Infighting threatens to kill Net music antipiracy standard

In response to the explosion of music on the Net--much of it available illegally--the Recording Industry Association of America (RIAA) late last year formed the Secure Digital Music Initiative (SDMI), a consortium of music companies, consumer electronics firms, and others. The group was charged with creating specifications for secure downloads of music online.

The first priority for the group was to create a specification for portable devices that play downloaded music--such as Diamond Multimedia's popular Rio player. SDMI released preliminary guidelines in June, within its self-imposed deadline, in an effort to get SDMI-complaint devices to market before the all-important holiday shopping season.

But since then, problems have erupted that are threatening to hold up the specification, which means the devices that go to market this holiday season may not be SDMI-compliant. Industry observers have said that missing the holiday deadline could threaten SDMI's overall standards effort.

"Despite the months of hard work by the SDMI participants, SDMI portable device manufacturers and SDMI service providers are still unable to prepare for this holiday season," Sony vice president Geoffrey Anderson wrote in an email to SDMI executive director Leonardo Chiarglione and SDMI members, which was obtained by CNET News.com. "We will be deeply disappointed if continued delays within SDMI frustrate the goals of implementers and SDMI alike."

An SDMI spokesperson declined to comment on the letter, saying only that "a lot of progress is being made on a wide array of issues in a short amount of time." SDMI meetings are closed to the public.

Sony characterized the letter as an internal document and declined to comment further.

SDMI members at odds
One of SDMI's problems is that individual members have found themselves at cross-purposes, not only because illegally distributed music has been one of the original drivers of portable player shipments, but also because the screens to prevent playback of illegal songs have no obvious value to customers shopping for players.

In other words, if even one portable device that is available to consumers can play illegal songs, consumers will have no reason to buy the ones that can only play legal music.

"SDMI does not provide value or added benefit to the consumer," complained one SDMI member, who asked not to be named. "The issue of security, which is not a consumer issue, suddenly becomes a consumer issue. Authentication is of greater concern to the content creator than the consumer."

Digital music, especially songs recorded in the MP3 format, has skyrocketed in popularity because it makes the process of posting and sharing files online relatively simple. But that simplicity also has led to widespread sharing of illegal copies of copyright-protected content online.

Some say the proliferation of music online presents an array of new marketing opportunities to music companies. And in the last few months, record companies have begun to utilize the Web for distribution instead of simply relying on it for marketing and sales of physical CDs. For example, record company EMI earlier this year began encoding its catalog of music to make it available for download.

SDMI also is hindered because the technology itself is still evolving, observers say.

"From the outset, they set themselves up for lack of success, because the pace [at which] technology is moving won't wait for a group of people to go off and meet in hotel ballrooms around the globe every six weeks and discuss the ways to do something," said Mark Hardie, an analyst with Forrester Research.

Timing is everything
Some of the key players, namely Diamond Multimedia and Sony Electronics, are apparently in stark disagreement about how and when to implement the first phase of the group's copyright protection, or "watermarking," technology, sources say. Adding fuel to the fire, both Diamond and Sony this week unveiled new Net music players.

At the regular meeting of member companies in New York yesterday, Sony pushed to get the technology specifications hammered out as soon as possible, so that hardware manufacturers can have a chance to offer SDMI-compliant devices in time for the holiday season. At the same time, smaller companies such as Diamond are resisting any attempt to rush the debate, sources said.

Representatives from Diamond have expressed frustration to other SDMI members about efforts to push a vote on any draft before members have time to allow company attorneys to review it, SDMI sources said. Diamond declined to comment.

The two companies are at odds in part because it takes Sony longer to get new products to market, making it less flexible to changes, Hardie said. "Diamond has a shorter lead time to get a product to market, while the longer the negotiations proceed, that's not in Sony's best interests," he said.

But as the companies hammer out their differences, some analysts and SDMI members are expressing concern that the group's work is becoming irrelevant in the increasingly popular digital music market.

As Philips, Toshiba, Creative Labs, and now Sony are announcing and shipping new players, delays in the antipiracy specification mean that devices will ship without the technology to screen out illegally created music. Moreover, analysts say consumers aren't interested in waiting for SDMI-compliant devices.

Because digital music businesses are so new, it is also difficult for companies to predict the impact any antipiracy initiative will have on sales.

"Can you really create a standard that impacts so many different business models, with no history to base this on?" said an SDMI member, who spoke on condition of anonymity.

In addition, the music industry has failed to recognize that music enthusiasts don't care about the software or hardware required to play their favorite songs, Hardie said. "The consumer shouldn't care," he said. "We don't want the technology decision to precede a music decision."

News.com's Beth Lipton contributed to this report.