The 53-year-old former on-air radio personality heads Phoenix-based SunnComm, one of dozens of digital rights management companies aiming to thwart would-be pirates from distributing copyrighted material over the Web. Record labels, including Bertelsmann, have been experimenting with technologies from DRM companies to create copy-protected CDs. Such providers include SunnComm rivals Midbar and Macrovision, and a handful of other companies.
While SunnComm is betting that copy-protected CDs will be the music industry's answer to digital content protection, it's discovering that success stories don't come easy.
In May, SunnComm provided anti-copying technology on a CD release by veteran country music singer Charley Pride. But before the CD was shipped to U.S. stores by Nashville, Tenn.-based Music City Records, free copies of the songs appeared on the Internet. Eight of the 15 songs on Pride's new album, "A Tribute to Jim Reeves," were posted on a private Web page hosted by Yahoo. And later, consumers complained that the SunnComm-protected CDs could not play properly on all devices, such as certain DVD players.
In its defense, SunnComm said the leaked songs did not come from a cracked CD but were likely copied from an unprotected set of 2,000 CDs released in Australia. The company also said it had upgraded its technology to play on DVD players.
Still, consumers have not warmed up to the idea of copy-protected CDs.
One person is suing SunnComm, along with Denver-based Fahrenheit Entertainment, for misleading consumers by failing to include an adequate disclaimer on packaging for the copy-protected CDs. The lawsuit, filed three weeks ago, seeks an injunction against the two companies, preventing them from tracking consumer habits and requiring them to provide adequate privacy notices on the CD case.
SunnComm embeds a technology, called MediaCloq, into a CD to make the CD's directory structure invisible so it cannot be read by a personal computer. For instance, the names of the tracks do not appear on a computer's screen, and as a result, the music cannot be ripped and transferred to a desktop. The CD, however, will still play in an ordinary CD player, according to SunnComm. Jacobs said what sets his company apart from competitors is that SunnComm does not alter the music itself because the company's technology leaves the tunes untouched.
In an interview with CNET News.com, SunnComm's chief executive talked about the DRM business and the importance of protecting copyrighted works.
Q: Many people say copy-protection schemes don't work. If you can hear the music, you can copy it and steal it. What makes your technology different?
A: The technology that we sell is a padlock to music. If you have a lock cutter, a bolt cutter, you can cut that padlock off. If you're determined to steal the music, the music can be stolen. Our technology is not thief proof. What it's meant to do is provide a speed bump to people who don't steal things, and wish to use them in the parameters that are suggested by the artists...If you give people what they want with respect to their ability to copy the music in ways that they think is reasonable, they will not ever attempt to circumvent the technology. Only hackers will attempt to circumvent the technology in order to prove that it can be done. We're not designing the technology for them.
The recording industry wants to make it harder for consumers to directly copy CDs, but one of the hurdles is that any barriers to copying must be "backwards compatible"--meaning the new technologies would have to work on old CD players that don't screen pirated material and vice versa. What is SunnComm doing to overcome this problem?
What we do is we own hundreds and hundreds of CD players dating back to 1983 and forward. Before we release any copies of our MediaCloq product, our CDs are tested on all of those different CD players for playability, sound quality, everything. That's how we ensure that what we build today will work on CD players from 20 years ago.
So if someone breaks your anti-copying technology, are you going to sue?
The Digital Millennium Copyright Act prohibits users from circumventing copy protection. It's now a crime in America to do that. Having said that, it's certainly up to the record companies to decide how they're going to manage hackers that circumvent the technology in the future. From our standpoint, we are designing the software for the 99 percent of the people who don't want to steal the music but instead (want to) use it for whatever means--for whatever personal use that's allowed by the artist and the record label. The software was designed for those people, not for the 1 percent who are going to take the lock cutters and cut the lock off and steal music in an unauthorized way. Do you believe that copy-protection schemes violate fair-use rights?
Ours is the only copy-protection scheme that doesn't violate fair-use rights...We allow (people) to make copies for their own personal use: for their computer, for their compilation disc and for their MP3 player, so they can have portable use of their music. The only fair use that's left--and it's not fair use at all--is the "fair use" of sending thousands of copies to file-sharing services to be copied hundreds of thousands or millions of times. That's the only use we've limited and so that's not fair use; it's certainly not fair to the artist. I've got a whole line of artists that would agree that's certainly not fair, but there are a whole lot of artists that agree you ought to have your own personal copy or be able to make copies or do whatever.
How many copies do you allow people to make?
It's up to the record company, but six is the standard right now. So they can make six copies; as long as their disc is in the tray of their computer, they can make those copies...It's hard to get your arms around copy protection as a technology, and I get that. Everybody here gets that. The thing is how do you make it warm enough for people to accept it.
What kind of initiatives are you undertaking to prevent consumer backlash?
By allowing the consumers all the fair-use opportunities they had prior to having the protection on the disc itself. That's how we do it. Because I think in the end, music lovers will do what's right. They expect to use music for their own purpose and be able to continue to do that. We're the only protection technology in the world that allows people to do that and at the same time protect their digital property, and that's what we're going for here.
So how much money is in this?
We need to protect about 4 billion CDs a year. That's what we'd like to do. We'd like to be the market leader in this business and protect about 4 billion CDs a year. And we think, just like Hershey's, we can make our money a nickel at a time, and it adds up, you know, 1 or 2 billion adds up.
Can you translate those 4 billion CDs into a monetary figure?
That would be in the neighborhood of a $200 million revenue stream.
Have you ever used Napster?
Yes, I have. I've used Napster, and both my kids have used Napster...I (also) smoked once but I didn't inhale...I've tried to explain to my kids how wrong this is. We need to explain to people that the financial result of using file-sharing services is not good even though getting the music for free is "cool." It seems cool; it's really not in the end, when artists don't get what they need. Having said that, I hope to see a file-sharing service in the near future that will allow people the same effortless ability to download music even if it's of lesser quality, like MP3 quality, for a very small amount of money a month.
Why are you in this business? It's not a market that would make someone rich, nor is it a business that would make consumers adore you.
I'm trying to change that. You see...you're driving along and you see a policeman in your rearview mirror. You know he's supposed to be the friendly guy that helps you. But that's not what you think when you see him in your rearview mirror, is it? You think, "I'm going to get a ticket." That's just like I think. OK. Well, I'm trying to change that for us. I don't want to be the cop in the mirror for people who are driving along. What we want to be is a company that develops a way to transmit digital property within a business model that will continue to develop digital property. The problem is, if digital property just becomes public domain the minute it's released, then the whole incentive model for distributing that property goes away.
Doesn't anybody want to think about what happens in the world where no music is paid for?...This business can be a very lucrative business if it's done properly and if it's done with a sensitivity toward record companies and record buyers. I think there's a huge opportunity for this company to expand not just from the CD music but also for CD software, digital data, streaming, et cetera...It just takes more development time for us to get into those different areas. But don't you think that as everything moves from analog to digital, the ability to exactly copy things creates a threat for any property owner--whether it's art, or books or music? Someone better come up with a way to get better and better at protecting the rights of the artists, because without doing that, I think that the art and the ability to distribute the art goes away. If somebody can show me that I'm wrong, I'll be out of this business in two days. But I don't think that I'm wrong.