Chipmakers take spotlight in music battle

Cirrus Logic is the computer chip manufacturer that makes the lion's share of the processing chips now going inside MP3 players and soon to be seen inside ordinary living-room stereos. For the last several years, Perry's team has been testing digital audio and copy-protection technologies and cutting deals to put these technologies on the chips themselves.

Until recently, this hasn't had a sweeping influence on the digital music market. But as digital music heads into the mainstream, people are starting to take it off computers and onto Walkman-like devices and ordinary stereos. That means Cirrus and other chipmakers could potentially influence the types of music formats played inside these mass-market systems--and ensure home stereos block copying for the first time.

The chipmakers' influence stems from the limited processing power and data space on inexpensive chips meant for stereos and portable devices. The companies must choose instead of supporting everything. In Cirrus' case, this has meant including MP3 and Microsoft formats so far. Notably absent is RealNetworks, which has focused on streaming services rather than downloaded music.

"The big race (for digital music technologies) is going to be getting distribution in as many consumer devices as they can," said Steve Vonder Haar, an analyst with The Yankee Group. "Consumer devices are critical."

A complicated dance
After years of legal wrangling, closed-door business discussions and standards battles, it's still far from clear how online music will be distributed--or by whom.

For their part, music labels have been indecisive as to which format will reach the most people and will provide the most protection against copying on file-swapping services such as Napster. All the labels have experimented with various proprietary formats from Microsoft, AT&T and RealNetworks, as well as with ordinary MP3s. They've also tried a host of different ways of protecting their songs against illegal copying without yet settling on a single standard.

Inside the cross-industry group known as the Secure Digital Music Initiative, music labels, technology companies and consumer electronics companies have fought for more than two years to find a common standard for protecting music. Each has a different set of goals: watertight protection for the labels vs. inexpensive, invisible technology for the consumer electronics companies, for example. Delays and infighting have been the result.

But the parties are talking to each other on a business level as well. Already a few ordinary CD players have hit the market that can play back MP3 files burned onto CDs. And chipmakers such as Cirrus say this will be far more prevalent come Christmas, although the real mass-market sales are still a few years off.

What makes the cut?
Today the most dominant chipmakers are Cirrus and Texas Instruments, reaching about 80 percent of the portable, digital audio-player market, according to electronics market research firm Forward Concepts.

These companies don't make their decisions in a vacuum. Although they work closely with technology creators such as Microsoft or copy-protection company InterTrust Technologies, their decisions are largely driven by what consumer electronics companies want.

These manufacturers are in turn listening largely to what the record labels say. If Sony Music Entertainment or Warner Music Group decides to release all its music in Windows Media Audio, for example, the biggest stereo makers must take this into account.

But the influence goes both ways. The consumer electronics companies and the chipmakers need a simple market with just a few formats. Otherwise, chips will be too expensive to produce, requiring too much processing power and royalty payments to be feasible for the Wal-Mart market. Nor do the chipmakers have the ability to switch between formats on a moment's notice.

"What we don't want in these markets is the technology du jour," said Perry, who is general manager of Cirrus Logic's embedded processor group. "We use our influence to winnow down the number of (audio technologies) out there."

Thus, the decisions made by the manufacturers and teams such as Perry's ultimately will decide what will be able to play on the vast majority of stereos--the touchstone for success in the mainstream music market. And many of these decisions have already been made.

Cirrus, for example, supports MP3, Microsoft's Windows Media, and AAC, another format that provides better quality than MP3 but is not widely used online.

Entering a protected world
Also built into chips now rolling off of Cirrus' and other manufacturers' assembly lines are controversial copy protections, or "digital rights management" technologies. As these chips become more widely used, consumers could find for the first time their own home stereos blocking them from making tapes or other copies.

These features, which prevent a song from being copied and distributed an unlimited number of times, haven't yet played a large part in the online music world. But as the big record labels start releasing songs through planned subscription services such as MusicNet and Duet, they are likely to play a larger role.

Here, too, the chipmakers' decisions will likely influence what is now a wide-open market. Cirrus already supports Microsoft and InterTrust on its chips, leaving out competing technologies from IBM and others. But the company says more announcements are forthcoming.

The introduction of anti-copying functions into ordinary stereos will be a new feature--and likely a controversial one for consumers used to making tapes or CDs without any technological hurdles. Analysts say that it's still far from a sure thing that products that limit people's use of their own music will be accepted, even if copy-protection support becomes a basic feature of stereo systems.

"There is no guarantee that consumer electronics companies are going to take these capabilities and put them center stage," said The Yankee Group's Vonder Haar. "This is still a very fragmented market. There's a lot of confusion that needs to settle out."