© This article is reprinted with permission from IP Magazine, June 1999
Though it is causing a sensation - and consternation- MP3 does not spell the end of the music business as we know it.
Y2K isn't the only area of computer technology that causes otherwise clear-thinking and well-adjusted people to take leave of their senses and begin loudly proclaiming cataclysm and apocalypse.
The explosion of easier and faster methods of distributing music over the Internet has crowded soapboxes with stern prognostications of the end of the world (of music) as we know it, as well as glowing predictions of the liberation of downtrodden artists from the evil clutches of the record companies. As is typical with such things, the backlash to these provocations can seem every bit as shrill, insisting that the intellectual property status quo must and will prevail. Sometimes the debate is enough to make one contemplate holing up in the mountains with the millennium doomsayers until everything blows over.
But before you start stocking up on nonperishable food and rugged clothing, step back and consider one thing: United States copyright law is based fundamentally on economic motivations. It is this economic underpinning that will most likely continue to make that law highly relevant in the digital age.
HARBINGER OF A BRAVE NEW WORLD?
As everyone who pays even the slightest attention to the Internet or music well knows, MP3 (MPEG 1, Audio Layer 3) is an algorithm that can compress digital audio by a ratio of 12:1. That neat little trick so shrinks in size an audio file that it can rapidly and easily be downloaded from an Internet source, such as a music fan's Web page, and stored on your computer's hard drive, to be listened to time and time again. What concerns the recording industry, however, is the fact that MP3 technology enables this audio file to be easily copied without authorization from the copyright owner and that those illegal copies can then further be distributed over the Internet simply by, for example, being attached to an e-mail message. And when copied and saved in a mobile phone-sized player, such as the now-infamous Diamond Multimedia Rio Player, that audio file can be played back at any time and any place-- as many times as you like. MP3 players for your car and audio players that plug into stereos are also on the horizon.
To complicate matters further, several other companies -- including IBM Corp., Microsoft Corp., AT&T Corp. and a partnership of Lucent Technologies (which owns Bell Labs), e.Digital Corp. and Texas Instruments Inc. -- have in the last two months announced that they plan to come out with compression technologies that will compete with MP3. The controversy centers around something fundamental in music -- money, namely who stands to make it through these technologies, and who stands to lose it.
Not surprisingly, MP3 and its rapidly proliferating progeny have garnered the attention of the recording industry, which understandably fears an onslaught of copyright infringements in the sound recordings owned by record companies. In many ways, this onslaught has already begun. To address the infringement issue, the industry has founded the Secure Digital Music Initiative (SDMI), which seeks to establish an open architecture for the delivery of digital music, whether downloaded from the Internet or delivered through other media. This architecture, which may contain watermarks and encryption, would include protections against unauthorized copying of digital music that would work across all platforms and media, and be user friendly.
While that effort has been complicated somewhat by the recent proliferation of competing compression technologies, the first SDMI specification is scheduled to be released by June 30 of this year. Nevertheless, it is unclear precisely what the state of affairs will be by the time the year-end holiday buying season begins. One possible scenario is the availability of several different compression technologies and players, some of which will contain some form of copyright protection, and others that may not.
PROTECTION VERSUS INCONVENIENCE
The recording industry's efforts to protect the intellectual property rights of its members has engendered a curious reaction in some quarters -- criticism, some of it quite severe. Some contend the industry should not place what they label as "inconveniences" in the path of consumers who want to copy digital music over the Internet for their own use, create their own customized archives, and perhaps share this music with their friends. They argue that any protection against copying imbedded in the music's digital code ultimately can be undone by those who are proficient enough with the technology. From this they conclude that stopping unauthorized copying of this nature should not even be attempted -- in other words, because there are some people out there who will pirate digital music, why try to protect it at all? Just go after the really big offenders, true music pirates who commercially exploit multiple unauthorized copies of music for profit.
Another, more extreme, view has also surfaced. Some voices of the Internet -- cousins of the "information wants to be free" subculture -- argue that compression technology will liberate the burgeoning musician from the supposed stranglehold and exploitation exacted by record companies over budding artists. No longer forced to secure a recording contract before they can reach their audience in any significant sense, musicians will be able to control their destiny by themselves posting their music on the Internet, thereby building their own fan base through more direct contacts with people who hit their Web site, and allowing their fans to download as much of their music as the artist permits -- whether for free, or for a price set by the artist -- who can then keep all or most of the money. Taking this theme still further, "bricks and mortar" operations such as record companies, and especially their CD and tape manufacturing and distribution components, are said to be going the way of the dinosaur.
Once compression and delivery technology is fully developed, according to this view, most, if not all, music will be distributed over the Internet or other alternative media. There will be no need to have a record company manufacture physical Mylar-covered plastic discs and distribute tens or hundreds of thousands (or, for the lucky few, millions) of them throughout the country and the world. The artist will be able to do it himself or herself from the artist's personal Web site. Cut out the middle man, reach your fans directly, and keep more money for yourself.
LET'S GET REAL
As with all idealized utopias, this one works only if you don't look closely at the details.
First, it is highly unlikely that physical CDs will be replaced wholesale by direct digital distribution of music any time in the foreseeable future. Consumers still like to have physical products that they can touch and feel, and retailers and others know how to categorize those products according to consumers' interests and market them effectively. Second, record companies provide numerous benefits that will not be available through this do-it-yourself approach. Differentiation is one. Like it or not, there is a lot of mediocre talent out there. Filtering through the wannabes and discovering quality artists in the first place is a significant benefit that record companies provide to the consumer.
From the beginning artist's perspective, a state-of-the-art recording studio, innovative producers and experienced engineers are additional benefits. Fully integrated and experienced promotions and marketing machinery is yet another. So are contacts at radio stations to encourage air play -- still one of the best ways to reach a wide and potential fan base -- and support on tours, another crucial way to get right out there in front of your audience. Say what you will, but the world's most awesome Web site will not get you any of these things. It will be similar to what now happens to bands who cut their own CDs -- word of mouth will still be their biggest marketing tool, except that the word may now travel electronically.
Yet even if self-distribution over the Internet were the saving grace for up-and-coming artists, the "independent artist" utopia avoids the ultimate issue. Sure, MP3 and similar technologies can make it easier on some level for artists to distribute music directly to their fans, and to give their fans more leeway in selecting the music they want to possess. But what does that have to do with copyright protection?
If an artist writes and records her own music, and retains the rights to the music and the sound recording, she can do whatever she wants with her creation. She can sell it at whatever price she sets or she can give it away. No one quarrels with that. But let's take it one step further. Does she really want a supposed "fan" to download 10 of her most recent songs for free and then send them to 10 of his friends, who all then send them to 10 of their friends? For an artist wanting to make a career out of music, that's one mighty expensive chain letter.
Or what if the "fan" instead decides to make some money himself, by posting the artist's music on the "fan's" site but then charging people to download it, thus making money to which the artist, under any notion of fairness, is entitled? How about if a dyed-in-the-wool pirate does it on a grand scale? Not quite a digital paradise, is it?
Copyright law rests on two fundamental rationales. One is to encourage creativity by protecting an artist's work from unauthorized copying by others. The other is to reward the copyright owner by enabling him to profit from this creativity. These two concepts work best together. The parade of horribles that winds its way through the current debate seems to have wandered away from these principles. Yet these are the very principles that will likely provide a way out of the current digital music thicket.
Some of the more enlightened observers of the current digital distribution debate have suggested that dollars-and-cents business decisions -- not legal precepts -- will shape the way the compression technology controversy resolves itself. They are probably right, and that is, after all, what makes the most sense in a market economy. The law should react to the interplay of competing interests; it should not rigidly try to predict currently uncertain outcomes and impose that prediction ahead of time. Not only would it probably miss the boat, but it's a bit of a totalitarian approach.
A FEW PREDICTIONS
So what can we expect? Once people stop emoting and start thinking, some kind of accommodation on both sides is probable. Both sides have too much to lose otherwise. If more new artists set up Web sites and begin to offer their fans the ability to download samples of their music -- or even a limited number of songs, for free in order to promote themselves -- who is to say whether that might not create a new type of promotion in which record companies will also have to participate to help promote their artists on the record companies' own Web sites? At the same time, if more and more new talent tries to market itself on the Web, A&R (artists and repertoire) personnel at record companies will have to surf the Internet even more than they are now to help them discover new artists.
There can also be no doubt that both unsigned artists and record companies will move to online sales of music directly to the consumer. As long as whoever posts the music for download has the rights to do so, and if the thorny issue of whether that constitutes a broadcast or a sale/distribution is resolved -- a ripe subject for another article and further litigation -- there should be little problem at that stage. Both sides would then benefit from having protections in place to prevent the unauthorized copies of those downloads.
But what about the specter of exploitation of the artist? Will MP3 and its progeny alter the power relationship between the record company and the unknown artist? Maybe some kind of modulating impact will occur, as long as each side remembers it has a lot to gain from the other, even if all music were suddenly to become distributed primarily over the Internet. The record companies will, of course, continue to gain talented new artists from whom to make profits. They may even find a wider array of new talent to choose from.
However, the artist also can gain, and not only from the technology itself. It will be easier for the artist to get her music out there and get the attention of fans even without a recording contract. She may have more creativity, and will be able to keep most or all of the money she makes by selling her music directly. That may give the artist more clout with a record company during contract negotiations -- if the artist doesn't like the deal being offered, she can rely on her now more realistic ability to go off on her own as added leverage in negotiations. Or even more likely, the new technologies may alter economies of scale and make it easier to form small, independent record companies who will compete with the majors for the artist's services.
Ultimately, this new technology will not cause the end of the musical world as we know it. Certainly, it will foster significant changes, but most of those will be in the manner in which music is distributed and sold. The record companies will undoubtedly survive, and will be successful in implementing satisfactory copyright protections for their music.
There will be some piracy, as there always has been. Yet the blank audio cassette and recorder and the video recorder did not destroy the music or motion picture industries, but enhanced consumer choice, convenience and freedom. The same result is likely in the field of compression technology and whatever comes after. Most likely, there will be more music out there, it will be more interesting, and it will be a lot easier to get. And it will sound great, too. In many ways, it may be the best of all worlds.
Now if we could only figure out who pays whom.