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Merger could spawn more copy-proof CDs

Macrovision agrees to buy rival Midbar Tech, in hopes that companies' combined efforts can overcome resistance from music fans and record labels to anti-copying technology for CDs--and spread its reach.

Two leading copy-protection technology companies announced Tuesday that they are merging, in a deal that could help speed the move of controversial copy-proof music CDs to market.

Macrovision, a Santa Clara, Calif.-based company, said it will acquire Israeli company Midbar Tech, with the intention of joining the rival anti-copying technologies from the two companies. Both companies' products have met resistance from consumers and record labels, and together they hope to overcome market skepticism, they say.

Analysts said the deal would likely help smooth some of the bumps in the path toward general acceptance of anti-piracy technology for music CDs, although the consolidation fell far short of a guarantee of success for the industry sector.

"One of the major hurdles...has been the lack of digital rights management standards," said P.J. McNealy, research director with GartnerG2, a division of the Gartner research firm. "I think this will accelerate some of the experiments that are currently going on." To date, each of the major labels has tested rival copy protection technologies internally, and most have released a few trial discs into retail markets.

The merger is one sign of maturation in a technology niche that has struggled to date for acceptance even among record labels, which are itching to keep consumers from making unrestricted copies of their CDs.

Over the last two years, at least four companies--Macrovision, Midbar Tech, Sony and start-up SunnComm--have tried to persuade record labels to add various flavors of anti-copying technology onto ordinary CDs. But after an initial flurry of excitement, consumer backlash and stories of technological incompatibilities with some CD players and computers have kept sightings of copy-protected discs few and far between.

Record labels haven't abandoned the idea, however. In recent interviews, executives from several music companies have said they're still experimenting with the technology, but remain concerned about the technological glitches and consumer worries.

Macrovision and Midbar say the merger will help address those worries. By melding the two companies' products, they hope to be able to improve compatibility with computers. The companies also promise that by next year CDs using their joint copy-protection technology will include two versions of songs--one for ordinary CD players, and one that can be loaded onto computer hard drives in much the same way that MP3s can be "ripped" or copied onto computers today. Listeners will not be able to make unrestricted copies of these alternate digital files, but the songs will be able to be transferred to mobile devices such as MP3 players and even burned onto CDs in a limited way, company executives said.

"We've kind of learned over the past year that consumers are really fighting this," said Brian Dunn, Macrovision's senior vice president of business development. "They want more flexibility."

The deal does put Macrovision in a position to better replicate the standing it has in the video realm, where its commercial videotape anti-copying technology is an industry standard. The company's SafeAudio and SafeAuthenticate products have yet to make a similar impact in the audio market.

Shuffling forward on CDs
Sony continues to work on its own proprietary anti-copying technology, but has seen little use outside of its own associated record labels. Rival SunnComm, after initial successes, has lost momentum after alleged stock manipulation and the departure of its chief technology officer earlier this year.

Midbar Tech's Cactus Data Shield technology has had the most market success to date. Its copy protection has found its way onto a few discs in the United States, and far more in Europe and Asia. According to the company, the technology has been loaded on close to 45 million CDs, largely distributed overseas.

Macrovision also announced Tuesday that it would acquire the copy-protection assets of TTR Technologies, which originally developed the SafeAudio technology. Those two companies had earlier created a joint agreement to develop and market music CD copy-protection products.