Scary or awesomely exciting, this is the new face of the record business. Music, digitally recorded for decades, is tailor-made for cyberspace. Once scrunched into a manageable-sized computer file using various compression techniques, anything from arias to zydeco can slide effortlessly across the Internet to consumers’ ears, hard-drives, or a growing choice of portable digital music players. Stars—among them Canada’s Sarah McLachlan and Alanis Morissette as well as Britain’s David Bowie and America’s Tom Petty—are using the Web to communicate with fans in novel ways. Up-and-comers like Nickelback and Newfoundlander Damhnait Doyle (whose second album was available free online for a limited time last month), use it to introduce themselves. The five giant corporations that control 80 per cent of the global music industry—worth $60 billion annually—have taken notice. Edgar Bronfman Jr., who controls the world’s biggest music company, Universal Music Group, told a business audience earlier this month: “Music and the Internet are truly a match made in heaven.”
But the romance is bedeviled by the same characteristics that make music such a Net natural. In digital form, it can be duplicated in a few keystrokes. Since 1998, the popularity of the MP3 compression format (named after the standard-setting Motion Picture Experts Group)—and the wide availability of software to translate, or “rip,’’music from conventional compact discs into MP3 form—have fueled an explosive illegal trade in pirated tracks. Between June, 1998, and June, 1999, traffic in music files over the Internet increased 20-fold, becoming “the single largest traffic component on the Web,” according to Dermott O’Carroll, a vice-president of Toronto-based Rogers Cable Inc. “It’s even bypassed porn.”
Record companies face a huge challenge from the Internet—especially from digital pirates
Much of the credit for that dubious distinction goes to a young American. Shawn Fanning was 18 and at Boston’s Northeastern University when he wrote a program called Napster last year. Available free from a Web site of the same name, it lets users troll the Internet for each others collections of MP3s and download them. In one trial last week, Napster detected 6,890 collections around the Internet, with 804,802 music tracks available for download.
By far the largest concentration of such illicit archives is in North America—with many residing on large computers belonging to universities. Some are so massive they throttle other traffic. At the University of British Columbia, caches of g MP3s are blamed for half a dozen disruptions in computer | service this academic year, ranging from system crashes to e| mail that runs at a snail’s pace. In addition to those who | merely trade tunes for their own use, some entrepreneurial youths equipped with CD “burners”—the devices that copy files onto blank CDs—take orders for “custom CDs” of illegally downloaded music. The going price at one New Brunswick high school: $5, about a quarter of what a commercial CD costs when taxes are thrown in.
Dozens of commercial Internet sites offer other ways— most perfectly legal, others debatable so—to acquire music digitally. Streaming music, which plays directly over the Net through a computer’s speakers, can include promotional releases from the likes of McLachlan or Bowie (consumers are not supposed to be able to save these on their own machines, but software is available to do so). Other songs are available by download to keep. Tunes by lesser-knowns are often free; those by established acts can cost from about 35 cents to $1.80 a track.
One Web music giant—San Diego-based MP3.com, whose shareholders include Canada’s Morissette—has incurred almost as much wrath from the recording industry as Napster. It lets consumers choose from thousands of music tracks (mostly by unknowns) and have the songs burned into a CD, which is shipped to its buyer within 48 hours. Shoppers can also order regular CDs by established artists. So far, no problem. But according to the record industry, two other MP3.com services violate copyright law. One lets people who buy CDs listen immediately, rather than wait for the disc to arrive. Another lets them “upload” music from CDs they already own to MP3 .com, where they can access the tracks later f from any Internet connection. The Washington-based Recording Industry Association of America says the company illegally copied tens of thousands of popular CD titles onto its own computers, to avoid having to do so individually each time a consumer purchased or uploaded them. MP3.com insists it has done nothing wrong.
How badly all of this will harm musicians or the hugely profitable recording giants is a matter of intense debate. “I don’t think there’s any question artists are getting hurt,” asserts Vancouver’s Bruce Allen, who manages Bryan Adams and Martina McBride, among other stars. But, “Are we bleeding from the wrists and ankles?” says David Basskin, president of the Toronto-based Canadian Musical Reproduction Rights Agency, which represents Canadian music copyright holders: “I don’t think so.” Still, the stakes are escalating. Legal online music sales are running at $1 billion (U.S.) a year in the United States, says Bronfman, and will quadruple by 2004.
Music causes the most traffic the Net—‘It’s even bypassed porn’
Those sales are mostly in conventional CDs. But the giants of the music business have not waited for the download bloodletting to become critical to respond. The RIAA has sued both MP3.com and Napster and launched a lobbying campaign to have universities and colleges block access to Napster on their networks. According to a Web site put up by students opposed to it, the RIAA’s campaign has been successful at more than 130 campuses, including Ottawa’s Carleton and the universities of Guelph and Western Ontario. Meanwhile, the Toronto-based Canadian Recording Industry Association sends up to 40 letters a week to the Internet service providers hosting illegal MP3 music sites, threatening legal action if the files are not removed from the Net. But the effect of such measures is questionable. The RIAA claims to have reduced the amount of illegal music on college sites by 10 per cent, hardly a mortal blow to the digital pirates.
At the same time, the music majors have been working with consumer electronics manufacturers and software companies since 1998 to develop technical measures to foil illegal duplication. The first installment of the Secure Digital Music Initiative was released last July. It applies only to digital music downloaded directly to computers or new-generation personal digital players like the Sony Music Clip or RCA Lyra. In essence a set of standards, SDMI requires record companies and electronics firms to use compression formats and hardware that limit users to making no more than four copies at a time of any protected track. “You can make convenience copies for yourself,” says Larry Kenswil, president of Universal Music’s eLabs. “You just can’t copy at will for friends.” A second phase of SDMI is supposed to make it harder to copy all new music tracks—including those on CDs—but work has just begun.
Still, all the major labels plan to begin delivering digital music directly to consumers during the course of this year. Some have already dipped their toes in the surf. GetMusic.com, a joint venture between Universal and Germany’s BMG Entertainment offers music from both companies’ catalogues for download. Warner Music Group (whose announced merger with Britain’s EMI Group PLC is expected to create the world’s biggest music company when complete) and Sony Music Entertainment sell music online through their jointly owned CDNow.com. Sony and EMI, meanwhile, are involved in a plan to install kiosks in U.S. music stores, where consumers will be able to download tracks directly into personal music players.
While the majors plot their cyber-debuts, individual artists, software makers and a handful of record labels are pioneering radical new ways to get music to fans. Cape Breton fiddler Natalie MacMaster recently performed two skirling medleys that were recorded and posted on the Web site of music retailer HMV, where e-buyers can download them for $2.99. Embedded codes ensure that only a credit-card holder with a Canadian address can download the music, and that it can no longer be downloaded once the offer expires.
The arrangement typifies the new role the Internet is playing in promoting performers. “It’s become direct marketing right to your audience,” says Nickelback manager Bryan Coleman. The Vancouver band’s song Leader of Men has been downloaded tens of thousands of times, Coleman admits, without any return to the artists. But: “That’s 30,000 or 40,000 kids that have heard at least one track off the album.”
Until now, the Internet has been less successful at selling entire albums. Even David Bowie failed to move more than a few thousand copies of his CD Hours, when he initially made it available online from his own Web site (it was later released through conventional channels). One reason may be the long download time required for an entire CD over anything less than a high-speed connection.
But some visionaries believe the Internet’s musical future lies closer to MacMaster’s demonstration than Bowie’s. Pollster Allan Gregg, who, with partners, sank $25 million last year into the creation of Canada’s largest independent record company, Song Corp., predicts that in future the same downloadable music track may be sold at several different prices—with a lower tag entitling the buyer to fewer plays than a higher one. Software embedded in the music tracks will control how many times or for how long they can be played before reverting to digital dust. Universal’s Bronfman foresees digital music streaming freely to wireless Internet receivers in automobiles where “you will be able to press a ‘buy button while listening to a song you like.” Nearer the horizon are online subscription services, giving consumers access to vast libraries of music for varying monthly fees. “Pop music might be like basic cable, relatively cheap,” suggests Universal’s Kenswil. “But if you want the hottest hits of the day, it’s going to cost more.”
There may be other benefits for audiophiles. Kenswil predicts that future online fidelity will surpass CD quality. The lower cost of offering and selling digital files compared with plastic discs, moreover, holds promise for those with minority tastes such as bluegrass music, and fans of older artists dropped by their record labels. Competition from downloads (still less than one per cent of all music sold) may even force down the cost of conventional CDs.
As e-music thrives, will bricks-and-mortar record stores perish? HMV Canada vice-president Andrew Pollock doesn’t think so. “Retail,” he insists, “still offers the experience of seeing the product and taking it home to bear it the very first time.” And downloading, Pollock adds, will never become the social mainstay that store cruising is to mall-rats everywhere. But other industry players aren’t so sure. “I find it difficult, in March, 2000, to think there won’t be some physical exchange of goods,” muses Deane Cameron, the president of EMI Music Canada. “I may have a different answer 10 years from now.”
Much of the industry’s optimism for legitimate online music sales depends on first defeating—or at least containing—the legions of Napster-inspired pirates. “If that doesn’t get fixed,” says Gregg, “all bets are off.” And the fix is far from a foregone conclusion. Devices that limit what their owners can do with music stored on them “may work, they may not,” suggests Eric Scheirer, a music researcher at the Massachusetts Institute of Technology’s Media Lab. “They may not be acceptable to consumers.” Experts already say there will be compatibility problems among the SDMI technologies used by different major labels: one player may not be able to handle them all. Then, too, the entire library of existing CDs, unprotected by SDMI, remains as vulnerable as ever.
‘Artists are getting hurt,’ says Bryan Adams’s manager
Some critics applaud the potential shriveling away of music giants they believe have too much control over artists. “The danger the Internet represents to the industry,” says MIT’s Scheirer, “is it gives artists new leverage to move away from labels and distribute their music in other ways.” Up to a point, anyway. Vancouver’s Allen, for one, agrees that e-music gives stars an extra card at contract time. “Established artists are going to say, ‘You guys can have traditional distribution,’ ” he predicts, “ ‘but we’re going to withhold Internet distribution.’ ” But cross-town rival Terry McBride, who manages Sarah McLachlan, adds: “I laugh at the suggestion that MP3 was supposed to be a bonanza for young artists. You still have to promote, market and tour”— all activities that rely on record company expertise and bankrolls. If anything, argues Kenswil, “artists will need record companies more than ever, because they need to differentiate themselves on the Internet.”
In the end, the marketplace will be the judge. And many in the music industry express the fervent—if unscientific—faith that most consumers will eventually agree to pay the piper when they call down the tune. “Once downloadable music is legally available, easy to use and not very expensive,” says CRIA president Brian Robertson, “I think it’s going to be quite attractive to those who are now stealing.” Comparing the Napster phenomenon to the Seventies fad for dubbing to tape cassettes, HMV’s Pollock notes: “When I was going to school, I taped albums. When I left, I stopped.”
To the musicians of Nickelback, many of whose young fans are of prime Napstering age, the outcome is anything but academic. “I don’t think people realize,” says band member Peake, “that if they don’t support the CDs and the bands they like, musicians won’t be able to produce another album. They’ll go broke.” It is a riff other performers, managers and labels echo. But it has yet to catch on with legions of online music fans.
Easy to download, harder to carry
It’s not that easy to go portable with digital music. Downloading it to a computer is simple enough, and many people are content to play their sounds through a computer's speakers, or plug it through the stereo. Some people use a CD “burner” ($260 and up) to copy music files to discs for a portable CD player. Even linking the computer up with a purpose-built portable digital player just takes a cable and software. But the biggest hurdle facing mass acceptance of digital players now, says Van Baker, a San Jose, Calif.-based analyst with research firm the GartnerGroup, is the lack of an industry standard for compressing and decompressing digital tunes delivered over the Internet.
Right now, MP3 is the dominant format, but because it lacks security features-meaning the music can easily be pirated-major artists have, for the most part, shunned it. More than half-a-dozen formats are out there, says Baker, including Windows Media, ATRAC3 and Liquid Audio. Until that number is narrowed down to one, or at most two, secure alternatives to MP3, many consumers will balk at buying a portable for fear of wasting their money on the Betamax of digital music players. “Ultimately,” says Baker, “what you end up with is confusion in the marketplace.”
Most of today’s digital players hold between 30 minutes and three hours of music. The industry leader continues to be the Rio (from $275) by Diamond Multimedia Systems Inc. of San Jose, Calif. But the Rio, which plays only MP3s on its built-in memory, has more competitors today than it has ever had. Among them: Sony Corp.’s Memory Stick Walkman ($599, available this summer), which plays MP3 and ATRAC3, and RCA’s Lyra ($329), which plays MP3 and Windows Media. “Rio’s share is coming down, definitely,” says Baker, “but it’s still the lead dog in the pack.”
www.mp3.com: Big-name CDs for sale; custom
CDs and free downloads from lesser names; controversial user-accessible
www.mjuice.com: Claims to be original legitimate MP3 download
site; leans heavily to young bands, hip-hop, rock and
www.GetMusic.com: CDs, downloadable song tracks and videos, backed by giants BMG and Universal.
www.emusic.com: All-downloadable singles and albums in a variety of genres; some freebies. www.CDNow.com: Discount commercial CDs, custom CDs and downloadable tracks that the site says can’t be further copied.
www.artistdirect.com: Performer-oriented site, claims to have music and info for more than 96,000 artists.
www.farmclub.com: Online talent-search and showcase site; upload your garage band.
www.rioport.com: All-downloadable free singles; subsidiary of MP3 portable-player maker Diamond Inc.
wwwAtomicPop.com: Youth-oriented, underground and world-beat site.