels will have the ability to determine how many times or for how long a downloaded song can be played before they will ask a consumer for payment, Burnett said.
``It certainly says IBM is going to be a player in this market,'' says Joshua Duhl, an analyst at market research firm International Data Corp. ``That gives people a level of comfort, at least on a business level.''
IBM is not the only company with a solution to the music- swapping issue. Microsoft Corp., Liquid Audio Inc. and Intertrust Technologies Corp. also have products, Forrester Research Inc. analyst Eric Scheirer said. He said the issue is not finding better security methods; instead, it's finding a business model to compete with Napster.
``IBM is throwing its hat into the ring in a very ... public way, but it's not dealing with what the real question record companies have, which is how do we stop Napster,'' Scheirer said.
IBM is making the announcement at Midem 2001, a music industry conference in Cannes, France. IBM shares today fell $2.69 to $108.56 in New York Stock Exchange trading.
Jan/22/2001 17:15 ET
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