Legal Effort May Slow but Not Stop Music Revolution

Unlike many in her circle of music-loving pals, 17-year-old Danielle Lew of Playa del Rey does not download songs from an Internet file-sharing network.

But Lew doesn’t buy CDs either -- she uses the CD recorder in her computer to burn copies of other people’s discs. That makes her Public Enemy No. 2 on the recording industry’s list, a notch below people who copy music on Kazaa and other file-sharing systems.

The industry lashed out Monday against file sharers, filing 261 lawsuits seeking at least $200 million in damages for copyright infringement. But as Lew illustrates, other digital technologies are transforming the way people obtain and enjoy music, posing another threat to the CD sales that are the major record labels’ lifeblood.

The labels are responding not only by filing lawsuits but also by offering their songs through online music stores and subscription services, by lowering CD prices and by deploying anti-copying technology. That includes reinventing the CD itself, aiming to deter piracy by putting an electronic leash on its contents.

Some critics say the major record companies are trying to slow the online music revolution when they should be capitalizing on it by taking the music business to the masses. That means allowing the copying of an unlimited number of songs for a reasonable monthly fee that would encourage people to be paying customers, instead of pirates.

“We have to get to the place where we can collect the money, but we can’t control the business,” music publisher Jim Griffin of Cherry Lane Digital said at a recent industry conference.

Label executives offer a slew of reasons not to go that route. For one thing, they say, file sharers never would accept a monthly fee high enough to pay for all the music, movies and games they download. Record companies have begun talking to the file-sharing companies about offering services that pay royalties to artists, but in the meantime the industry is escalating the technological arms race against unauthorized copying.

The record companies characterize the battle as a fight to stop theft. It’s also an effort to regain control over what people can do with the music they buy.

The industry lost much of that control when it embraced the compact disc format 20 years ago. Unlike vinyl records or tapes, CDs can be duplicated with no loss in fidelity. Songs on CD also can be extracted by a computer and squeezed into files small enough to be e-mailed or downloaded through the Internet, for listeners willing to sacrifice a little sound quality.

Lew said she doesn’t like to download songs because it takes too long. “It’s a lot faster and more convenient to burn CDs,” she said, adding that she typically copies the pop-music discs that her younger sister borrows from friends.

Although she feels a few pangs of guilt about not buying CDs, Lew said her burning habits expose her to more artists that she can support in other ways. For example, she and her sister recently spent $50 to see Jack Johnson, whose CD her sister had burned from a friend.

“We spent, like, $50 on those tickets, so that makes up for all the CDs I burned,” she said. “I hope that artists aren’t all out to make a big profit. I think the most important thing is to get your music out there.”

Eager to stop Lew’s kind of copying, leading record companies in Europe and Asia have introduced “copy protected” CDs that use a variety of electronic techniques to deter computers from copying their songs. About 150 million protected discs have been sold so far. Some buyers have complained about playback problems in cars and DVD players, degraded sound quality and even damaged CD drives, but that hasn’t stopped protected CDs from becoming a fixture in those markets.

Record companies have released only a few protected CDs in the U.S., because they don’t think consumers here would accept them. The industry is waiting for a new type of disc that will permit a limited amount of copying, enough for personal uses but not for rampant piracy.

The wait soon may be over. The major labels are testing protected CDs with two versions of each song: one that can be played but not duplicated and another, a compressed file, that can be copied onto a computer, transferred to selected portable devices and burned onto a limited number of discs.

First 4 Internet of Oxfordshire, England, has demonstrated protected CDs that allow buyers to copy their songs onto “sterile” discs that yield no further copies, said George Macdonald, director of sales and marketing. The technology also lets the CD’s owner send copies of songs to friends, who would be able to play them only a few times before they automatically become disabled.

Another option, Macdonald said, is a sharing feature that mimics what happens when people lend CDs. Buyers could send a copy of a song to a friend, but the version stored on the CD owners’ computers would be disabled for as long as a friend’s copy was active.

“We’re not denying people access to the music,” Macdonald said. “We’re just trying to help them manage their access.”

The problem for the industry is that music buyers have grown accustomed to copying CDs onto their computers, mixing songs onto homemade discs and transferring tracks into portable MP3 players. Protected CDs set limits on all those activities, potentially forcing buyers to change or curtail some innocent types of copying.

To make the new discs more palatable, Adam Sexton of Macrovision Corp., which makes copy-protection technology for music and movies, says they should be loaded with extras, such as live recordings or music videos. Consumers should expect to receive more when they put the disc into a computer, not less, said Sexton, a marketing vice president.

Opponents of protected CDs say the discs themselves are far from foolproof. Their security measures have been flummoxed by the ever-changing software in CD recorders, circumvented by unorthodox wiring and even defeated with a felt-tip pen.

Wherever the labels have tried to reassert control over what people do with music, they have run into resistance.

For example, soon after the Recording Industry Assn. of America announced that it would sue those who share songs online, several file-sharing networks rolled out new versions that promised to hide users’ activities from the copyright police. Some also enabled users to block inquiries from Internet addresses associated with the movie and music industries and their anti-piracy contractors.

These steps threaten to make it harder for the RIAA to gather the evidence needed to sue a file sharer for infringement. But Paul Kocher, an expert on security and networks, said file sharers shouldn’t rely on cloaking techniques to hide them from a determined investigator.

That’s because file sharers have to expose their Internet addresses to exchange files, said Kocher, president and chief scientist of Cryptography Research Inc. in San Francisco. “Ultimately, there isn’t perfect anonymity for any of these participants.”

Fred von Lohmann, an attorney for the Electronic Frontier Foundation who is helping defend the Morpheus file-sharing service, suggested that the major labels legitimize file sharing instead of suing users. People could be offered the right to unlimited downloads from the catalogs controlled by the labels for $5 a month, he said, “an amount that virtually all file sharers would agree is eminently reasonable.”

The labels still would sue file sharers who refused to pay, but to von Lohmann, that would be easier to justify than suing the estimated 60 million people in the U.S. who share files today.

An alternative would be to add a surcharge to Internet access accounts that would cover the cost of unlimited file sharing. Jim Guerinot, who manages several rock bands and runs a record label in Laguna Beach, contends that a surcharge of less than $2.40 per month for each American online would generate about the same amount as the music industry’s profit from CD sales in 2001.

This approach would require Congress to get involved, passing legislation to authorize file sharing, to tax Internet providers and to distribute the proceeds to labels, music publishers and other copyright owners. In fact, numerous file-sharing companies have formed a lobbying group, dubbed P2P United, to promote the idea of compulsory licenses for their networks.

Label executives say creating a fixed pool of royalties would reduce the labels’ incentive to risk money developing and promoting acts. Music would become a commodity, making it hard to justify the current practice of spending different amounts to push different releases. And a government-imposed regime, they say, would slow the development of other, potentially superior models for online music.

Fundamentally, the labels have the same problem with compulsory licenses that they do with file sharing: It takes away the control they wield as copyright holders. And that’s just something the labels will have to get used to, said Griffin of Cherry Lane Digital.

“Art, music, expression are anarchistic,” he said. “Every time we exercise control, we lose. Every time we let go, the thing we fought becomes the thing that feeds us.”