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Record Industry Shoots Itself With MP3 Bullet
By Brian Ploskina, [email protected] Week

Napster may have supplied the ammo, but so far it has been the record labels shooting themselves in the foot over accessing music on the Internet. Although people have been downloading pirated MP3 music files for more than two years, the record labels are just now responding with something other than a lawsuit.

And while the record labels denounce the practice of pirating music as a detriment to the sales of legitimate recordings, the evidence would indicate the contrary.

In 1999, the first year in which MP3 technology was widely available, the record industry experienced 8 percent growth in revenue - from $13.7 billion in 1998 to $14.6 billion in 1999 - while the number of audio and video units sold rose from 1.12 billion to 1.16 billion, based on statistics published by the Recording Industry Association of America.

According to legitimate businesses that use MP3 for sales and promotion, these numbers might have been higher if the record labels had actually embraced MP3, rather than shunning it. Critics said the strategy backfired into the Napster rebellion. Napster software, which is spreading like wild fire, allows MP3 users to share files.

Officials at the RIAA could not be reached for comment.

Gene Hoffman, chief executive of EMusic.com, an online MP3 store and showcase, said that once MP3s were available, consumers were going to download them - legally or illegally. Unfortunately, downloading illegal MP3s was, and still is, the only option available for getting music from most headline artists. "In the '20s, people made a lot of bathtub gin, but they don't do that today because they can buy it for $20," Hoffman said.

Would an about-face on MP3 by a record label work? Marc Geiger, chairman and CEO of Artistdirect , a site for artists to provide music for download and get in touch with fans, expressed doubt.

"Once you get used to something being free, it's hard to get back from that," Geiger said. "The hard part is it's a game for the current Napster users, because there's been this perception that music has been too expensive. [Consumers think] they've been getting ripped off, and artists have been getting too rich."

In a sense, it's payback time.

The music industry is embracing the Secure Digital Music Initiative, a way to encode music, but strip from it the ability to be copied. Since it's still being hammered out, there's no indication yet whether MP3 players will be able to play SDMI music.

The folks at Napster aren't taking the MP3 battle with the stereo on mute. The company is fighting the RIAA with its own medicine, using the Digital Millennium Copyright Act to throw out the case the RIAA has filed against it in a San Francisco court. At press time, the judge's ruling was imminent.




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