Dubbed "Vorbis," the open-source project is being led by programmers at CMGI's iCast. It is scheduled be unveiled in beta form at next week's MP3.com summit in San Diego. It will be released to the Web without intellectual property restrictions, which means software companies, Internet radio firms and music sellers can use the format without paying patent holders a dime.
That's different from MP3 itself, the most popular type of downloadable music files on the Web. In the technology?s early days, no royalty payments were collected. But the German research institute that helped create the format is beginning to collect its dues, charging companies that create MP3 software and hardware or sell MP3 downloads. Next year it will begin charging Webcasters, it says.
"People think MP3 is free, but it's not," said Jack Moffitt, the 22-year-old iCast vice president who is overseeing the open-format effort.
CMGI and iCast won't see any revenues directly from the sale and use of the format. But the open-source effort is likely to pay for itself if iCast can switch its Web radio service into the Vorbis format and avoid paying MP3 royalty fees, Moffitt says.
Vorbis will hit a market where older music formats have already established themselves, possibly making it difficult for even a free version to gain traction. MP3 is the dominant format for Web surfers seeking free downloads. But Microsoft's Windows Media format is beginning to gain acceptance by record companies and other firms seeking a more secure format. Liquid Audio's format is used for some secure music downloads, and RealNetworks' technology is used for much of the streaming audio on the Web.
The Vorbis project dates back several years to when lead programmer Christopher Montgomery was still in graduate school.
Montgomery and several other open-source music developers have recently been hired by iCast, which has agreed to fund the project.
"We're hiring as many of the superstars of the community as possible," Moffitt said.
Moffitt, who is overseeing the project, is himself the creator of the open-source Icecast, a streaming MP3 technology similar to Nullsoft's Shoutcast, now owned by America Online. He came to iCast last year when the company acquired Net radio firm Green Witch.
MP3's price tag
iCast and other Webcasting companies are facing potentially steep hikes in their operating costs next year, a looming fact that has helped drive the Vorbis effort.
Much of the technology underlying the MP3 music format is patented by the Fraunhofer institute in Germany, a sprawling research organization that counts audio technology as just one of dozens of disparate interests. The institute has licensed its rights to Thomson Multimedia, which is in charge of collecting the patent royalties.
And those royalties can add up. MP3 download companies are required to pay 1 percent of the price charged to the listener per song, with a $15,000 minimum. MP3 hardware companies must pay 50 cents per unit shipped, also with a $15,000 annual minimum.
The biggest effect has likely been on software companies trying to make free MP3 encoders--a difficult task given that the company must pay Thomson $5 per unit. That means companies such as MusicMatch that distribute free MP3-based CD "rippers," which allow people to convert CDs and translate them into digital file formats, are actually suffering considerable financial drain with every download.
Some free rippers have developed in the open-source community, such as the LAME (which originally stood for Lame Ain't an MP3 Encoder) program. This is distributed as code that must be "compiled" into a working software program, allowing it to exist in a legal gray area.
Thomson plans to start charging Webcasters on behalf of Fraunhofer beginning next year. But it hasn't yet figured out how much or how it will levy the fees, according to Henri Linde, vice president of new business.
Thomson's MP3 licensing Web site indicates the model is likely to be similar to those for the other businesses.
"We do not charge royalties for MP3 streaming or MP3 broadcasting (e.g., Internet Radio) until the end of the year 2000," the site says. "Beyond this date we anticipate to charge a small annual minimum and a percentage of revenue."
The Vorbis project will need to win the support both of online music companies and consumers--many of whom have already built extensive MP3 libraries--if it is to make a dent in the marketplace.
But that work is already under way, the programmers say. Plug-ins have been written for many of the most popular MP3 players, such as Winamp, Freeamp and Sonique. The companies hope to see the plug-ins find their way into the most basic download of these players, helping the format
A representative for Lycos, which owns Sonique, said the company had seen the Vorbis plug-in and called it "really well done."
iCast will certainly be among the first to adopt the technology, as it is being developed in-house. But other online radio music-streaming companies said they also were open to the idea.
"We're always looking for a low-cost alternative," said Keith Crosley, marketing director for WiredPlanet.com, which streams MP3 songs. "I think everyone in the online music space will be following the open-source efforts very closely."