Thomson Offering Lock for MP3 Files

When German audio engineers developed the MP3 format in the early 1990s, they unwittingly created the currency of online music piracy -- song files that could be copied freely and downloaded swiftly.

Music fans embraced the format, but it was snubbed by record labels and online music services because there was no way to stop MP3s from being bootlegged.

Now Thomson, the French company that distributes MP3 technology, is trying to make amends to the music industry. It’s adding electronic locks that a record label can use to limit the number of times a song can be duplicated onto CDs or portable devices.

Thomson, however, may have a tough time finding an audience for this version.

The online music market already is crowded with competing secure formats from Microsoft Corp., Apple Computer Inc., RealNetworks Inc. and Sony Corp. Their incompatibility gives record label executives heartburn, and Thomson’s move adds a fifth format that doesn’t work with any of the others.

Plus, songs encoded in the new format won’t work on many older digital music players for which the original MP3 is the lingua franca.

Figuring out how to make locked music files that play on a range of software and devices -- “that’s what people should be worried about,” said Lawrence Kenswil, president of ELabs at Vivendi Universal’s Universal Music Group.

Nevertheless, Thomson executives hope that the music industry will look at the update as the best of both worlds: It has the familiarity and cachet of the MP3 name and the security of electronic locks.

By embracing the new format, music services may start drawing the masses away from illegal downloads on file-sharing networks, said Rocky Caldwell, a director of technology marketing, patents and licensing for Thomson.

“MP3 is a brand the average consumer ... would [expect to] find on an audio service,” Caldwell said.

That logic led Roxio Inc. to pay $5 million for the Napster brand and some of its technology in November 2002. But the new Napster service that Roxio launched in October didn’t take the online music world by storm -- it’s a distant second behind Apple in downloadable songs sold and has attracted fewer subscribers than at least three other services.

One factor is that Roxio’s fee-based version of Napster is very different from the original, which enabled people to copy MP3s free from one another’s computers. Similarly, Thomson is changing one of the central features of the MP3 format -- its ability to be copied and moved without limitation -- by adding what’s known as digital rights management software, or DRM.

“Anytime they bring up DRM and MP3 in the same sentence, it’s going to set off a lot of firestorms,” said analyst Mike McGuire of GartnerG2, a technology research firm.

Developed by the Fraunhofer Institute in Germany, the original MP3 made its formal debut in 1993 as part of a Motion Picture Entertainment Group, or MPEG, standard. The technology squeezes a song into a digital package about one-tenth the size of a track on a CD. Such files can be stored on a computer or portable player, organized into custom playlists, burned onto personalized CDs and sent easily over the Internet via a high-speed connection.

The format has become the common language for music-playing software and portable devices and has made its way into a growing number of car stereos, DVD players and home entertainment systems. It’s also the format of choice for the billions of songs downloaded free from file-sharing networks such as Kazaa and EDonkey.

Thomson’s new version combines the standard MP3 compression technology with a DRM that hews closely to emerging standards for rights-management techniques, Caldwell said. Music services and device makers can rely on the new version to remain unchanged for years, he said, rather than having to adapt to the periodic updates made by Microsoft, Real and others.

One drawback: The new format won’t work on the wide array of portable devices and disc players that can play MP3 files. Some of those devices could be made compatible with new software. For others, Thomson wants to let people make unlocked copies with reduced sound quality, which they could play on any device that supports the original format.

The labels, however, would have to approve that kind of copying.

Laura Goldberg, chief operating officer of Napster, said MP3 may have a marketing advantage over other formats. But Napster also wants to give users maximum flexibility with the songs they buy and to support the widest range possible of portable music players.

“If it were to have all those things, it might be interesting,” she said.

SigmaTel Inc., a leading manufacturer of microchips for portable music players, will support locked MP3s if player manufacturers ask it to, said Mark Martinets, a product marketing manager. “To date, we don’t have any customers that have requested it,” he said.

One of SigmaTel’s biggest customers, the Rio Audio division of Digital Networks North America Inc., already has rebuffed Thomson. Kevin Brangan, a marketing vice president at Rio, said he doubted that the labels would adopt the new MP3 because it would only add to consumer confusion.

Referring to Thomson’s licensing fees for using the technology, Brangan said, “There’s really not much of a reason to pay $1 a player for a [format] I don’t think anybody is going to use.”