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January 12, 1999
Web posted at: 1:07 p.m. EDT (1307 GMT)

by Rob Guth

(IDG) -- LAS VEGAS -- The growth of downloadable music is outpacing the recording industry's ability to keep a handle on it. This was the tenor of product announcements and comments made by industry executives at the Consumer Electronics Show here last week.

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Hardware vendors rolled out new portable devices for listening to music downloaded from the Web. Meanwhile, many executives from technology companies expressed doubts over a recent attempt by the Recording Industry Association of America to hammer out a standard for protecting music sent over the Web.

"This is too big; the genie is out of the bottle and consumers are embracing [music over the Internet]," said Richard Doherty, director of The Envisioneering Group in Seaford, New York.

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The comments and product announcements come amid a battle between those most ardently promoting the downloading of music over the Web and the recording establishment that needs to protect its intellectual property.

Over the past twelve months, a growing number of Web sites have begun offering, both legally and illegally, music for sale or for free download over the Internet. The leading file format behind the sites is the Moving Picture Experts Group Audio Layer 3 (MP3), which compress digital music so it can easily be downloaded by users via PCs.

Still locked in a lawsuit with San Jose, California-based Diamond Multimedia Systems, a maker of the Rio MP3-based portable music player, the RIAA last month announced the Secure Digital Music Initiative.

The SDMI aspires to protect the intellectual property rights of music companies while not stifling the rapidly growing market for Internet music sales. The group hopes by year end to create a technology specification that will enable music to be downloaded for a fee while ending illegal distribution of copyright-protected material.

Net changes for music

But officials here at CES last week, including some SDMI members, said that the recording establishment still misses the most important point: The Internet has forever changed music distribution; record companies therefore need to rewrite their business models.

"It's not about 'secure digital music'--they are totally misguided," said Hassan Miah, president and chief executive officer of Xing Technology, which sells compression software. RIAA members "are so focused on 'we've got to lock it up' rather than focused on 'we've got to open up to the digital age.'"

At a CES panel discussion examining the "MP3 syndrome," one official described the RIAA's efforts as "killing ants with a hammer," while others said that artists care more about reaching a broad audience with their music than the short-term worries of record companies.

"I have never met a musician who used [the words] 'business' and 'model' in the same sentence," said Gerry Kearby, chief executive officer and cofounder of Redwood City, California-based Liquid Audio, an Internet specialist in enabling the secure online distribution of professional-quality audio.

The advance of technology coupled with growing consumer demand for music from the Web will continue to outpace any efforts to fight single products like Diamond's Rio, industry experts said. Also, the SDMI will have trouble aligning the disparate interests of the players, from chip makers to record companies, that have a stake in the group's hoped-for specification. In addition, compression formats are expected to proliferate in the coming months adding even more confusion, officials here said last week.

Sony is at work on a new format that will probably be unveiled later this year, said people familiar with the company's plans. The technology will likely be used in future versions of Sony's portable storage product called the Memory Stick. The Sony technology will also use security that prevents data from existing in more than one place at the same time. For instance, the format "moves" a song from one storage system to another instead of copying it, the company said.

Such a technology "would alleviate a lot of the concern of the content owners and distributors," said Envisioneering's Doherty.

MP3 products debut

Several vendors at CES showed off MP3 products.

Among them, Samsung Electronics rolled out three MP3-based devices under the brand name Yepp including two models, the B-Series and D-Series, which it calls the world's smallest MP3 players. The units are about the size of a credit card. The players have magnesium casings, use a SmartMedia flash card for storage, and run off of two AAA batteries.

The E-Series players offer 16MB of embedded flash memory and have a direct parallel port for connecting the player to a PC. The unit also features voice recording and a telephone directory. The device measures 65mm by 87mm by 17.2mm.

The B-Series players use 24MB of embedded flash memory with a Smart Media slot and use a docking station with PC parallel port interface.

The D-Series players have a total of 40MB of memory (24MB embedded and 16MB on a SmartMedia card), a digital FM radio tuner, and voice recording capability. The device also uses a docking station with PC parallel port interface. The unit can record up to ten hours of external voice audio.

Samsung said it will begin selling MP3 players in the U.S. market only after the company gets approval from the RIAA. Samsung is a member of the SDMI and said it "aims to work closely with the RIAA." The company expects to sell 400,000 MP3 players in 1999, about 100,000 of which will be in the U.S., the South Korean company said.

Diamond, meanwhile, showed off its controversial Rio portable player. The RIAA in October 1998 failed to gain a temporary injunction barring the sale of the Rio; the player is now selling at a rate of about 10,000 units per day, some observers noted. Diamond reportedly cannot keep up with demand.

The $199.95 Rio uses 32MB of flash memory to store up to 60 minutes of continuous playback of music or eight hours of voice audio. About the size of a deck of playing cards, the Rio weighs 2.4 ounces and includes headphones. Additional memory is available.