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April 12, 2001 [WSJ.com]

Tech Center

Technology Industry Aims
To Render MP3 Obsolete


MP3, a popular format for downloading music from the Web, is encountering competitive pressure as leading technology companies such as Microsoft Corp. work to subtly wean consumers away from the technology.

These companies, which have the music industry's blessing, are encouraging those who download music to use new proprietary software formats that make the audio sound significantly better but also make it harder to share copyright-protected songs.

Microsoft, for example, plans to severely limit the quality of music that can be recorded as an MP3 file using software built into the next version of its personal-computer operating system, Windows XP. But music recorded in the Redmond, Wash., software company's own format, called Windows Media Audio, will sound clearer and require far less storage space on a computer.

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[Go] Federal Court Orders MP3.com to Pay Record Label $292,000 (April 9, 2001)

RealNetworks Inc. of Seattle also is encouraging consumers to use proprietary software formats, such as its Real Audio 8, though RealNetworks' listening software can accommodate a variety of different formats, including MP3 and Microsoft's. Other formats gaining popularity are based on the relatively new Advanced Audio Codec created by AT&T Corp. of New York, Dolby Laboratories Inc. of San Francisco, Sony Corp. of Japan, and the Fraunhofer Institut Integrierte Schaltungen in Germany.

Why the eagerness to move consumers away from MP3, a format many people know from using Napster, the controversial Internet music-sharing service?

All the new music-software formats include technology known as digital-rights management, which can "lock" copyright-protected songs and make it harder for consumers to share that music illegally. As the largest recording labels begin selling music online, they generally have shunned MP3, which "has been commonly regarded as an unprotected format," says Cary Sherman, senior vice president and general counsel of the Recording Industry Association of America.

"The industry doesn't want [MP3] pushed, and Microsoft and RealNetworks don't want it pushed. The consumer is going to eat what he's given," says David Farber, the former chief technologist at the Federal Communications Commission.

It isn't clear how successful the industry will be in its efforts to make MP3 files as obsolete as eight-track tapes, because of the sheer volume of music already available on the Internet as MP3 files -- much of which is available illegally. All the major software and hardware devices support MP3 music, even as vendors try to popularize rival formats.

"It's not an easy job," says Andrea Cook Fleming, a vice president at Liquid Audio Inc., a Redwood City, Calif., company that offers music via the Web in a different format. "This is a big mess to clean up. It's going to have to be attacked on many fronts."

Even Mr. Sherman of the recording association, which has fought a pitched battle against Napster Inc.'s sharing of MP3 files, concedes that he expects the format "to be around for some time."

Still, experts said Microsoft's increasingly aggressive efforts to popularize its proprietary audio format -- along with legal difficulties facing Napster -- could stem MP3's popularity. They cite Microsoft's vast resources and the broad reach of its Windows operating system. Microsoft, for example, has been giving away free licenses to other companies to use its audio technology, which now is supported -- along with MP3 -- by major hand-held music players.

"Certainly, when Microsoft decides to put something in their operating-system support, it becomes the standard," says Mr. Farber, who testified for the government during the Microsoft antitrust trial. "The average consumer will use what comes on the disc when he buys the machine. They're very effective in that way."

Under Microsoft's new restrictions -- which prevent its built-in software from recording MP3 files at fidelity rates higher than 56 kilobits per second -- MP3 music "sounds like somebody in a phone booth underwater," says P.J. McNealy, an analyst who researches Internet audio issues for Gartner Inc. in Stamford, Conn. (Existing versions of Microsoft's audio software don't allow consumers to record music as MP3 files of any quality.)

The new restrictions in Windows XP won't prevent other vendors' software applications from recording MP3 music at a higher fidelity, but early testers of beta versions of Windows XP already complain that the most popular MP3 recording applications -- which compete with Microsoft's format -- don't seem to function properly, apparently because of changes Microsoft made to how data are written on CD-ROMs under Windows XP. Microsoft says that while other software vendors' products may not be "optimized" to run with Windows XP, those products should run acceptably with the operating system.

Microsoft said its decision not to include built-in support for recording better-sounding MP3 music also avoids it having to pay license fees required by Thomson Multimedia SA and the Fraunhofer Institut, which collect at least $2.50 from software vendors for each copy of recording software based on their MP3 technology.

"We think at the end of the day, consumers don't really care what format they [record] in," said Dave Fester, a general manager in Microsoft's Digital Media Division. He maintains that despite the new restrictions, Microsoft will make sure its software does "a great job of making sure our player will play back MP3, or put it on a CD." But for new content that users might want to create, he says there "are clear advantages" to not using MP3.

Still, even MP3's critics concede it might be here to stay. "It's a little like the VHS tape," says Steve Banfield, general manager at RealNetworks. "DVD is great, but VHS is ubiquitous and it isn't going away anytime soon."

Write to Ted Bridis at [email protected]

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