Downloading the Future

Already, thousands of commercial songs sit on the Net for the taking, in mp3 form. They’ve been put there by college kids, high school computer brats, hackers and anyone with the minimal ingenuity required to operate a few simple pieces of cheap (often free) software.

While piracy is the designated bête noire in the record industry’s struggle over mp3, an equal threat to the recording oligopoly is the defection of the artists who provide the lifeblood of the industry, and the rise of independents that can undercut the major labels. Independents and unsigned bands are leaping into mp3-format distribution.

MP3.com went online just over a year ago and now claims a million visitors per month. CEO Michael Robertson has become something of a spokesman for the mp3 movement. His site, in January, received a boost in the form of $11 million from a Silicon Valley venture-capital firm. Thousands of bands post their music on MP3.com. Robertson says that in one day as many as 148 bands have signed up for his service — which is free to bands as well as listeners.

Last month, the Seattle-based Sub Pop label (best known for launching Nirvana) began posting mp3 songs by Combustible Edison, Saint Etienne and several other acts on the label. Sub Pop partnered with Robertson’s MP3.com to make the tracks available for free. And starting in April, Platinum Entertainment (parent company of several midsize labels) will hook up with the site MusicMaker.Com (which specializes in made-to-order CD compilations) to create the Web’s largest commercial mp3 site, peddling a reported 200,000 downloadable tracks from hundreds of artists ranging from Dionne Warwick to the Ramones.

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Some bands are setting out on their own, and the implications for the bottom line are inescapable. For example, the band Soul Coughing, which records for the Warner subsidiary Slash Records, has been posting an “mp3 of the week” on its official site (https://www.soulcoughing.com) for several months. None of the tracks posted for free online is offered anywhere else — they’re mostly live cuts and other unreleased recordings.

“Warner probably doesn’t even know anyway, and if they offered a serious challenge I would throw a hissy fit and not tour,” declares the band’s keyboardist, Mark De Gli Antoni. “Eventually, the album as a physical commodity will disappear,” adds lead singer Michael Doughty. “All music will be downloaded, or at least uploaded from software into the hard drive you keep your music collection in. No question. Done deal.”

“It just helps in terms of publicity, letting people know you have a record coming out,” says Richard Valentin, lead vocalist for the punk-pop band Poster Children, who record for spinART. Their latest album, New World Record, was released in both CD and online mp3 formats. GoodNoise sells the online version. But in advance of the release, the band posted one free song in mp3 on the GoodNoise site and saw it downloaded 3,000 times in the first week.

The efficacy of mp3 as a promotional “loss leader” seems beyond dispute. But Chuck D has a further agenda. Under the current system, artists generally take home a royalty of just 12 percent of the cash generated by sales of their own CDs, with the other 88 percent going into the coffers of the record label and various middlemen. Online distribution cuts out the middlemen and â perhaps even the record labels themselves.

In an ideal digital world, artists could pocket all of the money they make from selling their music online. GoodNoise offers a 50-50 split to the artists or labels it distributes on its site — exactly what Chuck D is pressing for.

“I’m fighting for every artist to have 50-50 joint ventures, because the record companies have been getting away with murder for 12 years, since the advent of the CD, when they could manufacture something for 69 cents and sell it for $10.98 wholesale,” says Chuck.

“The record companies have gotten away with so much for so long. What we’re looking to do is change the way certain things in the industry are,” says Chuck. “What will happen is that the marketplace will be splintered. You’ll have a million artists out there and 500,000 labels in three years. They’ll have to share the marketplace.”

But aren’t bands scared that fans will simply steal their music if they don’t buy into the anti-piracy schemes of the Big Five? Not according to GoodNoise marketing vice president Steve Grady. He contends that downloading a song through GoodNoise for 99 cents is simpler than searching the Internet for a pirated version.

“The 99 cents is to some extent a convenience fee,” says Grady. “We want to make it easier for the consumer to buy the music than to steal it. If you do that effectively, there’s a great business there.”

“For people who make large amounts of money in the music industry, the corporations, mp3 is bad news,” adds Valentin, whose Poster Children left Warner-owned Reprise Records to join spinART. “The way the large corporations have controlled the music industry is by controlling distribution and the expensive process of making a record. Now, recording technology has gotten so cheap and of such good quality that people are more and more recording at home, spending very little money on the process. Now that the distribution end will be eliminated by the Web, there’s not much a large corporation can offer a band.”

It would be wonderful to report that mp3 was devised by a shaggy-haired hacker locked in his dark basement furiously writing code through the night while downing case after case of Diet Coke and deriving all of his essential nutrition from Hostess Ho-Hos. But there is no Woz-Jobs story here. Actually, mp3 was developed, beginning in 1987, by the multinational German research firm Fraunhofer Gesellschaft. The project was a tiny slice of a massive ongoing effort, known as EUREKA, to bolster the European economy. Fraunhofer participated in EUREKA project EU147, devoted to digital audio broadcasting.

The “mp” in mp3 comes from “MPEG,” which in turn is a kind-of-geeky acronym for “Moving Picture Experts Group.” But Hollywood types need not apply. MPEG is an international cadre of computer scientists that meets several times per year to codify standards for encoding and compression of digital audio and video signals. Thanks to MPEG, the world is now blessed with DVDs and DirectTV, among other wonders. MPEG creates international standards for turning sounds and pictures into bits and bytes of digital code, which can then show up on your TV or your computer as The Wedding Singer.

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Not that any of that matters to the kid who just wants to download the latest Aerosmith single. But from those not-so-humble beginnings came the standard that has turned teenagers like Abe into the bogeymen — or bogeyboys — of the music business.

When you walk into the Venice apartment where Abe has lived by himself since late last year, you see the beach out his window, you see a surfboard leaning against the wall, you see the smiling mugs of Abe’s family and friends gazing down from a bulletin-board collage. What you do not see is a collection of CDs stacked neatly in a melon-tinged IKEA CD tree. You don’t even see CDs piled frat-house-style on the floor. There are no CDs anywhere. Yet music blares out of Abe’s powerful speakers, which are plugged into his computer — with a standard 15-inch computer monitor, and the one chair in the place facing the screen.

“I’ve never spent a dime on commercial CDs,” Abe says. Nonetheless, his music collection totals “50 to 100 regular CDs’ worth of pirated mp3s in various digital archives.” And he can update his stash with fresh sounds whenever he feels like it.

As Abe clicks his way onto the Internet, he makes it clear that the learning curve involved in becoming a serious mp3 collector is not high.

His first stop is a chat room, where Net junkies type back and forth, gabbing in text-only format about whatever’s on their minds. But chat rooms are, believe it or not, useful for functions more intriguing than freewheeling debates over last night’s X-Files repeat. Chatters can send any kind of computer file from machine to machine through the Internet.

The whole time Abe is online, music from the mp3 collection on his 5-gigabyte hard drive pulses through his computer’s speakers. A tiny box nestles in the bottom left corner of his monitor — his mp3 playback software’s graphical interface — displaying the current song’s title and playing time. The onscreen look of the player software mimics the façade of a CD player.

“An mp3 player is a really simple piece of software,” he says. “All it does is decode the file and send it to your speakers.”

The most popular mp3 player is known as WinAmp, a piece of software produced by a small Arizona company called Nullsoft and sold for $10 as shareware (i.e., you pay on the honor system) over the Internet. Nullsoft claims that WinAmp is downloaded at a rate of 120,000 copies per day. WinAmp is just one of numerous mp3 players, most of them free.

Abe fires up his “chat” software with a mouse click. A small box appears, asking which room (or “channel”) he’d like to join. Abe types the name of the channel he’s looking for: “#mp3cablemodem.” In there, he figures, people are willing to send each other their mp3 files. Another small box opens up, displaying the list of people on the #mp3cablemodem channel. They all use aliases — it’s the much-touted “anonymity of the Net.” The list is a dozen names long. Abe is slightly discouraged. It’s early on a weekday afternoon. A sluggish hour.

He types another simple command, which goes something like “/xdcc user/channel list.” Plain English translation: “Anyone got any mp3 files?”

His computer instantly sends the message to the computer of each user in the chat group. Abe has no idea who or where any of these people are. None of them knows who he is either, but their computers don’t care. In about five seconds: BLIP — BLIP — BLIP! Window after window pops up, cascading down his screen one over the next, each about the size of an index card. Each window is an automatic reply from a different computer (the person manning that computer doesn’t have to do anything — might not even know what’s going on), a list of mp3 files on its hard drive. Abe now faces about 100 song titles, and he has his pick.

Abe slides back from his desk a bit and sets the mouse aside, deciding. Shopping, sort of. Reaching back to the keyboard, he punches in another quick command, and the remote computer starts transmitting instantaneously. A minute or two later the mellifluous tones waft from Abe’s speakers. “I get knocked down . . .!!”

There are various alternate methods of finding and downloading mp3 songs. The Usenet newsgroups — discussion forums started years ago for scientists and academics to debate theories and share information, but now best known as a repository for a staggering selection of pornography — contain several groups devoted to mp3 downloads. (Try alt.binaries.sounds.mp3 for a start.) The newsgroups can be accessed with a (usually) no-charge piece of software called a newsreader. (Netscape Communicator comes with a newsreader built in. Netscape is, itself, free.)

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On the World Wide Web, a number of search engines are devoted to nothing but seeking out illegal mp3 files. Most of the mp3 search sites have been under-the-radar operations run by teenagers. Then, in early February, none other than Lycos — the second most visited site on the Internet, which is now in the process of selling itself to Barry Diller’s USA Networks — rolled out a search feature devoted to mp3 (https://mp3.lycos.com).

Piracy has never been easier.

As the spread of mp3 proved increasingly ineluctable, the RIAA adopted a kinder, gentler stance toward the piracy problem. Last December 15, inside the Sony Building in midtown Manhattan, the RIAA assembled the aging bosses of the Big Five on a single stage, each clad in remarkably similar charcoal-gray business attire. On steel-and-black chairs, beneath the klieg lights, the five men flanked RIAA chief exec Hilary Rosen, also dressed darkly, distinguished largely by the fact that her hair was brunette rather than thinning. The purpose of this Lollapalooza for suits: to unveil the RIAA’s SDMI project.

Rosen made it through her opening statement without dropping the word piracy once. Instead, she announced, “Today, the recording industry is embracing the digital marketplace with new enthusiasm and new optimism.”

The cause for optimism? The executives announced that they were forming a consortium — under the auspices of the RIAA — to create a single standard for downloadable music that will be (supposedly) immune to piracy and will allow record labels to actually sell music in the form of Internet downloads without worrying about illegal copying. They plan, perhaps unrealistically, to have this technological innovation in place by the end of the year.

“The idea is for the security features, the encryption technologies and all those other things that protect the content, to ensure that those do not interfere with the consumer’s ability to gain convenient access,” says the RIAA’s Cary Sherman. “Security should be invisible to the consumer.”

Nor is SDMI the lone effort under way to make the Internet safe for the multinational music corporations. On February 8, one behind-the-scenes endeavor came out of the closet — once again at a New York press conference that brought out high-level executives from the five big labels. The occasion: the unveiling of IBM’s long-rumored, formerly secret “Madison Project.”

Madison is IBM and the Big Five’s proj ect to create a mechanism for secure downloading of whole CDs. The Madison Project also includes software that enables buyers to take their downloaded music away from their computers by recording or, in techie terms, “burning” it onto a blank CD.

The trial will run this spring in San Diego, using the local Time-Warner-owned cable-modem system. Needless to say, as with other attempts to impose security, the Madison Project has been met with derision by mp3 advocates. If you can play it, you can record it. And if you can record it, you can encode it as an mp3 file.

“[Security] really is impossible for a variety of reasons,” says Steve Grady of GoodNoise. “Until you’re willing to remove CDs from store shelves or change the format that CDs are stored in, which basically means replacing all the hardware, then anybody can walk into a store and in 15 minutes have them up on their Web site in mp3.”

Grady also notes that computers play sound through standardized sound cards — which cannot understand “secured” files. The file must be unsecured in order to play. The only way to deal with that sticky issue: Replace â every sound card in every computer.

“And even if you were able to replace all this stuff with one agreed-upon standard,” Grady notes, “the people who are motivated to get around it are still going to get around it.”

Another “security” leak: the transfer of mp3 files onto portable mp3 players. Portable players promise to bring mp3 headlong into the mainstream by liberating music fans from their computers. Or as one RIAA lawyer rather indelicately put it in court, mp3 expands the market “from those of us who like to spend our lives in front of computers to people who actually have lives.”

So nervous about portable mp3 players is the RIAA that last October it sued San Jose–based Diamond Multimedia, maker of the Rio, one of the first mass-marketed hand-held mp3 players.

The lawsuit claims that the Rio promotes music piracy, in violation of the 1992 Audio Home Recording Act. It’s a tough charge to make stick, however, as the Rio does not record. Instead, users must move mp3 files from their computer hard drives into the Rio’s memory using a cable connected to the computer’s printer port.

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The RIAA sought an injunction preventing Diamond from selling its product. A U.S. District Court granted the injunction, then reversed itself 10 days later. That decision remains on appeal.

Diamond countersued the RIAA, claiming that the RIAA was really aiming not to prevent piracy but to quell the nascent mp3 business.

In the meantime, since the injunction against Diamond was lifted on October 26, Diamond says that it has already shipped upward of 100,000 Rios.

Jim Griffin was once a leader in the industry effort to stamp out illegal mp3 sites. As an executive at Geffen Records, he sent what he calls “polite letters” to roughly 300 sites that were distributing music without permission. The sites all complied. But even as he was challenging the spread of new technology, Griffin was becoming enamored of its implications.

Last year, Griffin left Geffen and formed his own company to capitalize on his conversion. OneHouse is officed in an imposing building on Wilshire Boulevard between Fairfax and La Brea — an area and a structure that convey corporate gravitas. The company is young enough that you can walk through the door into a vast, empty space and be greeted by the CEO himself. And his cat. It’s a setting that bespeaks nothing so much as potential.

Before launching into his prophecies about the music industry, Griffin offers a demonstration. A couple of clicks on his lightning-fast computer, and mp3-quality tunes come pulsing out of the machine — with no download at all. He seems to have overcome the final obstacle to total convenience in online music delivery. Even mp3s are supposed to take some time to download, aren’t they?

Not when they stream.

“Streaming” is Net terminology for playing audio and video while it is still downloading, rather than having to wait minutes or hours for the whole file to settle onto your hard drive. Streaming is the Net equivalent of a radio broadcast. According to Griffin, at some point not long from now, we won’t worry about CDs or even about storing mp3 files on our computer hard drives. All music will arrive in streams.

In Griffin’s post-download future, music buyers will pay a subscription fee, or put up with advertising, for the right to play songs or whole albums on their computers, on their stereos, in their cars or at the beach — or anywhere — whenever they want. Itradio, but with your personal playlist.

“There was a time when if you didn’t have food in your freezer you starved. That’s not true anymore. The digital bits you need to hear a song will arrive when you want them,” Griffin declaims. “You want to hear Van Morrison’s ‘Moondance’? Ask for it! It’s not about having music, it’s about hearing music!”

Moreover, streamed, on-demand music needs no security. If you can get it whenever you want it — why copy it?

Will all of these developments mean the death, or at least the maiming, of the Big Five? With a virtually infinite number of new distribution avenues open — what good are big record labels?

Still good for plenty, says Griffin (who, after all, is a former label exec). No one else can stage the type of marketing juggernaut that a major label can. In Chuck D’s world of “a million bands and 500,000 labels,” getting noticed in the crowd becomes more crucial than ever.

“The record company is more powerful in the future than it was in the past,” says Griffin, whose firm advises music pro fessionals on how to use the Internet. “It doesn’t cost much to distribute records. But the issue is how to cut through the clutter of the marketplace, not how to get into the marketplace. In future, it’s going to be worse.”

To Griffin, Chuck D’s goal of 50-50 profit splits is a fantasy. “I don’t think the future portends dramatically different profit allocations,” Griffin says. “If it does, they may be worse for artists, not better. We may actually find that we removed a dollar from the cost of delivering music but find we added $3 in marketing costs. Getting the message across may be more, not less, expensive in the future.”

But Chuck D dismisses the big corporations and their antics.

“The majors will say they promote, but they promote through traditional means — means that they dominate,” he says. “The average person who wants to get into the recording industry cannot, because there’s no way they can pay $2 million to get their record on the radio. The bureaucracy in radio will be undercut. The retail outlets who are looking for money in order to sell a record will be undercut, and the record companies who think they’ve got all the areas sewn up for themselves will be undercut like a running back who’s been taken out from underneath on the way to the goal line. It means that all these cats have to share.”