Tide turns in Napster's favour

The David and Goliath contest to win the hearts and minds of hundreds of millions of online music fans worldwide appears to be nearing a conclusion. It seems at this late stage that David has won.

Napster, a music swapping website that uses MP3 file compression technology and was dreamed up by US teenager Shaun Fanning, is winning over key business players in the global IT market to its cause.

As the number of Napster users climbs to more than 40 million worldwide, Intel has publicly declared its approval of the file sharing principle, Sony has unveiled a file compression system of its own, and Napster itself has announced an European deal with entertainment giant Bertelsmann.

Anyone that has been following the Napster saga will know that Bertelsmann was one of the major record companies that sued it. But Bertelsmann now appears to have broken ranks with the other litigants and has agreed to build a subscription-based file-swapping and download site with its former adversary.

The announcement came at the same time as RealNetworks revealed that it intended to bundle Sony's new ATRAC3 sound compression software with the latest release of its RealPlayer multimedia file player. Sony's OpenMG technology will also be included in the package to ensure "secure distribution of music from content provider to PCs and portable music devices".

Dick Anderson, general manager of IBM's Global Media and Entertainment Industry business unit, said: "We believe the alliance between Sony and RealNetworks will do much to advance the digital music marketplace as it gives consumers a fluid process for enjoying and moving music from their PCs to next-generation digital devices. The alliance also advances existing collaborations we have with both companies in supporting music protected with IBM's electronic Media Management System."

Turn up for the books
So the tide would appear to have turned - large players such as Sony and Bertelsmann are now apparently trying to jump on the online music distribution bandwagon, which users may pay for, or then again, they may not.

But there is still a group of rich, influential, anti-Napster, anti-free music die-hards proposing that only encrypted, secured, paid-for digital music should be made available on the web.

Analysts worldwide are now looking with weary cynicism at the efforts of the Secure Digital Music Initiative (SDMI), a US-based industry group that was set up to crush attempts by individuals to swap tunes free of charge on the internet.

In a moment of high comedy recently, however, the SDMI posted a challenge on its website. It publicised six super-duper watermarking systems and issued an open challenge to hackers, crackers and ingenious nerds everywhere. "Beat this!" it said - we'll give you "up to $10,000" if you can.

The aim was to publicly test new ways to make copyright tracks impossible to replicate. The idea was that if personal digital music players, home music systems and so on could recognise the digital mark, which is intended to be undetectable, the nefarious deeds of fraudulent home tapers could be nipped in the bud.

But within a few weeks of the challenge being posted, the principles behind all four of the proposed watermarking systems were cracked. Researchers at Princeton University in the US claimed victory first - they said they did it just to prove it could be done, refused the money, and even more inconveniently for SDMI, posted details of how to bypass the systems on their website. And according to a report in this week's Financial Times, an additional 450 people have since found ways to get around at least one of the watermark systems.

So is it back to the drawing board for the SDMI? At a meeting today in Washington DC, the alliance will announce how its challenge is progressing. But whether it can now keep momentum going is another matter - the Napster tide has turned and SDMI appears to be swimming upstream.

CD prices are key
At the core of Napster and MP3's success, however, is a frustration that music fans have been articulating for years: CDs are too expensive. This meant that when cheap and quick ways to copy tracks became available, whether that meant using audio tape, pirating CDs or downloading illegal MP3 tracks, they were bound to be jumped on with alacrity.

Napster gave penny-pinching fans everywhere the tools to get the sounds they want. And now big business is realising that this is the way the music business, and perhaps even the rest of the software industry, might have to go in future.

But the file-swapping process, if it can be made to work cheaply, could actually revitalise the music back catalogues (and balance sheets) of many record companies. A Bertelsmann spokesman said last week that record companies have vast back catalogues - millions of dusty old tracks that aren't worth their while to re-release. These could be searched for and accessed online, however, before being downloaded for a few pence.

Such a move would almost certainly lead to a personnel shakeout among the music industry giants - the ability to swap files legally and harvest the potential of back catalogues online is unlikely to require legions of expense-accounted 'tin pan alley' staff cluttering up the payroll.

But the wind of change sweeping through the music business could likewise sweep away arcane contract and copyright practices that many recording artists perceive as a bigger injustice than anything Napster currently does.

"When you look at the legal line on a CD, it says copyright 1976 Atlantic Records or copyright 1996 RCA Records," says Courtney Love, actress and leader of US grunge band Hole, on her website.

"When you look at a book though, it'll say something like copyright 1999 Susan Faludi, or David Foster Wallace. Authors own their books and license them to publishers. When the contract runs out, writers gets their books back. But record companies own our copyrights forever. The system's set up so almost nobody gets paid," she adds.

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