Apple to Unveil Music Service
Apple Computer Inc. unveils its online music service today -- an initiative that can either give a much-needed boost to the beleaguered record industry or become immediately irrelevant.
Cloaked in secrecy, Apple’s highly anticipated service has generated a healthy buzz among record label executives and music fans. Industry officials who have seen Apple’s fee-based service believe it is good enough to lure consumers away from free sources of music online, which recording companies have tried to shut down with lawsuits.
But a federal judge in Los Angeles dealt the entertainment industry a stunning blow -- and stole Apple’s thunder -- by unexpectedly ruling Friday that two leading online networks that let users copy music and movies for free aren’t violating copyright laws.
Although U.S. District Judge Stephen V. Wilson held that making unauthorized copies of songs and movies on file-sharing networks is illegal, he ruled that the companies behind the Morpheus and Grokster networks were not liable for their users’ piracy because they do not monitor or control what people do.
The decision could send the wrong message to consumers, said analyst P.J. McNealy of research firm GartnerG2, and that spells trouble for Apple Chief Executive Steve Jobs as he tries to get his new service off the ground.
“The ruling could completely undermine any momentum Apple hoped to have coming out of [today’s] announcement,” McNealy said. “It makes it monumentally more difficult” to compete with file-sharing systems “than it was last week.”
Apple has tried to keep the details of the service under wraps until it reveals them in a news conference in San Francisco today. Sources, however, said the company will offer songs that owners of Apple computers could easily locate in a vast online library, download and move to iPod portable music players.
Apple hasn’t disclosed how much it has invested in the service, which has been in the works for more than a year. But if the venture falls flat, it would cost the Cupertino, Calif., company more than money -- it could cast a cloud over Jobs’ vision of Apple’s computers as hubs of digital entertainment in the home.
The service will be available only to Apple computer users at first, sources say, although it may expand relatively soon to encompass the far larger market of computers that run on Microsoft Corp.’s Windows.
Music industry executives have praised the Apple service, saying it’s easier and more inviting than any of the other online music outlets they’ve sanctioned. But at the labels’ insistence, the Apple service will have a layer of complexity that’s missing from Morpheus, Grokster and their ilk: The music files won’t be in the MP3 format, which can be easily copied, burned onto a CD and moved to many digital devices. Instead, the files will be scrambled to deter piracy.
The new format means Mac and iPod owners will need new software to play music from the service, which sources say will be sold for about $1 per song. The service will be integrated into an updated version of Apple’s iTunes software, enabling users to search for, buy and download songs through the same program they use to organize and play music on their computers.
Unfortunately for Apple, that’s the same functionality offered by software from Morpheus, Grokster and similar file-sharing systems. And their songs are free.
One advantage for the companies offering authorized copies of songs online -- including MusicNet Inc., FullAudio Corp., Listen.com Inc., Streamwaves and Pressplay, which is jointly owned by Universal Music Group and Sony Music Entertainment -- is reliability. Files are properly labeled, the sound quality is consistently high and the services don’t flood users with intrusive advertising or “bonus” software, in sharp contrast to Kazaa and other leading file-sharing systems.
“Kazaa is full of pop-up ads, spyware, unreliable performance, decoy files, bad connections and even viruses,” said Phil Leigh, an analyst with investment bank Raymond James & Associates. “So it’s kind of like bathtub gin. Don’t drink it.”
Although the file-sharing companies created some of these problems in their thirst for revenue, the labels and studios have worked increasingly hard to gum up the networks with bogus versions of new songs and movies.
Another advantage that some subscription services have over the file-sharing systems is programming. Rather than trying to replicate the simple search-and-retrieve model of Morpheus and Grokster, companies such as FullAudio, Listen.com and MusicMatch Inc. offer songs in thematic packages that attempt to improve the process of discovering music.
That’s one area where Apple may not be trying to compete, though. Sources say Jobs rejected suggestions that he offer low-priced packages of music that subscribers could rent or play on demand from online jukeboxes, opting instead for a pure downloading service.
Some analysts said the entertainment companies have to do more to help the fee-based alternatives. For music, they stressed the need for lower prices and less-cumbersome restrictions -- two factors controlled to a large degree by the labels.
One path the Recording Industry Assn. of America and the Motion Picture Assn. of America are certain to follow is to continue the legal battle against file sharing and “peer-to-peer” copying. In addition to appealing Friday’s ruling, many record company executives want to sue individual users of Kazaa and similar systems.
Whether it helps the industry, however, is an open question.
“Do they really believe suing college students will stop peer-to-peer?” asked Jorge Gonzalez, founder of file-sharing site Zeropaid.com. “My answer to that is no, because college students will find ways around it. The tides will change too fast. They’ll have to sue too many people.”
Times staff writer Alex Pham contributed to this report.
