Online Music Firms Debate Piracy Threat

It was easy to start an argument this week at Webnoize ‘99, the annual conference in Century City about the convergence of music, new media and the Internet. All you had to do was ask these two questions:

With the proliferation of free music available on the Internet, will consumers ever be willing to spend money to buy that music? And if not, can record companies do anything to force them to pay up?

A host of Internet sites--from CDNow to Amazon.com to CheckOut.com--have sprung up in the last few years to sell music on the Web. Those transactions, the online equivalent of walking into a Tower Records store, end with a compact disc arriving in the mail.

But the real online music revolution that many expect--and some fear--will come when customers can go to a Web site, select the songs they want to buy and download them directly onto blank compact discs in their CD-ROM drives.

Record industry executives at Webnoize agreed with predictions by New York-based market researcher Jupiter Communications that 15% of all music will be acquired this way by 2003. But they squared off against online music start-ups over how much of that music would be legally purchased and how much of it would be pirated.

Representatives from about 400 companies attended the conference, and Internet retailers tried to calm the fears of the old guard. Amplified, an Atlanta-based digital music wholesaler that already provides services for downloading songs onto computers, commissioned a survey to find out what people would be willing to pay for downloaded music. The answers, said Amplified President Wayne Parker, are encouraging: Consumers on average are willing to pay $1.45 for a typical song, $2.46 for their favorite song and $8.78 for an entire album, according to the survey.

Speed, Convenience Driving Move to Web

It’s not low prices that make the prospect of downloading music attractive to consumers, said CDNow Chief Executive Jason Olim. Rather, the appeal stems from the speed and convenience of sampling songs and then buying them without having to leave the house or wait several days for mail-order delivery, Olim said. Customers would even be willing to pay extra for special options to customize their downloaded CDs, such as selecting the order of the songs or adding live tracks on the end, he said.

But despite such assurances, the record companies that control the $40-billion-a-year music industry are wary of embracing a technology that makes it easy for people to get practically any song for free.

Many songs are available on thousands of Web sites as so-called MP3 files, so named for the compression technology that allows computers to download CD-quality songs on regular PCs. Nothing about the technology prevents its use for legitimate online sales, and some bands have made a few songs available for downloading for a couple of bucks or less. But the majority of songs available as MP3 files are pirated.

To listen to an MP3 song, all a music fan has to do is download a free MP3 player from one of several Web sites, then search for songs to play. The pirated songs are posted by hackers who find ways to access the files without supplying credit card information, or by individuals who take songs from their CDs and transfer them to the MP3 format.

The Recording Industry Assn. of America is working with computer, software and consumer electronics companies to spur development of a technology that would prevent music files from being copied illegally. Until such technology is developed, music companies aren’t comfortable releasing vast amounts of legitimate music files on the Net.

Total Halt to Piracy Said to Be Unlikely

But critics at Webnoize said the record companies have unrealistic expectations of finding any technology that will stop all piracy.

“If you don’t want to have a piracy problem, put your digital master in Ft. Knox and get the army to guard it,” said James Burger, an attorney with Dow, Lohnes & Albertson in Washington who represents computer, software and Internet firms that are involved in the recording industry’s anti-piracy initiative.

Even that draconian step wouldn’t solve the problem. Well before the Internet gave rise to pirated MP3 files, bootleg CDs were freely available in Asia and even in the U.S., said Robert Ezrin, chairman of Santa Monica-based Internet music start-up Enigma Digital.

“Technology alone will not fix the problem,” said Talal Shamoon, vice president of InterTrust Technologies, a Santa Clara, Calif., company that makes software to prevent unauthorized downloads of music files. “Business practices alone will not fix the problem. Nor will law and policy. It will take all of it to bring the system back into equilibrium.”

*

Times staff writer Karen Kaplan can be reached at karen.kaplan@latimes.com.