September 17, 2004 11:18 AM PDT

Labels, Microsoft in talks on CD copying

Record labels and Microsoft are in discussions about ways that the next generation of the Windows operating system, code-named Longhorn, can support copy-protected CD technology.

The music labels, in large part led by top executives at EMI Group and coordinated through their U.S. and international trade associations, are creating a "wish list" of CD rights protection features they want to see provided or supported by Longhorn. Microsoft, in turn, has provided its own set of guidelines for the labels, without yet promising anything, sources familiar with the situation said.

The labels are far from unanimous on their thoughts about how to use, or even whether to use, copy protection technology on CDs. But sources said most are eager to avoid being locked into Microsoft technology and want to ensure that Longhorn provides a platform for copy protection that is at least as consumer-friendly as Apple Computer's iTunes Music Store.

"We're asking Microsoft to put in a framework--not to say what the rules are," said EMI Music North America Chairman David Munns, who has helped coordinate discussions among the music labels. "This would solve consumer confusion and help make the whole thing a much more friendly and easier consumer experience."

The discussions over copy protection and Longhorn are in some sense very theoretical, based on expectations of future technology developments and future consumer behavior. The music labels have been experimenting with ways of putting new copy controls on CDs for several years but have released only a few albums with the technology in the United States, with mixed success.

Microsoft's next operating system is also far from release. The company recently pushed back Longhorn's planned launch date until late 2006, and it is still working out details of a "Secure Computing" plan that some have said would help make digital rights management technologies much stronger.

However, EMI, in particular, has previously talked with Microsoft about ways to make copy protection a simpler experience by building support more deeply into the operating system, Munns said.

One idea from the record label side would be to let the operating system recognize a CD, when it is put in the tray, and automatically set in motion whatever usage rules have been specified by the label itself on the CD. This might include limits on the number of copies that can be made or what rules would be associated with a digitally "ripped" file, for example.

Today's copy protection technologies are more rudimentary, often including software on the CDs themselves, and have little interaction with the operating system. As a result, they are often easily bypassed and are very obvious to consumers.

The most recent discussions with Microsoft were initiated by the labels, Munns said. The software company agreed to consider their requests but in turn asked that the music industry come to a consensus on its requests, other sources added.

Led in part by EMI, labels have subsequently been developing their wish list for at least a month, with discussions that have included the major and larger independent labels. Representatives from the RIAA are scheduled to meet with Microsoft on Sept. 20 to discuss the requests, sources said.

Labels are primarily adamant that the operating system allow non-Microsoft copy protection technologies to function as transparently as Windows Media's own digital rights management tools. They also want to ensure that the operating system avoids treating the protected CDs in any way that might prompt consumer backlash, sources said.

"Longhorn done the right way could really advance that cause," one source familiar with the talks said. "Longhorn done the wrong way could significantly frustrate everyone involved."

Microsoft, in turn, has communicated to the labels that it does not want to support technologies that might be viewed by consumers as aggressive or potentially related to spyware, sources said.

No hard decisions have been made on either side, sources said. The meeting next week is likely to be the beginning of a series of discussions between the software company and the music business, as the operating system comes closer to completion. So far, Microsoft has been very open to working with the labels, Munns said.

A Microsoft representative declined to comment on the issue.

Munns said the drive would not be limited to Microsoft's operating system. The music companies have also had early conversations with Apple, and the framework of requests that develops from the industry wish list will be provided to any company that makes operating systems or digital rights management tools.

"Our fate as an industry--what we offer consumers, how we protect content and how the content is played--is inextricably intertwined with the technology companies and the platforms they offer," RIAA President Cary Sherman said. "We have to be in dialogue with them."

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