September 28, 1999 2:30 PM PDT

Sony's dilemma: Illegally copied music on Walkman

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Sony's new Walkman will be able to play illegally copied songs, a decision that puts the consumer electronics powerhouse in the middle of the industrywide firestorm over how to protect music copyrights in the online era--and apparently at odds with the company's public stand on the issue.

Sony Electronics announced last week that a new version of its popular Walkman personal stereo will be capable of playing music distributed in the MP3 file format.

Although the new product is designed to play files coupled with piracy protection technology, it also is capable of playing any MP3 songs, including illegally copied tunes, the company confirmed. The downloads are possible because the storage technology for the device--Sony's "Magic Gate Memory Stick"--can accept either format.

Adding to the dilemma, the Sony device will of course be able to download illegally copied songs by Sony Entertainment artists. That is precisely what Sony has been trying to avoid in lobbying for tighter controls over the distribution of digital music.

Digital music has skyrocketed in popularity among PC users and music enthusiasts because of the ease with which it can be shared and distributed on the Internet. But Sony and the rest of the recording industry have viewed the technology with distrust because much of the digital music available has been illegally copied and distributed.

In fact, the Recording Industry Association of America filed a lawsuit against Diamond Multimedia, charging that the company's Rio portable MP3 player infringed upon copyright-protected material. The suit was later dismissed.

Despite the controversy, Sony--which began the personal stereo trend with the first Walkman 20 years ago--could not afford to wait any longer to join the market, analysts say. Although Diamond's Rio holds the lead among today's digital music players, every major consumer electronics company--including Toshiba, Philips, Thomson, and Samsung--has already announced plans for competing devices.

The possibility of downloading all music is the price of going to market before a protective standard has been adopted. The new Walkman will be capable of downloading illegal tunes, as well as music which complies with the Secure Digital Music Initiative's preliminary copyright-protection specification, said Phil Abram, vice president of corporate strategy and new business development for Sony Electronics.

The SDMI is a consortium of music companies, consumer electronics firms, and others. Lately, infighting has marred the group's efforts.

"We hope people won't be using illegal music, MP3: Sound and fury but there is not any way to flag illegal content" so it can be blocked, Abram said. "We will make every attempt to manage copyrights to make sure illegal copies aren't made of secure music."

Sony's decision to move forward indicates how hot the digital music market is, said Forrester Research analyst Mark Hardie. "Digital music is critical in [Sony's] future if they're going to hang onto their leadership with the Walkman," he said. "They created the category. The last thing they want to do is cede that market to a peripherals manufacturer," such as Diamond.

The startling rise of MP3 and companies such as Diamond has clearly caused the old guard entertainment companies to refocus. Because it is a huge company, Sony faces a longer lead time in designing and getting products to market than smaller, more nimble companies such as Diamond. Thus Sony could not afford to wait for its entertainment division to come to a decision with the other record labels on a hard and fast antipiracy technology, Hardie said.

"Sony's consumer electronics division has a different perspective on exactly how important these devices are, and they can't afford to wait on the discussions of an industrywide group," he said. "They're moving as fast as Sony can move."

In the future, the SDMI technology that the new Walkman will support could be upgraded to filter out music that does not contain the approved watermark technology, Sony said.

Resistance to SDMI?
But SDMI may face an apathetic market. Some industry analysts believe that devices which filter out some music will not sell as well as players without filters. So it is unclear when SDMI technology will be implemented or in what form.

"In a few months the next phase of SDMI will begin to block music which does not have proper copyrights, but it won't be popular with consumers and it won't be permanent," Hardie said.

Sony's success in the consumer electronics market is also predicated upon the acceptance of the Memory Stick, a portable memory device about the size of a piece of gum, which is being designed into Sony's audio-visual products and PCs. With the Memory Stick, users can download songs or photos on a PC, and then transfer them to the appropriate playback device.

The Magic Gate version of the Memory Stick is SDMI-compliant, and works with all other Sony products, the company said. If the Walkman with Memory Stick is a failure, the group's overall strategy may be called into question.

The Sony Walkman with 64MB Magic Gate Memory Stick will be available next year for an estimated retail price around $400.

 

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