Rights, Piracy, and Politics

The flexibility and portability of MP3 has left the recording industry wondering where to turn, unsigned musicians newly empowered, signed artists with mixed reactions, and fans making out like bandits. The debate centers on a quest for the right balance between exploiting the promotional power of this new medium and protecting the intellectual copyright of artists and labels.

MP3’s Impact on the Recording Industry

In July of 1999, the International Federation of Phonographic Industries (IFPI) estimated that around three million tracks were downloaded from the Internet every day, most of them without the permission of their copyright holders. The Recording Industry Association of America (RIAA) claims to have lost as much as $10 billion through music piracy in 1998. It’s not just record company executives and artists who stand to lose; the digital music revolution has implications for everyone in the channel: record store owners, CD pressing plants, and even truck drivers. Of course, most signed artists resent having their intellectual property illegally distributed as well. Well-known artists ask the RIAA every day to clamp down on pirate sites hosting their music (although it’s also the case that many signed artists are much more supportive of MP3 than are their labels). In the rest of this chapter, we’ll take a look at some of the many difficult issues currently being faced by the industry and music lovers alike, and take a look at some of the techniques the industry is proposing to deal with the situation. The legal nitty-gritty of MP3 is discussed in more detail in Chapter 7.

File-based digital audio changes the game

For nearly a century, the record industry has held the distribution of musical content in a hammerlock. If you wanted to own music, you had to do it on their terms, purchasing music distributed on the media they had officially blessed, and only through their approved channels. While the industry’s stranglehold on music distribution slipped for the first time in the 1950s with the advent of reel-to-reel tape decks, and even more in the ’70s with the popularization of the cassette tape, tape technologies had a major Achilles’ heel: analog copies always lose a little quality as successive copies are made—a third-generation copy of a well-recorded LP doesn’t sound so well-recorded anymore. In addition, the person making the copy is burdened with having to create a new physical instance for each person to whom she wants to distribute her tunes.

I don’t have to tell you that MP3 has changed all of that. Digital copies (of anything) are virtually bit-perfect, so no quality is lost in successive generations—a 74th-generation copy sounds every bit as good as the original. And then there’s the Internet. Because digital music can be file-based rather than media-based, a single file representing any kind of content can be placed on a web or FTP server and made available to the entire world at once. The burden of making physical copies, which naturally limited the rampancy of tape-based copies to a large extent, has vanished.

But until recently, there’s been another “gating factor” that has limited the spread of file-based audio distribution: size. While it’s always been possible to rip an audio track from a compact disc and make it available on the Internet, doing so was impractical because uncompressed audio consumes around 10 MB per minute of storage space. Few people had the available bandwidth or storage space to be whipping 30 MB pop songs around.


If all of us had Internet connections with unlimited bandwidth and hard drives large enough to store terabytes or petabytes of data, MP3 would be unnecessary. Limited bandwidth and small hard drives are the only reason MP3 even exists (or, at least, the only reasons it’s become popular). Ironically, the MP3 phenomenon hit at a time when both of these issues were being addressed at a rapid clip. More and more, people are having DSL or cable modem connections installed in their homes, and 36 GB hard disks are available for a few hundred bucks at this writing. If the trend continues, and there’s no reason to think that it won’t, one can almost imagine audio compression in general becoming obsolete due to a lack of demand. But for the foreseeable future, limited bandwidth and modest hard drives are a reality, so digital audio compression is a necessity.

If you can’t beat ‘em, join ‘em

Will the recording industry be able to put an end to MP3? If not, how will it cope with the phenomenon? There are several factors at work here. While people commonly claim that the cassette revolution had little impact on the industry, the truth is that, for whatever reason, sales today aren’t as great as they were in the ’70s. Of course, there are several reasons for this, such as the fact that CDs cost twice what LPs used to cost, and the fact that we no longer seem to have anything like the giant mega-stars of the ’70s. Pink Floyd’s “Dark Side of the Moon” stayed in Billboard’s Top 100 for the better part of a decade. While we still have stars, the days of the Beatles and the Stones are, most likely, gone for good. Of course, the industry feels that illegal MP3 downloads are making these problems worse.

But a 1999 report from industry analyst Jupiter Communications concluded that only three percent of consumers would be purchasing downloaded music by the year 2003. While the industry has good reason to be concerned, some see that last factoid as a wake-up call to the industry—either adapt to a world in which downloadable copyrighted music is a reality, or be left out altogether. If this projection turns out to be true, the industry will either have to find a way to crush unprotected MP3 distribution (unlikely), or accept the fact that MP3s and other digital audio files will continue to be distributed without hope of a significant revenue return.

In the short term, the RIAA launched a campaign to start shutting down pirate sites. For the most part, this has consisted of cease-and-desist letters being sent to Internet service providers, warning them to remove illegal files from users’ sites or face prosecution (see Chapter 7 and Chapter 8). ISPs are generally quick to oblige (and are bound by law to do so). But even with the best lawyers in the land at their disposal, the industry has found that trying to crush pirate sites in the midst of a phenomenon this large is like playing a vast and endless game of Whack-a-Mole—eliminate one site and six others spring up in its place. Even with the cooperation of ISPs, the task is futile and the industry knows it, though they are still obliged to continue trying.

Beat ‘em: The Secure Digital Music Initiative (SDMI)

In the face of this apparent futility, the industry has decided to approach the problem from another angle: Chop it off at the knees. Since the sprawling and largely ungovernable Internet cannot be easily controlled, the industry has decided to work with its partners and make it harder to create copy-able digital music files to begin with. By colluding with the makers of compact discs, sound cards, and software vendors, and by embedding special codes into newly created CDs, the industry hopes to get as many people using copy protection-enabled equipment and source material as possible.[4] According to a quote made by SDMI Executive Chairman Dr. Leonardo Chiariglione in Billboard magazine:

You will be able to play your MP3 files on the portable devices of today, but at a certain point in time, which may happen quite soon, the record companies will start embedding some signals into their future content so that it can become playable only on SDMI devices.

As you’ll see throughout this book, it is logically and practically impossible to create a 100% secure system, since savvy users can always trap music as it’s heading out of the computer and toward the sound card. The industry’s goal, then, is to create a fence high enough that the vast majority of users will lack the technical know-how or wherewithal to try and jump over it. This plan, known as the Strategic Digital Music Initiative (SDMI), is already much-delayed in its implementation at this writing, and is, many feel, doomed for failure. Only time will tell. More on SDMI can be found in Chapter 6 and Chapter 7.

Join ‘em: MP3 and electronic commerce

If illegal MP3 distribution cannot be stopped or even significantly curtailed, then the industry may learn to embrace the new paradigm and accept the fact that its role is changing in the digital world. Major labels will most likely come to appreciate the “buzz” effect that can be created by posting tracks on their own web sites. Releasing a few good tracks from an upcoming album by a big-name star is likely to result in more sales and more word-of-mouth. Already, we’re beginning to see the first glimmerings of this phenomenon, as major stars such as Tom Petty, Billy Idol, The Grateful Dead, and Alanis Morissette embrace the format.


The industry faces a major obstacle in persuading hardware vendors to collude with them in making computers secure against music piracy: Consumers want the ability to copy music freely. If one hardware vendor adopts SDMI and another does not, many consumers are simply going to buy equipment from the one who does not. That’s quite a disincentive to vendors considering implementing SDMI in hardware, and without global and enforced legislation (unlikely), the industry faces an uphill battle. Nevertheless, Sony has already developed a pair of technologies, called MagicGate (for use in devices) and OpenMG (for use in PCs), that guarantee that a signal can be moved from one place to another, but not copied. Of course, Sony is also a record label, so their desire to move on this front is understandable. But unless they can get other vendors to adopt the same or similar technology, savvy consumers will simply avoid these products.

But the industry doesn’t have to give away MP3 files. What’s wrong with selling them? One can imagine a future in which fans can log into a label’s site and download tracks for a buck a pop, selecting only the songs worth purchasing and (happily) ignoring the duds. Whether this is managed via micropayments or ongoing accounts with labels, there’s a big problem here: Once a fan has purchased a file, what’s to stop him from hacking it into an unprotected version, placing that file on his own site, and making it available for download—enabling infinite copying of the unprotected version to the rest of the world? SDMI and audio formats with built-in security (see Chapter 9) will help here, but again, it only takes one user to break or somehow get around the security mechanism, and the file is once again in the clear and released into the wild. Right or wrong, most people are going to download the free, unprotected version rather than the 99¢ version when given a choice. One begins to appreciate the industry’s dilemma.

So, if the industry decides to go for it and start selling music online in a big way, how will they do it? First of all, due to its lack of security, MP3 is very badly suited for the job. Online sales of digital music are likely to come in some other file format, and more likely in several of them. No big deal—the flexibility of software makes it easy for users to store lots of formats on their hard drives, and probably even to play them all back through the same player. Regardless, you can practically rest assured that whatever formats are used will be SDMI-compliant. Taking that as a given, here are the models:


Because credit card charges always incur a transaction fee, low-cost items (such as individual songs) are more awkward to sell online than are sweaters or beer. The notion of micropayments is that users maintain an account with an independent organization. Users may load up the account with money in advance, as with a phone card, and charge small purchases against it. Record labels may also run their own micropayment schemes.

CD distribution

Because the production of compact discs is relatively inexpensive, users may be able to order up a bunch of songs at once and have them pressed to an audio CD, which will then be mailed to the user. Because the cost will be higher, standard credit card transactions will be feasible. This model, in fact, has already been used by companies such as Liquid Audio (http://www.liquidaudio.com), though they have not managed to reach a significant cross-section of the population. Such a model run by a major label would likely have more success.


In this model, users would pay a flat monthly or yearly fee and be entitled to download the latest hits from a variety of artists selected by the user or the label, in whichever format the label chooses to work.


Perhaps the simplest model, and the one most akin to the shareware model computer users are familiar with, is to simply give away a track or two from upcoming albums, with the hope that users will like the tracks enough to purchase the entire CD, either online or from a local record store.


Controversial for good reason, the MP3 advertising model is an extension of the banner ads on web pages with which we’re all familiar. Each downloaded MP3 file comes with a brief advertisement embedded into the first few seconds, which is the first thing the user hears. While this is essentially similar to what we get on the radio every day, most users dislike the notion of having their personal MP3 collections riddled with ads. Nevertheless, this model is already in use by Amp3.com, who has managed to sign a number of big-name artists on to the program.

“Guilt sites”

This rather odd idea, which has been tossed around by many people in many forums, has yet to see a working model. The concept is that many users want to enjoy the free trade and exchange of MP3 files, but still want to pay a royalty back to the labels and artists who made the music possible. "Guilt sites” would allow people to check in anonymously and say, “I’ve decided to actually keep and listen to 24 of the 113 files I downloaded this month. Here’s a list of the songs. Please accept my $24 in payment.” A fascinating idea, but one which the recording industry is unlikely to bless.

The Artist’s Turn

Great talent does not automatically end up at the top of the music business. All over the world, millions of talented, creative artists are playing music for their friends, or in small clubs, or even on tour, trying to make a name for themselves. You think that a talented artist will automatically end up with a recording contract? Think again. The record business isn’t necessarily looking for talent... but that’s another story.

Unless you’re scouring the local newspaper and heading off to local clubs night after night looking for something fresh, you may never hear thousands of great musicians and songwriters. Unless an artist is being spotlighted by the recording industry, mass exposure is almost impossible for an artist to get.

The next wave of self-publishing

The MP3 revolution addresses this concern head-on. Because any musician with a computer can encode their own songs to MP3, they can potentially expose themselves to the world at large without ever having to sign a recording contract. They can go directly to the people, bypassing the industry as we know it. This possibility is analogous to the great desktop publishing revolution of the ’80s and the web publishing revolution of the 1990s—suddenly, everyone has the ability to publish their own music (no matter how bad or how good) without help from “the man.”

Unsurprisingly, this—perhaps the single most liberating and legitimate aspect of the MP3 revolution—is seldom if ever mentioned by record industry executives when talking about piracy problems. An artist signed to a label generally does not have the right to post his own songs to the Internet, because the label owns the copyright to those songs. But an independent, unsigned artist can do whatever she likes with her own tunes. And while that represents a lesser threat to the industry, it represents a threat nonetheless; the prospect of a burgeoning “industry” that runs itself, outside of the RIAA’s purvey, is at hand. And unlike piracy issues, there isn’t a thing the RIAA can do about the rise of self-publishing musicians. Sites like MP3.com represent this concept in its full glory. Rather than requiring users to surf the Web for scattered, legitimate downloads by unsigned artists, users can search through archives of thousands of unsigned artists all in one place.


While MP3.com is focused on and dedicated to the promotion of unsigned artists, the site does indeed enjoy an arrangement with The American Society of Composers, Authors, and Publishers (ASCAP), which allows MP3.com to stream (not offer for download) the works of musicians signed to labels. MP3.com’s relationship with ASCAP is outlined at http://www.mp3.com/ascap/.

Do the math: A good deal for artists

There’s more than just exposure in it for the artist. Let’s do the math. According to one artist who’s been struggling to make it in the business for years, a band who sells 150,000 CDs through a medium-size label will still not be generating profit for themselves—yes, there’s that much overhead in being associated with a label.[5] Furthermore, only around 5% of signed artists end up turning a profit—signing with a label is not necessarily a “ticket to ride.” But if an artist presses his or her own CDs, and sells them for $10 each over the Internet, they can make a profit by selling only 15,000 copies. This artist would make $5 per CD in profit, netting $75,000 in sales. And, in fact, this is exactly what MP3.com allows artists to do, using their D.A.M. CD service (see Chapter 8 for details) .

Why MP3 Is Here to Stay

As you’ve probably heard, MP3 isn’t the only digital audio compression format out there. As you’ll see in Chapter 9, there are numerous alternatives to the format available to the public. In fact, many of them achieve even better compression ratios and/or better sound quality than MP3.

Not the best, but good enough

So why hasn’t the public moved toward competing formats in a wild rush? Even MP3’s most staunch supporters readily admit that MP3 is a less-than-ideal solution from an audiophile perspective. But like Betamax or the Macintosh, history proves that the best technology doesn’t always win. The VQF and AAC formats are great examples of this in action: both offer superior quality, and often, smaller file sizes than MP3 as well.[6] Nevertheless, MP3 is entrenched—you might say that MP3 is to the Internet audio industry as Windows is to the operating system market—functional and workable, but not the ideal solution, even though the depth of its penetration practically guarantees that it isn’t going anywhere anytime soon.

More often than not, standards are set by the technology that establishes a strong user base first. And establishing that user base has as much to do with marketing, wide availability, and ease-of-use as it has to do with quality. And history also shows that a superior technology doesn’t just have to be a little better in order to turn heads—it has to be way, way better. While some of MP3’s competing formats are better than MP3, the fact of the matter is that MP3 is good enough. At decent bitrates, it sounds great, and the compression ratios are perfectly acceptable to most people. While some people make the point that the public will migrate to another technology as soon as something better comes along, this is not proving to be the case. Excellent alternatives do exist, but they’re not taking hold (at least, they’re not as of early 2000). For another format to surpass the momentum of MP3, it would have to have all of the following attributes:

  • Smaller file sizes

  • Superior audio quality

  • Be free and unprotected

Ironically, it’s that third point that makes all the difference. The first and second points are already satisfied by other file formats and codecs. But the public wants what the public wants, and they have spoken very clearly: they want lots of choice, available source code, and freedom from copying restrictions. The fact that this also means a huge headache when it comes to protecting intellectual property is another matter.

The source, Luke, use the source

Another important key to MP3’s popularity is the fact that it’s highly available. Rather than hanging from the awnings of a single company, literally hundreds of MP3 encoders and players are available for virtually every operating system under the sun. And, of course, there are millions of MP3 files out there. Most people don’t have the time or the inclination to evaluate all the competing formats—they go with what works.

But perhaps most importantly, Fraunhofer and Thomson have made sample code available to the world. As you’ll see in Chapter 7, that doesn’t mean the MPEG codec is open source exactly (technically, developers still owe licensing fees to the codecs copyright holders), but it does mean that it’s been possible for competition to take root and for a multiplicity of approaches to flourish. From the most complex and exacting command-line applications to dirt-simple, all-in-one GUI applications, a quick search of any MP3-related site will uncover as many approaches to MP3 encoding and playback as there are types of computer users. That kind of diversity has a way of generating a deep, grassroots kind of spirit around a technology—one need look no further than the amazing success of Linux to witness the kind of results that can arise in an open, “biologically diverse” environment.


Among the contenders to MP3 is Microsoft’s own digital audio compression format, Windows Media. To be sure, Windows Media does deliver good sound at much smaller file sizes than MP3 (at the lower bitrates).[7] Windows Media offers security features for artists and labels who want to take advantage of it. It’s built-in streaming features make it competitive with MP3 and RealAudio simultaneously. But the real kicker, of course, is the fact that Windows Media is built into later versions of Windows, giving it a level of direct access with which no one can hope to compete. But at this writing, Windows Media was not gaining any kind of serious buy-in from users (though that doesn’t mean it never will). Think about that: if not even Microsoft can break into a market it desperately wants to occupy, then it’s a pretty safe bet MP3 will be sticking around for a good long time. MP3 is in a position relative to digital audio compression that Microsoft itself is in relative to operating systems—it got in on the game early and established a strong user base, making it the standard. And standards have a way of remaining standards (imagine what would happen if you purchased a new toaster and it came with an electrical plug that didn’t fit your wall sockets). Windows Media and other competitive codecs are covered in Chapter 9.

“Open source” music

To be sure, there are a handful of bands who have adopted the “open source” approach to music. The Grateful Dead is probably the most famous example of this force in motion. For decades, attendees at Dead shows were not patted down for hidden microphones; rather, taping of live shows was actively encouraged by the band and its management. The Grateful Dead realized that when you encourage a meme to spread and make your fans feel like they’re an integral part of the process, the fans become loyal to the family; the Dead always sold out their concert venues. While industry execs still fear that giving things away means cannibalizing their own business, the important lesson is that if what you give away is good, then people want more of it, not less.

Today, with the Dead a thing of the past, this spirit lives on at sites like http://www.deadabase.com, where users can trade MP3 versions of all those live shows. The only restriction placed on people downloading tracks is that they aren’t allowed to profit from them, even by selling ad space on their sites. In subsequent years, bands such as Phish, Metallica, the Black Crowes, and the Dave Matthews Band have all jumped on the “open source music” bandwagon, although this always applies to tapes of live shows rather than of albums.

Comparison between the MP3 movement and the open source software movement doesn’t stop there. Some argue that the entire history of music is open-source-like, noting that Homer’s Iliad and Odyssey were composed collectively over the years by “skilled Greek emcees,” and that the modern practice of resampling, remixing, and audio collage forms a perfect audio analog to the open source movement.[8]

Give the people what they want

Finally, there’s the fact that MP3 is unprotected. Ironically, it is this fact that labels and signed artists fear the most—any MP3 file can be duplicated a bazillion times, traveling from one user to the next like an unrestrained virus. Right or wrong, millions of MP3 users are interested in the technology simply because it’s so easy to get “free” music. While the record industry struggles to introduce protected formats that will allow us only to copy our own music, for our own use, the public apparently wants just the opposite—a simple format that works the way they expect the rest of our computer documents to work, not one that imposes restrictions and limitations on who can get at the contents of a particular file, and on what machine.

Protected audio compression formats are going to make some headway, because the industry is going to make sure that they do. But there are too many people who appreciate MP3 precisely for its openness for it ever to go away. While some songs may eventually become available only in protected formats, people will continue to use available MP3 tools.

Biting the hand that feeds

The question is, does the freedom afforded by MP3 ultimately threaten the very industry it so enjoys? The industry certainly made this argument at the dawn of cassette tapes, and again at the dawn of video tapes, only to be proven wrong for the most part. But as mentioned earlier, infinite digital copying really is a horse of a different color, and this time around, the industry has a right to be afraid. But is that really such a bad thing? MP3 may force the industry to change the way it does business. Labels may ultimately have to give a few tunes away in order to sell an album. They may at some point have to start selling songs one tune at a time rather than as complete albums—the whole concept of what constitutes an “album,” which is currently an artifact of the amount of recording time that can be fit onto a vinyl LP or CD, may be permanently affected. They may even be forced to lower the unjustifiably high prices they currently charge for compact discs.

In short, MP3 and related formats may force the record industry to downsize its approach to the whole game, and to come to grips with the fact that they can’t fight this phenomenon forever. For its part in the debate, the watchdog organization Electronic Freedom Foundation (http://www.eff.org), has stated that:

...architecture is policy. Given the choice, consumers would choose to purchase music in open formats. We believe that artists who allowed their works to be distributed in open formats would gain competitive advantages over artists who locked up their work.

The EFF’s fear is that if the Big 5 record companies (Sony Music Entertainment, EMI Recorded Music, Universal Music Group, BMG Entertainment, and Warner Music Group) are allowed to monopolize the trade in online music, independent artists will be stymied just as their big opportunity appears on the horizon.

Can’t we all just get along?

The record industry is not going to simply go away. They’ll still be around to promote artists, to manage tours, to print and sell t-shirts and bumper stickers, and to run the web sites of their artists. As one representative put it, “Without the help of the industry, the independent artist’s experience may be closer to that of a street performer, rather than a stage performer.” It is, after all, possible that a marketing machine more powerful than MTV itself may rise like a Phoenix from the chaos of the Internet.

The industry has yet to feel the full impact of MP3, but they will—it’s inevitable. The genie is already out of the bottle.

[4] Embedded codes in music, known as watermarks , are created such that their presence persists even when transformed from one format to another, even when “jacked” out of an audio port.

[5] It is for reasons such as this that the relatively successful group TLC was forced to file for bankruptcy in 1999.

[6] Many MP3 players also handle VQF and other audio formats; you can switch between them seamlessly.

[7] Though the consensus is that the format creates noticeable artifacts, especially with certain types of sounds—see Chapter 9 for more information.

[8] Julian Dibbell, “You Say You Want a Revolution?,” http://www.mp3.com/news/258.html.

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