Record Firms Form Coalition
To Combat Piracy Via the Web
By EBEN SHAPIRO
Staff Reporter of THE WALL STREET JOURNAL
Faced with a rash of online piracy, the world's biggest record companies are forming a coalition to develop a technological standard to protect music delivered via the Internet.
The Recording Industry Association of America has called a news conference for Tuesday in New York to announce "a precedent-setting initiative to address new digital-music opportunities." The trade organization said that top record executives from Bertelsmann AG's BMG entertainment unit, EMI Group PLC, Sony Corp., Seagram Co.'s Universal Music, and Time Warner Inc.'s Warner Music would participate. Executives at the companies declined to comment in advance of the news conference.
The move comes as the $12 billion music industry is confronting an outbreak of digital piracy made possible by MP3, an audio-compression format. MP3 allows computer users to digitally copy and send music via the Internet. Although some record executives say the Internet provides an excellent new way to market music to consumers that don't feel comfortable shopping in record stores, there is huge concern over the fact that many young fans have curtailed buying CDs in favor of downloading free songs from the Internet. The record companies' aim is to develop a system similar to satellite-delivered cable networks, which scramble their signals so people can't pirate them from satellite feeds; only paying customers are able to receive unscrambled signals.
Several technology companies, including IBM Corp., and AT&T Corp., are working on different technologies to safeguard music delivered via the Internet. Record executives said that the industry doesn't plan to endorse a specific technology, but only set up a committee to work toward establishing standards, or "setting a performance bar" for delivering music in a way that protects the industry's profits. A steering company of technology companies is expected to be established as part of the initiative.
Rob Glaser, chief executive of RealNetworks Inc., a Seattle company that is a leading seller of software and systems used to deliver audio and video on the Internet, said the move by the record companies will "help establish rules of the road" for digital delivery of music. He called the move significant because it signaled that the record industry was acknowledging that the Internet has become a "fact of life" in the business. Mr. Glaser said until now, the record companies haven't developed a cohesive, effective plan for dealing with digital downloading. "I would give them an 'A' for effort, but not an 'A' for results," he said.
Some technology executives say that record executives have been more concerned about protecting relationships with record stores, their main customers, than with developing systems for the Web.
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