If You Can't Fight 'Em, Join 'Em - Industry Trend or Event

It may well be the bastard child of the music industry is going to claim an inheritance after all.

MP3, once considered a computer pry tool self-styled audio for pirating copyrighted music for free on the Internet, is now being used by the industry itself as a potentially powerful marketing and distribution technology.

Why the big turnaround? Because the music industry realized it could make more money co-opting the technology than fighting it, according to industry watchers, including Jim Penhune, an analyst for the Yankee Group.

In the past year, Penhune points to a shift in the recording industry from opposing MP3 outright to using it as a distribution channel. He thinks record executives have concluded if you can't beat it, exploit it.

"I think (record labels) all realize they don't have much choice in it and now it is just a matter of how it is presented," he said. "I think they realize they have more to lose by not getting involved with it than they do with illegal copying."

Rich Fleischman sees the same thing from his viewpoint at Liquid Audio, a service and software company that helps artists, record labels and retailers translate music to the Internet.

"Our feeling is the record labels have come around significantly in the last year," the senior director of Liquid Audio's product management said. "They are really much more enabling the Internet as a marketing tool and as a sales tool."

The popular MP3 format, based on the MPEG video compression standard, has been troubling for the music industry because of its use as a copyright piracy tool. The Strategic Digital Music Initiative, a coalition of software makers and the five largest record labels, formed in late 1998 to come up with digital music standards and encryption technology to prevent illegal music downloads.

Because of the industry mood swing, however, Penhune thinks SDMI's role has shifted from just protecting copyright to creating an interoperability specification allowing all digital music to play on all digital players -- similar to the DOCSIS initiative in cable modems.

But don't think the industry has let down its copyright guard. Witness the Jan. 21 lawsuit filed by the Recording Industry Association of America against MP3.com, a leading online music Web site. The suit charges MP3.com violates copyright laws in allowing customers to store their music CDs online. Not to be outdone, MP3.com filed a countersuit against the RIAA charging unfair business practices.

For Fleischman, Internet watchers traditionally have fallen into two extreme camps. One argues the Internet can never be controlled and the music industry is doomed, while the other argues the music industry will seize on digital downloads and rule with an iron fist. But he thinks the Internet environment today is too complex to support either.

"The Internet can't be fought," he said. "It's happening, and the question is do you deny it, do you embrace it or do you tolerate it?"

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