Buyers Would Pay More to Copy Digital Music
By Colin C. Haley
March 14, 2003


As the copyright debate spins in recording industry boardrooms, Congressional hearing rooms and college dorm rooms, an upcoming survey of digital music suppliers and consumers suggests some common ground.

A key conclusion of the Jupiter Research study is that music fans -- whether buying CDs in a store or downloading albums or individual tracks over the Internet -- want to own the tunes and are willing to pay a premium to do so.

Nearly twice as many online consumers are willing to pay $17.99 for a CD that has unrestricted copy abilities versus a CD at only $9.99 that cannot be copied, the study concludes.

"Consumers are well-accustomed to having freedom to copy music as they see fit," said Peter Sargent, a senior analyst at Jupiter Research, and author of the report. "It's really been a right of passage. If I buy it, it's mine to keep."

While consumers' willingness to pay more for an unencrypted disc may be music to the ears of the Recording Industry Association of America (RIAA), it doesn't follow that jacking up prices is good businesses.

"The message for content providers is to be extremely careful about introducing copyright restrictions without considering sigifnicant reductions in price," Sargent said. "Otherwise they risk a backlash."

So far, it's an understatement to say content providers are resisting the need to decrease prices, Sargent added. The companies are wary after seeing free content sharing sites such as Napster and its progeny cut into profits.

The study, which surveyed 1,700 online consumers and will be available in about two weeks, reached similar conclusions for movies.

Forty-one percent of respondents said they were willing to pay more for movies that could be copied. Since few DVDs can now be copied, the findings represent a significant opportunity.

"The concept is attractive, because so few consumers are currently doing it and because it could be introduced at premium prices," Sargent said.

Despite the opportunities, there are high hurdles to clear to find a balance between digital content owners and consumers including workable encryption technologies, legislative and judicial issues concerning the application of the Digital Millenium Copyright Act, and the adoption of a widespread tiered pricing system.
culater

CeBIT: Mobile to Drive Tech's Future
By Niall McKay, Mar 12 2003

TheFeature’s coverage of CeBIT week starts today. What’s big this year?

(3 recommendations)



The ability to send and receive photographs, music, and corporate data while on the move – even while munching on a Big Mac at McDonald’s – is emerging as a main theme of CeBit, the world’s largest electronics trade show. Over half a million people are expected to browse the products of the 6000 exhibitors in Hannover, Germany this week.
TheFeature’s editorial staff will for the next week bring you breaking news and stories from CeBIT on 3G-network infrastructure products, mobile office software, and mobile content offering as well as reviews of the hottest products to debut at the show. Be sure to check out TheFeature’s new Scream Event mobile service to get the latest breaking news sent right to your mobile.

Subdued Keynote

During what was reported to be an uncharacteristically subdued keynote speech for a technology trade show, German Chancellor Gerhard Schroder joined Nokia chairman and CEO Jorma Ollila to officially launch CeBIT on Tuesday evening, saying that 2003 could be another difficult year for the industry.

Despite this, Ollila said that mobility is the next global megatrend and will influence the IT, media and the consumer electronics business sectors. It is already expanding into new areas such as entertainment, media and the enterprise, he said.

Phone Home

On Tuesday, paving the way for the next generation networks in Europe and the US, Nokia and Siemens launched a number of new handsets. The Nokia 6220 is the company’s first phone for EDGE (enhanced Data rates for GSM Evolution) networks in Europe, and it will provide download speeds of up to 118.4kbps, a digital camera, a color screen and Java and MMS support. The company also launched the 810 car phone and the 3300 music phone, which features an MP3 player, FM radio and digital recorder.

Meanwhile, Siemens demonstrated its SL55 and M55 mobile phones, which are tri-band GSM/GPRS world phones that also support digital camera attachments.

Ear Phone

Samsung is set to release an interesting Bluetooth earpiece that contains both a transmitter and microphone and utilizes the user’s head as a speaker and microphone.

Wi-Fi is making the transition from geek to chic and going mainstream as companies such as Philips announced their intention to include the technology in future consumer electronics products. Meanwhile, Intel launched its Centrino mobile processor chipset, which features built-in Wi-Fi capability, hoping to make 802.11 technologies standard in a wide range of new devices. Following in the footsteps of its Japanese subsidiary, McDonald’s announced that it will begin the roll out of Wi-Fi services in 300 restaurants in New York, Chicago and California by the end of the year with Intel’s support, joining several other enterprises like Borders book stores and Hilton hotels in adding the networks to their locations.

Are Things Looking Up?

Financially, the news around the show was mixed. Nokia warned that first quarter earnings would be weaker than expected due to lack of demand for networking equipment, while Patricia Russo, Lucent's chairman and CEO, said that the worst may be over for the telecom industry.

Still, despite the global economic slump and the ensuing threat of war, the handset market actually grew in the US by over 10 percent last year, according to the market research firm IDC and global cell phone sales increased by over 6 percent according to another research firm, Gartner Dataquest. Analysts are predicting that (war and recession permitting) sales will stay up in 2003. Wouldn’t that be nice?
culater

View: The absent sound of music
By: Jørgen Sundgot, Friday 14th March 2003, 10:02 GMT

While mobile devices rapidly catch up on features required to act as digital music players, record labels are notably absent in the big picture. Jørgen Sundgot tells you why.

Memo to record labels: Welcome to the future. That's right, this is 2003 - and the future, embodied by all-singing, all-dancing mobile devices has finally arrived. By now, mobile devices have reached a stage of maturity where a number of them already double as digital players - and with the introduction of wireless to the mix things are getting very exciting indeed. There's just one snag: record labels don't seem to be paying attention.

Dedicated digital audio players aside, the kind of mobile devices that can obtain direct Internet connectvity in one way or another have been proliferating for some time now. I'm talking about Palm OS devices, Pocket PCs and Symbian OS devices, all of which now support audio playback in one way or another. And not to forget, mobile phones are also reaching a stage where they can easily double as digital audio players - probably a match made in heaven, as far as most of us are concerned.

Yet there isn't a single application for any of these platforms that allow their owners to even check out the latest chart hits for their particular taste of music - or any music, for that matter. Imagine how easy conducting the following scenario with today's technology would be: check chart; find song; listen to first 15 seconds; decide whether to purchase; decide whether to download on the fly or the next time you return to your PC and broadband connection. And what do record labels do? License their vast catalogs to small outfits that produce annoying ringtones of (mildly put) varying quality.

But can we really blame them? Napster, Gnutella, Kazaa and Morpheus are all names that boast lead roles in the nightly horror plays of music executives all over the globe, causing them to brutally wake up in the middle of the night - soaked in sweat and clutching their wallet whilst condemning those who invented the Internet to eternal damnation.

So, here we are then with mobile devices that are more than powerful enough to support advanced Digital Rights Management (DRM) solutions, combined with brilliant audio features and integrated wireless connectivity. Pocket PCs have had excellent recording and playback capabilities for years. A great number of Nokia phones have integrated FM radios. Other mobile phone manufacturers have experimented with MP3 playback capabilities. So has Nokia. The audio quality of Sony Ericsson's P800 is outright amazing. Palm OS devices? They're coming along nicely, too.

Yet record labels seem to refuse trying anything new, which is simply astounding considering the lesson they should have learned from what must in those circles be dubbed as the Internet Horror Show. And on that note, it was with considerable glee I recently discovered that Nokia's new 3300 is ingeniously capable of recording audio from its integrated FM radio. Just imagine the number of youths who will choose to record their favorite hits straight from any hit chart show, rather than buying music in stores. In doing so, they bypass the chain of revenue the record labels have so carefully built up - delivering a punishing blow to their wallets. Sadly, artists will also be at a loss with today's model for distributing music.

End note to record labels: This is the 21st century. A fraction of the billions of dollars you make in the hands of a few good developers could bring about a revolution, make things easier for a few billion people and even - most importantly for you - increase your profit margins. But we can't have that, now can we!
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Press Release Source: SRS Labs, Inc.


SRS WOW(TM) Technology Adds Audio Punch to New Portable Digital Audio Player From e.Digital
Tuesday March 4, 7:31 am ET
WOW Technology Rapidly Becoming Audio Standard for Digital Entertainment Products


SANTA ANA, Calif., March 4 /PRNewswire-FirstCall/ -- SRS Labs, Inc. (Nasdaq: SRSL - News), a leading provider of innovative audio, voice and ASIC technology solutions, today announced that its patented WOW audio technology has been selected by e.Digital Corporation (OTC: EDIG - News) to deliver the ultimate audio experience for its premier digital audio player, the Odyssey(TM) 1000. WOW creates a natural and expansive audio experience with rich bass enhancement through Odyssey's included collapsible stereo headphones or when connected to the external speakers of a home stereo or multimedia PC system. The Odyssey 1000 is available exclusively through e.Digital at www.edigital-store.com/odyssey1000.html for $349.
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According to InStat/MDR, worldwide portable digital music player unit shipments (including solid state and revolving media products) will grow from about 7.2 million in 2002 to almost 30 million in 2006. Based on e.Digital's MicroOS(TM) technology, the Odyssey 1000 plays both MP3 and Windows Media(TM) audio files and features an FM tuner and a digital voice recorder with built- in microphone.

Steve Ferguson, e.Digital's vice president of sales and marketing, said, "When designing our premier large-capacity player, the Odyssey 1000, we chose to incorporate SRS WOW audio technology because it delivers the most powerful audio experience possible in a portable entertainment product. Our customers demand the best and we are pleased to offer them the best design, the best features, and the best audio technology."

"e.Digital's new Odyssey 1000 is an example of the growing importance of delivering a high quality audio experience in portable entertainment products," said Ted Franceschi, executive vice president, marketing and sales for SRS Labs. "WOW is the ideal audio solution for this rapidly growing product segment and we are pleased to work with an innovative company such as e.Digital to deliver the ultimate in digital audio entertainment."

SRS WOW is an award-winning, patented, playback enhancement technology that improves audio dynamics and bass performance of any mono or stereo audio. It provides a stunning improvement when used with smaller speakers or headphones that are not capable of achieving a high fidelity experience, especially when the audio has been digitally compressed into formats such as MP3 and WMA. WOW is a compelling audio solution for manufacturers of mobile or portable devices, in addition to products in which speakers are located close together, such as televisions. Hardware and software products that feature WOW include mobile phones from Sharp, Microsoft's Windows® Media Player series software products, car CD receivers from Kenwood, as well as televisions from Sony and Sharp. To date, over 300 million hardware or software products have been shipped or downloaded that include the powerful WOW audio feature.

About e.Digital

e.Digital Corporation designs, licenses, brands, manufactures, and sells digital audio products and technologies. The company's trademarked digital audio players include the MXP® 100, Treo(TM) portable digital jukebox line, and Odyssey(TM) line of flash- and hard disk drive- based players. e.Digital launched WeDigMusic.com to complement its digital audio players by providing consumers with a one-stop-shop for streaming and downloading music from thousands of artists on the Web. For more information on the company, please visit www.edig.com . To shop in the e.Digital online store, please visit www.edigital-store.com .

About SRS Labs Inc.

Over the past decade, SRS Labs has become a recognized leader in the advancement of audio and voice technology. The company works with the world's top manufacturers to provide a richer entertainment experience through patented sound techniques. SRS technologies can be heard through products ranging from televisions, DVD players, and cell phones to car audio systems and computers. Through its SRSWOWcast subsidiary, the company offers hardware and software tools to professionals and consumers for the production of content featuring SRS technologies. SRS Labs' wholly owned subsidiary, ValenceTech, is located in Hong Kong and provides custom ASICs and standard ICs to top manufacturers worldwide. Based in Santa Ana, Calif., the company also has licensing representation in Hong Kong, Japan, Europe, and Korea. For more information about SRS Labs, Inc. or SRS technologies, please visit www.srslabs.com . The information on the above-referenced websites is not incorporated by reference into this press release.

For further information, please contact: Investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com




--------------------------------------------------------------------------------
Source: SRS Labs, Inc.
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E-Music Sites Settle on Prices. It's a Start.
By SAUL HANSELL


as the music industry found the 99-cent solution to its file-sharing woes?

"Solution" is far too final a term for this business still very much in flux. But after years of denial and confusion, belligerence and panic, most of the big record labels have coalesced around a set of prices at which they will make almost all of their music available to an ever-expanding array of legal online services.

A major step toward a legal mass market for online music came last week when America Online started offering its first online music service to its 27 million members. AOL's plan roughly matches the terms and pricing that have evolved over the last 18 months by about half a dozen other paid music services.

They all now charge $9 or $10 a month for customers to listen to a pool of about 250,000 songs online, using a technology called streaming. And they charge about 99 cents to download a song and copy it onto a CD, where it can be played in a car or on a home stereo, or converted to a computer file format like MP3 to be shared with others (legally or not).

Other variations have also evolved. AOL's service, and others, include an unlimited number of what are known as tethered downloads, where songs can be copied onto a computer and played offline, for example, by a traveling laptop user. (The tethering means a subscriber can listen to the downloads on no more than two computers, and cannot copy the files to other devices or send them to other people.) And others offer variations on Internet radio, where users can pick genres or even specific artists to listen to online.

These options, along with the expanding pool of songs, finally have created online services that might have a chance of appealing to consumers and luring at least some from the free file-sharing services like KaZaA.

"We are at a crossover point," said Rob Glaser, the chief executive of RealNetworks and the chairman of MusicNet, which operates an online music service sold by RealNetworks and AOL. "Everyone doesn't agree on everything, but everyone agrees on enough things that we can start putting products in the market."

This agreement is also helping to frame some of the difficult questions the music industry must confront as it moves, however slowly, into a post-CD world. It is unclear so far whether the dominant digital business model will be selling downloads or renting access to a full catalog. It is clear that consumers are more interested in buying one song at a time than entire albums, an audience preference that is likely to mean major changes for the way the recording industry produces music. What those songs are worth in the long run is very much up in the air — except everyone agrees that eventually the hottest hit and the stalest oldie will not both be worth 99 cents.

But for now at least, the $10-a-month and 99-cent-a-song price list is letting the marketing side of the business take over from the deal makers. And Internet users will start to see increasing promotion for the first time for the online music services.

Listen.com, a privately held service, has attracted quite a bit of attention by discounting the price of burning songs onto CD's to 49 cents, from 99 cents, until March 31. And Internet service providers, including AOL, are looking to bundle stripped-down versions of these music services with their high-speed, or broadband, offerings.

The industry has come a long way since the first legal downloading services were introduced at the end of 2001. Back then Napster, the hugely popular file-sharing service had just been shut down by the courts. With a sense that the threat of free swapping had subsided, the big labels set up paid services, trying to preserve all sorts of advantages for themselves.

For one, the labels split into two groups. Sony and Universal, the two largest labels, created PressPlay. Warner, Bertelsmann and EMI along with RealNetworks, created a rival, MusicNet. Neither had access to music of their rival's owners.

Both offered limited numbers of songs that could be listened to online, or through tethered downloads. Only PressPlay allowed songs to be copied onto CD's or portable music players, and only in limited numbers.

Consumers spurned the first services. And indeed America Online refused to introduce the first generation of MusicNet, even though it is part owned by its corporate cousin Warner Music (both part of AOL Time Warner).

But as the music industry fiddled, the file-swapping masses were burning more free CD's than ever.

"After Napster shut down, the music-sharing community reassembled like the cyborg in `Terminator,' " Mr. Glaser said. "It was much more rapid and much more organized than anyone expected."

Indeed, far more people use KaZaA, the largest of the file-sharing services, than ever used Napster. And sales of recorded CD's kept on falling, declining 9 percent in 2002.

So the music companies stopped jockeying for advantage in the music services they owned, and stopped worrying so much about how the paid services would cannibalize their CD sales and started searching for something — anything — that music lovers would actually pay for.

EMI, for instance, first focused on receiving a share of the profits of any online service selling its music, and by the end of last year decided to sell its music to most any online service.

"We moved to the notion that we are a content company and our content will have the greatest value for us and our artists if it's ubiquitously available and we enable the maximum number of business models to thrive," said John Rose, an executive vice president of EMI.

So EMI, which owns part of MusicNet, decided to license its music to PressPlay, Listen.com and others. By the end of last year, all of the labels were available on all of the services.

The music services, meanwhile, were able to use their lack of success to persuade the labels to allow them to offer unlimited streaming and more flexible downloads.

"The industry over the last year has developed a much greater understanding of the viability of this market," said Michael Bebel, chief executive of PressPlay. "We are at a point where a set of fundamental economics has emerged."

A basic wholesale price structure is coming together that online services can use to create product offerings. For example, a download of a song, with a suggested retail price of 99 cents, has a wholesale cost of about 65 cents from the labels, according to music executives.

The streaming services and tethered downloads have a more complicated price structure. Basically, the services pay between two-tenths of a cent and a penny to the label every time a user listens to a song. But there are monthly guarantees to the labels that together make the minimum monthly cost for music licenses to offer an unlimited streaming service about $5, according to music executives.

Internet radio is far cheaper for the online services to offer, costing stations seven-one hundredths of a penny a song for each listener, under a royalty arrangement the federal government set last year. And the services like MusicMatch's Radio MX that let users choose the artist they want to listen to but not the song, have a wholesale price that is higher than regular Internet radio and less than services that let users pick each song.

"We found demand drops off quickly after about $5 month," said Dennis Mudd, the chief executive of MusicMatch. Indeed, Radio MX, which has $2.95 and $4.95 a month options, has 120,000 subscribers, more than MusicMatch and PressPlay combined, according to analysts estimates. (Neither releases their subscriber counts, but they admit they are small.)

There is quite a debate about whether $9.95 (or $8.95 on AOL) is the right price for the unlimited streaming services.

Paul Vidich, an executive vice president of the Warner Music Group, argues that a service that lets users only listen to music — not copy it onto a CD or other device — is likely to be offered free with a broadband Internet subscription.

"At the end of the day we will invite people to listen without charging an admission fee," he said. "We are in the business of selling songs for people to own."

But others argue that in a world where stereo systems and even cars would be hooked up to the Internet with access to every possible song, no one will need to buy any music to keep. If that is true, the value of a monthly music subscription could be far more than $10.

The price of the songs themselves is also very much in question. At first, the labels tried to sell songs for as much as $2.99 each. But a series of experiments showed that consumers were not interested until the price hit 99 cents. That appears to resonate because it is in line with a 12-song CD that costs $15.

For simplicity's sake, the labels started by charging the same price for all their songs. But they are already working on plans to charge more for some and less for others. EMI, for example, is charging a premium of 50 to 75 percent for hot songs when they are released to download services before the albums are available in stores. And others are considering selling older titles in their back catalogs at a discount.

Moving forward, this emphasis on selling one song at a time may substantially hurt the industry. Since the the demise of the two-song 45 r.p.m. record a quarter-century ago, the recording industry has generally been able to charge for a full album on a CD — even if the consumer only wanted a song or two.

But Mr. Rose of EMI argued that the big issue for the music industry is not the subtleties of whether people buy songs or albums, but finding something that music lovers will pay anything for at all. And there is money to be made in volume, he said.

"If all the consumers who pirate tracks today bought them for a buck, that would be a $5 billion a month business," Mr. Rose said, noting that that is twice the size of the music industry today.
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agreed-tech and partners are what keep my interest-can only hope it holds together for the retail shareholders.Bought some now, but time to buy may be after split. culater

bearstache (or anyone)-welcome-any thoughts on the 40 to 1 proposed reverse split? culater

RealNetworks hedges bets with Listen.com stake
Wednesday February 26, 8:14 pm ET
By Sue Zeidler


(Adds background, quotes, byline)
LOS ANGELES, Feb 26 (Reuters) - Digital media company RealNetworks Inc. (NasdaqNM:RNWK - News) on Wednesday said it had taken an undisclosed stake in struggling online music firm Listen.com, transforming a onetime competitor into a close ally.

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Listen.com, which recently cut its staff to 50 from 70 and has been seen as a potential takeover target, said it will use the investment to boost its Rhapsody music subscription service, which competes with MusicNet, an online service 40 percent owned by RealNetworks.

Under the deal, RealNetworks' technology will become the primary platform for the Rhapsody service and the two companies will explore collaborating on future services, they said.

Prior to Wednesday, Rhapsody's primary platform had been Windows, made by RealNetworks' chief rival, Microsoft Corp. (NasdaqNM:MSFT - News), which it will now support as a secondary platform.

The investment comes on the day that America Online began offering a revamped version of MusicNet to its 27 million U.S. Internet customers, the biggest move yet to bring commercial online services to the mainstream as they struggle against free, unauthorized services like Kazaa.

Analysts said the investment reflected RealNetworks' desire to hedge its bets in the still-developing field.

"They're making multiple bets. Now that they have a stake in Rhapsody, they can promote whichever service they feel best meets consumer needs," said Phil Leigh, analyst with Raymond James and Associates.

STRUGGLING TO STAY AFLOAT

Leigh is among several analysts who has pegged Listen.com as a takeover target. While Rhapsody has been winning kudos for its pricing, content and ease-of-use, Listen.com has been struggling to stay afloat in recent months, according to industry sources.

Listen and FullAudio are among the few remaining players in online music not backed by the world's major record companies.

Leigh said either FullAudio or Listen.com could possibly be acquired during the next year, particularly since CD-burning software maker Roxio Inc. (NasdaqNM:ROXI - News) plans to relaunch the once wildly popular song-swapping service Napster, which it recently acquired.

"Roxio plans to offer music through Napster by the end of the year and if they can't get the licensing or the technology, management has indicated they would acquire whomever they need. Two potential targets are Listen and FullAudio," he said.

A Roxio spokeswoman was not available for comment.

In addition to RealNetworks, MusicNet is backed by Bertelsmann AG (BERT.UL), EMI Group Plc (London:EMI.L - News), and Warner Music, which like America Online, is owned by AOL Time Warner (NYSE:AOL - News). Rival service Pressplay is owned by Vivendi Universal (NYSE:V - News; Paris:EAUG.PA - News) and Sony Corp. (Tokyo:6758.T - News)

Rhapsody currently offers about 280,000 tracks, versus Pressplay's and MusicNet's 250,000. What differentiates Rhapsody from others, according to analysts, is that when searching for an artist, Rhapsody provides photos, links to an artist's Web site, a list of similar artists and influences, a sample of its best work and a complete roster of albums.

OT-Intel Announces 'Wireless-Internet-on-a-Chip' for Cell Phones
Thursday February 13, 8:02 am ET
Industry's First Single-Chip Cellular Processor Combines Computing, Memory and Communications Functions


SANTA CLARA, Calif.--(BUSINESS WIRE)--Feb. 13, 2003--Intel Corporation today announced a new cellular processor that uses advanced "wireless-Internet-on-a-chip" technology.
The highly integrated microchip is the first to combine the key components of today's cellular phones and handheld computers onto a single piece of silicon -- promising to bring advanced functionality, longer battery life and more innovative phone designs to mainstream phones.

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Called the Intel® PXA800F cellular processor, it is a key component of the Intel® Personal Internet Client Architecture (Intel® PCA), Intel's development blueprint for designing wireless handheld communication devices that combine voice communications and Internet access capabilities.

In creating unique "wireless-Internet-on-a-chip" technology, Intel engineers overcame significant technical hurdles associated with combining the different design and manufacturing technologies for processing, flash memory and communications functions. The Intel PXA800F cellular processor is built using a single process to place all key components onto one chip using the industry's leading .13-micron silicon manufacturing technology.

"Intel's ability to provide communications, computing and memory functions in a single chip is unmatched in the industry and promises to deliver outstanding performance, greater versatility and a richer experience to cell phone users worldwide," said Hans Geyer, Intel vice president and general manager of its PCA Components Group. "As the industry transitions from voice-only phones to advanced devices that combine voice and data, the ability to effectively and efficiently combine advanced processing, memory and communications technologies will be required to drive the next-generation of cell phones."

Bringing High-End Capability to Mainstream Cell Phones

Today, feature-rich phones that include integrated camera, color screen, and games have multiple components, and represent the most expensive and sophisticated portion of the cell phone market segment. However, history has demonstrated that when more capabilities are put on a single chip, the functionality of the device increases and production costs decrease.

By combining multiple functions through silicon integration, Intel has delivered a cellular processor with higher performance, lower power, and increased reliability that increases the capabilities of a mainstream, data-enabled cell phone.

The First "All-in-One" Processor for Cell Phones

The Intel PXA800F cellular processor features a high-performance, low-power processor running at 312 MHz based on the Intel® XScale(TM) technology with four megabytes of integrated Intel® On-Chip Flash memory and 512 kilobytes (KB) of SRAM for industry leading application performance. In addition, the Intel PXA800F cellular processor includes a 104 MHz signal processor using the Intel® MicroSignal architecture with 512 KB of integrated Intel On-Chip Flash memory and 64 KB of SRAM, resulting in a complete system on a single chip for advanced GSM/GPRS cellular networks.

Industry Support

The increasing availability of mobile content and the emergence of worldwide wireless data standards are driving the development of a new generation of data-enabled wireless devices for businesses and consumers. To assist phone manufacturers with the rapid development and deployment of wireless devices, applications and services, Intel has worked with communications industry leaders including TTPCom Ltd.*, Esmertec*, Elektrobit*, ADI*, RF Micro Devices, Inc.*, Dialog* and Jamdat* to offer a complete communications system in support of the Intel PXA800F cellular processor.

From power management modules to mixed signal and radio frequency capabilities to form-fit reference designs, this platform speeds the development process by supplying key software and hardware components to enable rapid production of GSM/GPRS handsets.

Pricing and Availability

The Intel PXA800F cellular processor is sampling today with production volumes expected in the third quarter of 2003. Products using the new processors will be available later this year, or early next year. The Intel PXA800F cellular processor has a suggested list price of $35 (US) in 10,000 unit quantities. More information on the new processors can be found at www.intel.com/info/gprs.

Intel, the world's largest chip maker, is also a leading manufacturer of computer, networking and communications products. Additional information about Intel is available at www.intel.com/pressroom.

Intel, Intel StrataFlash and XScale are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries.
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Shoshana Berger article on CNN money-http://money.cnn.com/2003/02/12/technology/gizmos_eDigital_Odyssey_1000/
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Free music offered to net users


Customers of Tiscali are getting six months of free digital music included with their standard net service.
Tiscali's dial-up and broadband customers will get access to a large library of digital music files as well as special content such as concerts, interviews and radio programs.

Customers will be given credits that they can trade in to listen to tracks or burn the music they like to a CD.

The European net firm has signed a deal with music distribution firm OD2 and software giant Microsoft to set up the service.

Credit trail

The free music downloads are available from today to every existing Tiscali customer and gives them access to 150,000 tracks by 8,500 artists

Tiscali currently has about 7 million active subscribers in 16 countries.

The library of music, including artists signed up to Warner, BMG, EMI and Universal, is being supplied by OD2, the online music firm backed by ex-Genesis front man Peter Gabriel.

Dial-up users will get 50 credits per month over the next six months that they can trade in to listen to 300 tracks streamed to their computer or to download 30 music files to their home computer.

Broadband users will get credits to listen to 400 tracks over the same period and will be able to cash in 100 credits at a time to burn music to a CD.

Keen music fans will be able to buy more credits or upgrade to a pay service.

"To show there's a compelling alternative to piracy, we need to publicise the growing digital music catalogue available through legitimate channels," said Charles Grimsdale, chief executive of OD2.

The popularity of peer-to-peer file swapping services such as Kazaa is posing problems for music firms who are keen to stop people sharing pirated pop.

By offering music that is free from viruses and higher quality than is usually available on peer-to-peer services net providers and music firms hope to slowly wean people away from pirated pop.

The Tiscali music club is also open to non-Tiscali customers and charges a small fee to listen to or download music.

The music is encoded and protected by Microsoft's Windows Media format.

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Major slump for UK record industry


Piracy is being blamed for falling CD sales



By Hugh Pym
BBC News



The British record industry has experienced its biggest sales decline in decades, the BBC has learned.

Figures out this week will show sales of CDs and other recorded music were down almost 4% last year, says the British Phonographic Industry (BPI).

It is understood the figures will reveal the biggest downturn in a single year since the birth of the CD market in the early 1980s.

The industry is blaming piracy, including illegal duplication and distribution by international criminals, for the decrease.

The illegal CD market is half as big as the legitimate one and is growing daily



Peter Jamieson, BPI chairman


The value of trade deliveries (albums and singles) in 2001 was just over £1.2bn - this includes LPs, cassettes and minidiscs as well as CDs.

Some of the decline can be explained by price-cutting. There is fierce competition in the leisure market as rivals in the entertainment business try to woo British shoppers.

But the BPI says piracy is the main factor.

People are either downloading tracks from unauthorised online suppliers or buying CDs which have been illegally duplicated and are sold in street markets.


Most computers sold in the UK have a CD burner

"The illegal CD market is half as big as the legitimate one and is growing daily - it's a significant threat to the industry," said BPI chairman Peter Jamieson.

The recording companies are not in a healthy state and have been laying off people progressively."

The BPI, which works with police forces to track down the bootleg CD reproduction plants, says there is evidence of links with organised crime.

Paramilitary groups

Last year a total of seven million CDs were seized in raids on premises around the country, an increase of almost 50% on the previous year.

Officers at the counterfeit products unit of the Police Service of Northern Ireland have told the BBC that paramilitary groups are involved.

The illicit sale of CDs and other related products has become one of the main sources of income for these groups.

But others, including some of the smaller record labels, say the big companies are simply not keeping up with the demands of modern music buyers.

The critics argue that piracy is a convenient excuse for the record industry to hide behind.

They claim that tastes are changing and people prefer a wider range of electronic formats for their entertainment.

Alternatively the industry may not be offering the type of music which appeals to a younger generation of listeners.


Record stores are finding their business under threat

Some analysts say that the record companies must accept the reality of the internet and the desire of consumers to download music.

Calum Chace, who leads the media practice at KPMG's Strategic and Commercial Intelligence Group, said: "They have to make their product available digitally and to make it more attractive for consumers to get it from them than to get it free.

"They can offer subscription services where you get access to a defined catalogue for a specific time period or perhaps bundle access to concerts on a discounted basis with access to interviews."

There is no doubting the fact piracy is a big problem for the music business. Industry sources acknowledge they have to adapt to the realities.

But they want politicians and shoppers alike to realise that jobs and livelihoods are on the line.
culater

MP3 Insider: iPod killers coming soon


By Eliot Van Buskirk
Senior editor, CNET Reviews
(2/12/03)
For more than a year now, Apple's iPod has been our favorite portable MP3 player. It's more expensive than the competition, but well-designed products usually are. Even more astounding than the iPod's popularity in this country is the fact that the device still enjoys a 42 percent market share in Japan a year after its introduction. What's so odd about this? Well, as anyone who has been to Tokyo can tell you, the Japanese marketplace is usually about six months to a year ahead of its American counterpart. From video cell phones to e-mail-retrieving robots, the Far East gets the new stuff while it's just a glimmer in a U.S. importer's eye. So if the Japanese are still buying more iPods than any other MP3 player, then maybe Apple has lapped next year's competition as well.

This is a nice theory, but from what we saw at CES last month, it's simply not true. Apple is facing loads of competition from multiple sources, thanks in part to the availability of a new generation of Toshiba 1.8-inch hard drives, which cost less per megabyte than the Hitachi drives used in the first round of iPods. Here are a few of the products that will probably give Apple's player a run for its money.

eDigital Odyssey 1000
The hard drive-based players that we've seen from eDigital--the Treo 10 and the Treo 15--seemed like the iPod's clumsy, awkward cousins, due to their large sizes and clunky interfaces. But the Odyssey 1000, as its model number suggests, is about 100 times better than eDigital's previous offerings. While the Odyssey's design clearly borrows from a certain all-white MP3 player from Cupertino, the 1000 has a few tricks up its sleeve that might cost Steve Jobs some sleep:


USB 2.0: eDigital claims a file-transfer speed of 8MB per second (we'll believe it when we see it) over this port, which is likely to be more accepted by Windows users than FireWire. Plus, the Odyssey is backward-compatible with USB 1.1.
20GB hard drive: eDigital plans on offering its model for more than $100 less than Apple's 20GB iPod.
Scroll wheel: The Odyssey's scroll wheel doesn't look enough like the iPod's to warrant a lawsuit, but it's very similar.
Voice recording, FM radio, and WMA compatibility: When the iPod originally shipped, these features were frills, but now that they're almost standard, Apple looks remiss by not including them.
Voice navigation: Using the built-in microphone, you can actually make verbal requests for the songs that you want to hear.
Doubles as a removable hard drive: When you connect the Odyssey to your computer, it shows up as a removable USB 2.0 drive.

Samsung YEPP 900
Samsung's YEPP line has been consistently decent, so when the company announced a hard drive-based player, we had a feeling that its offering would be something of a zinger. Sure enough, the YEPP 900 brings the goods on many fronts, with a wide range of recording- and FM-related features:


10GB hard drive: The 900's capacity is not huge, but it's certainly acceptable.
FM receiver/transmitter: How did Samsung fit one of these into such a small device? However the company did it, its inclusion means that you can play your MP3s on any radio within range, wirelessly.
USB 2.0: As a next-generation, hard drive-based MP3 player, this YEPP needs a fast connection, but due to copyright issues, Samsung might not allow the device to be used as an external hard drive.
Line-in recording/encoding: Connect any line-level analog source--such as a CD player, a stereo auxiliary output, or a powered microphone--to the YEPP 900, and it will encode the audio onto its hard drive in the MP3 or WMA format. This Samsung is the first player to record in two different codecs.

Digital Innovations Neuros
We've written extensively about this newcomer and will post a review soon. Besides holding 20GB of MP3 music, the Neuros takes FM-radio compatibility as far as possible; in fact, I can't think of any FM-related feature that it doesn't have. I haven't yet heard Samsung's YEPP 900 broadcast through a stereo system, but I've heard the Neuros do so with aplomb. Here are the player's main features--I think that the song-identification option is pretty mind-blowing:


20GB hard drive: You can also buy a 128MB flash backpack and swap the control console between the hard drive and the flash memory. For example, you can switch to the flash memory for jogging and use the hard drive while you commute.
FM reception, recording, broadcasting, and identification: Like the YEPP 900, the Neuros can receive FM stations as well as transmit radio signals to stereos. But you can also use this player to tag radio songs with the push of a button, then identify the tunes when you connect the device to your PC.
Two-way syncing: The iPod syncs to only one computer, but the Neuros syncs to multiple machines and transfers files from computer to player and back. The record labels won't like that, but consumers sure will.

Deltron Cinema Disk
We love the Archos Jukebox Multimedia 20, which lets you watch videos portably and listen to audio. The Deltron Cinema Disk takes a different approach, functioning as a dedicated video display and storage device that can be used only with a television. A remote control and an S-Video connection sweeten the deal. The Cinema Disk also has some pretty impressive digital-photo capabilities. If you regularly download movies from the Internet or need to provide portable video for professional reasons, you'll be all over this player. The Cinema Disk is not coming to a theater near you--it is a theater near you. Here are a few key reasons why movie fans might choose this gadget:


20GB, 40GB, or 60GB capacities: Video takes up more storage space than audio, thus the massive 60GB option.
S-Video connection and remote control: The Archos isn't a slick device, but the Deltron is literally ready for prime time.
CompactFlash slot: Digital photographers will appreciate being able to dump photos onto the compact Deltron while on the go.

Apple iPod (20GB, 30GB, 40GB): Faster file transfers and larger buffer (for better battery life)
Ironically, the biggest iPod killer of them all could be Apple's next-generation models. Apple rumor sites have been abuzz with talk of new iPods shipping within the next month or so, containing Toshiba's new 1.8-inch drives in 20GB, 30GB, and 40GB flavors. Evidently, these drives will help prolong battery life while increasing file-transfer speeds. Rumor also has it that the new breed of iPods will look the same as the old models but will perform better. Here's why:


Same top-notch design: Although several of these upcoming hard drive players will be as small as the iPod, the jury is still out on whether they'll be as user-friendly. Apple's ace in the hole might be its award-winning design.
Larger capacities: With 40GB of space and a faster connection, people will be more likely to use the iPod as a second hard drive.

New wish-list item
A few months ago, I posted a column listing the features that my dream MP3 player would have, and you responded with your own ideas. The above products include some of my wish-list items, but while writing this article, I thought of one more. Since so many players have an external microphone for voice recording, how about building a noise-cancellation system into the device? If the microphone sampled the outside noise--such as sounds from a subway, a bus, a plane, or other consistent sources--the device's processor could attenuate those frequencies in the audio signal the same way that noise-canceling headphones do.


MP3 Nugget: Create a text list of your MP3s
If you're like me, you store every song that you've ever ripped--from legally purchased CDs of course--in one folder, which is in turn filled with subfolders containing specific songs from albums or artists. For all sorts of reasons, you might desire a list of these files, whether to post on your Web page, brag about in an e-mail, or print out for reference. I found the perfect utility for this, and it's called PrintFolders. Like all other MP3 Nugget software, it's 100 percent free to use. Point the app at a folder, and it creates a text file listing every folder and filename. ID3 tag support would help, but since most people include artist and song information in the filename, the program's approach works well enough. PrintFolders is almost impossibly fast: it generated a list of 3,077 MP3s in about four seconds on my 750MHz machine, which has 128MB of RAM.
http://electronics.cnet.com/electronics/0-3219397-8-20851455-1.html
culater

Anyone know anything about this Bang & Olufsen product-http://www.estarlab.com/product.html
It seems to involve music, TTS, & Digital Voice Messenger(??)-
http://www.estarlab.com/customer.html
And Fonix-
http://www.estarlab.com/robot.html
http://www.estarlab.com/index.html
culater

ot-PTSC Granted Patent by European Patent Office for Its Unique RISC Microprocessor Architecture
Monday February 3, 12:03 pm ET


SAN DIEGO--(BUSINESS WIRE)--Feb. 3, 2003--PTSC (Patriot Scientific Corp.) (OTCBB:PTSC - News) announced today they have received allowance of a key patent by the European Patent Office (EPO) for its unique RISC Microprocessor Architecture.
This milestone enables the recognition of this PTSC technology in as many as 17 European countries and will launch the company's efforts in the region.

"The RISC microprocessor architecture patent specifically delineates an improved form of a simplified and more efficient microprocessor," stated Dr. Patrick Nunally, the company's CTO. "The PTSC patent allowed by the EPO provides a foundation for new opportunities to provide a superior technology for battery powered, hand held terminal devices as well as sophisticated, multi-functional Smart Cards," continued Nunally.

PTSC plans to sanction this grant by the EPO in one or more of the eligible European countries.
culater

Ta-ta TiVo
The coming ubiquity of personal video recorders will lead to their demise.
By Om Malik
January 29, 2003

Six years after pioneering the concept of personal video recording--a way to record television shows on a hard drive, skip commercials, and even pause live TV--the industry's founding fathers are facing a unique problem: ubiquity. We're not talking about the good kind of ubiquity, either--like Windows on every desktop and $40 billion in your bank account. Rather, it's the kind that will likely end their lives as independent companies before they've even had a chance to make a profit.


The original PVRs, introduced by TiVo and ReplayTV, were indeed revolutionary: the PVR is arguably the first home recording innovation since the video cassette recorder hit the scene in 1972. In just about five years, however, what was a once unique product has become a must-have service. And almost every maker of consumer electronics is getting in on the action.

That's bad news for business models based on the PVR alone. TiVo set out to license its technology to consumer electronics makers like Sony that would then sell the products to the public. Such devices sell for around $300, and users pay $13 a month to TiVo. Sonicblue, the owner of ReplayTV, makes its own boxes, which also cost about $300, but charges only $10 a month. Both offer a $250 lifetime subscription service as well.

Take a trip to your local Best Buy or Circuit City, though, and you'll see that PVRs are no longer sold solely as stand-alone devices. Instead, they've become add-on features for other consumer electronics. While the up-front costs for many are still high, they'll come down over time. And there are no subscription fees to speak of.

RCA sells a DVD player with PVR functionality for $600. Panasonic sells one as well ($1,200 including a DVD burner), and cable box makers Motorola and Scientific-Atlanta are wooing cable providers with hybrid cable/PVR boxes.

There are even more unlikely sources. ATI Technologies bundles free PVR software with its All-In-Wonder video card. SnapStream Media is selling a $100 software download that turns a PC into a PVR. Microsoft has a version of WindowsXP called Media Center Edition--currently sold by Gateway and Hewlett-Packard--that has PVR technology. "PCs have all the PVR components, and are cheaper and easier to upgrade," says Kevin Eagan, general manager of Microsoft's eHome division. "It's a natural evolution, since consumers already use PCs for digital content."

With all that activity, Forrester Research's estimate that 39 million U.S. homes will have a PVR by 2007 seems almost believable. It's the kind of number that Anthony Woods (ReplayTV) and former Silicon Graphics employees Michael Ramsay and Jim Barton (TiVo) must have dreamed of in 1997, when they founded their companies. (Both introduced products in 1999.) Investors too: TiVo went public in October 1999 and the stock hit an all-time high of almost $80 a share in January 2000.

The hype outpaced the business, however, and sales of TiVo and ReplayTV devices failed to take off. The equipment was too expensive for the masses, and users found the technology complicated. By year-end 2000, TiVo had just 150,000 subscribers, and ReplayTV had sold only 100,000 devices. Hardly revolutionary growth for such a revolutionary product. ReplayTV fell on such hard times that Sonicblue acquired it in February 2001 for about $123 million in stock (Nasdaq: SBLU). TiVo's stock hovered around $5 this past December.

Both companies are still skating on thin ice. Sonicblue has about $13 million in cash, and a $65 million stake in the Taiwanese chip maker United Microelectronics. Yet the company had a market capitalization of just $55 million in late December. Why? Simple: it has about $146 million in debt and negative quarterly operating cash flow of $111 million.

Despite hitting 510,000 subscribers in the quarter ended October 31
(see "Reality TV"), TiVo's situation was equally precarious, as liabilities outnumbered assets by almost two to one. The pressure on TiVo lightened a little in November, when two private investors, Crosslink Capital and NEA (TiVo's original venture capital backer) bought nearly 7 million shares for roughly $25 million. Still, the company blows through about $25 million a quarter, so that won't last long.

Even with what could be a combined 1 million subscribers, the two firms are still losing their grasp on the market. In the end, not enough people want yet another box for which they could lose the remote. "Consumers would probably rather not add another brick on top of their TVs," writes Jim Davis, an analyst at TechDealmaker, a New York-based research group.

The key for both companies would be to get the licensing nod from the cable guys. It may not come: despite a grueling patent war between the industry's two founders, other manufacturers are either waiting patiently or have developed unique ways to offer their own PVR functionality, skirting patent infringement in the process. Either way, cable players are dragging their feet on licensing, says Mike Paxton, senior analyst with the research firm In-Stat/MDR.

There's one last hope. TiVo has a brand that has already sunk into the popular lingo. It's a name that might be worth something to somebody. A possible buyer, says Mr. Davis, could be AOL Time Warner, which already has a stake in TiVo. RCA Electronics or Samsung Electronics could be others. He thinks Sonicblue's ReplayTV unit is a good fit with the likes of Creative Technology, HP, or Apple Computer.

"Investors no longer have illusions that being first mover in a new product category bears any direct relationship to profitability," writes Mr. Davis. And that about sums up the future of this cool technology--PVRs everywhere, and not a dollar of profit in sight.
culater

Embrace file-sharing, or die
A record executive and his son make a formal case for freely downloading music. The gist: 50 million Americans can't be wrong.

Editor's note: John Snyder is president of Artist House Records, a board member of the National Association of Recording Arts and Sciences (NARAS), and a 32-time Grammy nominee. On Thursday night, he submitted the following paper to NARAS.

- - - - - - - - - - - -
By John Snyder and Ben Snyder



Feb. 1, 2003 / The following was written in response to a discussion by the board of governors of the New York chapter of National Association of Recording Arts and Sciences (NARAS) regarding the position NARAS should take with respect to a new public relations campaign proposed by the Recording Industry Association of America (RIAA) condemning those who download music from the Internet.

The subject of digital rights, and the position NARAS should take with respect to it, is near and dear to me. I've read a great deal about it. If I may, I would like to offer a few thoughts:

I. Intellectual Property

Irrespective of what we think should be done, it is still currently illegal to download copyrighted music that you didn't buy. This is a problem that needs to be addressed. The statistic discussed in the December meeting that there were 3 billion downloads the previous month shows that the law is going to have to be changed, unless you take the position that downloaded music is stealing and thereby criminalize the society. But how can 50 million people (over 200 million worldwide) be wrong? How do we reconcile the reality of downloaded music with the idea of intellectual property?

Intellectual property has not always been defined and protected as it is today. Thomas Jefferson wrote about the philosophical considerations:

"If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density at any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property."

The above quote appeared in John Perry Barlow's excellent essay, "The Economy of Ideas," published first in the March 1994 issue of Wired magazine. Barlow writes:

"If our property can be infinitely reproduced and instantaneously distributed all over the planet without cost, without our knowledge, without its even leaving our possession, how can we protect it? How are we going to get paid for the work we do with our minds? And, if we can't get paid, what will assure the continued creation and distribution of such work?

"Since we don't have a solution to what is a profoundly new kind of challenge, and are apparently unable to delay the galloping digitization of everything not obstinately physical, we are sailing into the future on a sinking ship.

"This vessel, the accumulated canon of copyright and patent law, was developed to convey forms and methods of expression entirely different from the vaporous cargo it is now being asked to carry. It is leaking as much from within as from without.

"Legal efforts to keep the old boat floating are taking three forms: a frenzy of deck chair rearrangement, stern warnings to the passengers that if she goes down, they will face harsh criminal penalties, and serene, glassy-eyed denial.

"Intellectual property law cannot be patched, retrofitted, or expanded to contain digitized expression any more than real estate law might be revised to cover the allocation of broadcasting spectrum..."

The entire concept of intellectual property needs to be reexamined, and ways of protecting it need to reconsidered. Unfortunately, the entertainment industry has, by legislative crook and judicial hook, obtained a 20-year copyright extension. The Supreme Court recently upheld the "Sonny Bono Copyright Term Extension Act (CTEA)" that extended the life of existing copyrights an additional 20 years. This, in the face of Justice Steven G. Breyer's estimation that only 2 percent of works copyrighted between 1923 and 1942 are available to the general public. The Supreme Court case pitted the public against Disney, whose early Mickey Mouse cartoons were to enter into the public domain in 2003, and for whom Congress drafted the legislation in the first place.

This is a clear case of a multinational conglomerate using its political muscle to the disadvantage of everyone but itself. So, instead of creating new content and allowing long-standing laws to work, the entertainment business frantically seeks to manipulate the process to its own ends. And it does this with the obsequiousness of penurious politicians and a supinely acquiescent Supreme Court. That is the best the establishment has to offer, and it has nothing to do with progress or the good of the society.

II. Competition for the CD

The current argument over intellectual property is the result of the sharing of music files encoded as MP3s, Windows Media files, RealAudio files or other formats currently available. The music business blames these downloads, which it perceives as piracy, for the 10 percent decline in sales for the year 2002. This raises several questions, among them: How and why do people listen to music? What other products compete with CDs? And what is the role of radio?

Why is it that record companies pay dearly for radio play and fight Internet play? What is the real difference between radio and the Internet? Perfect copies? If we look at the Internet as analogous to radio, the problem becomes one of performance rights, not the unlawful exploitation of intellectual property. People are creating their own "radio" on their hard drives, and they are constantly changing it. Would this have anything to do with the "McDonaldization" of radio by Clear Channel and others? Would the fact that almost every song on commercial radio is bought and paid for have anything to do with the narrow focus and homogeneous nature of radio? What drives radio is advertising and money, not music. A lot of music gets left behind thanks to the current state of radio; that consumers are rejecting it shouldn't be surprising. They're creating their own MP3 playlists, and if the labels were smart, they'd be doing everything in their power to be on those playlists, just like they do everything in their power to be on the playlists of radio stations. Instead, they scream copyright infringement and call their lawyers.

There are other reasons for CD sales to be down.

Dan Bricklin and Forrester Research list reasons for the drop in CD sales:

"... the economy, competition from other forms of entertainment (including the yearly $6 billion of video games and the rush to the new DVD video format), and finally the shorter playlists on radio (partially a result of Clear Channel's control of 60 percent of rock radio listening and their style) that leads to fewer new musicians becoming well known ... MTV is playing fewer music videos, and in general, there is a record industry style to push a narrower range of musicians. You can imagine that the death of Internet radio will also cut down on the ways to find out about new music."

Price is a major reason for the decline in CD sales. On Bricklin's Web site there's a chart that shows that between the years 1991 and 2001, the average price of a CD went from $13.01 to $14.64, which is a 12.53 percent increase in price. The record companies raised prices precisely at the time costs were coming down. When a DVD costs $19.99 and includes the movie in multiple formats with bonus material and no hassle, and a CD costs $18.99 and comes with potential legal hassles, limits on fair use, and all the finger waving the RIAA can muster, the choice of which product to buy becomes clear. To put it simply, consumers feel that out of all their entertainment options, CDs provide the least bang for the buck.

There are five or six new and growing ways for people to spend their entertainment dollar. The video games market is one place the consumers went, and music followed suit. VH1 News recently reported that the new place to break an artist in is a video game. Some companies, such as Island Records, know this. They have a great track record of getting music on video game soundtracks. But unlike Island, most don't. There are other distractions that draw business away from the record companies: DVD, the fastest-growing home electronics development in the history of the world, the Internet itself, e-mail, cable TV, movies, and even mobile phones. In addition to that, the product marketed by record labels is narrow and significantly overpriced in comparison to the other available entertainment options. Portable CD players are being replaced by iPods. Instead of the 12 songs on a CD, there are 1,500 songs on an iPod. Why shouldn't CD sales be down? Truth be told, the record business is lucky to be alive.

Ananova.com reported that 3.8 million DVD players were sold last year, double that of the previous 12 months. DVD sales reached 80 million last year, representing a 111 percent increase over 2001. Twenty million DVDs and 1.2 million DVD players were sold in December 2002 alone. The movie industry sold 1.6 billion tickets, taking in $9.3 billion in gross box office receipts in 2002, up 11 percent from the previous year, despite President and CEO of the MPAA Jack Valenti's recent statements that the future is bleak. Not since the 1950s have so many movie tickets been sold. Meanwhile, movie sharing on the Internet is at an all-time high. The movie business isn't suffering because of activity on the Internet. Quite the opposite -- the industry is making more money than ever! This is happening at a time when consumers are being offered more choices to view movies than ever before. This supports the view that people spend more money when they have more choices.

Advances in hardware and software have propelled the movie business ever since the VCR, which at the time was decried as the death of the movie business, just as the cassette was to be the death of the music business. In both cases, these "copying" devices enhanced their respective businesses. Whether it's the MPAA or the RIAA, there is no reason to trust those who have cried wolf in the past about new technology, especially when history has shown that advances in technology increase consumer spending.

Then there is the reality that the Internet is changing many businesses. EBay, the fastest-growing and most profitable of the major Internet companies, is selling everything in entertainment (and everything else) to scores of millions of people every week, including music and musical instruments. As a result, they have put many music and instrument stores out of business. In an era of rapidly evolving technology, businesses that adapt will survive, those who don't, won't. As reported by the New York Times on Jan. 17, 2003:

"EBay reported a profit of $87 million for the fourth quarter, more than triple the $25.9 million posted a year earlier ... Revenue was $413.9 million in the quarter, up 89 percent from a year earlier ... For the full year, eBay earned $249.9 million, up from $90.4 million a year ago. Sales increased 62 percent to $1.21 billion ... Last year, a total of $14.9 billion worth of merchandise was sold on eBay. This is just shy of the $15.5 billion in sales analysts expect this year from Federated Department Stores, the parent of Macy's."

These are startling numbers, and they reveal the way of the future. According to the Times, sales at Amazon increased 28 percent, to $1.43 billion, and this in the face of one of the toughest retail markets in years. They did this by expanding their product lines (to include clothing) and offering free shipping to consumers whose orders exceed $25. They did it by providing greater service for less money. Perhaps the music business will take note.

It is true that downloading music is a very popular entertainment option for many people. The number one P2P application, KaZaA, was downloaded 3,145,095 times during the week of Jan. 6-12, 2003. The number two P2P application, iMesh, was downloaded 440,877 times during the same period. KaZaA estimates that it had 140 million users by the end of 2002, twice as many as Napster at its peak. These fantastic numbers indicate a desire among consumers for music that the music companies traditionally satisfied but increasingly no longer do. This raises another question. Why don't the record labels have P2P networks? They have proven to be wildly popular. They don't require expensive investments in technology to start and maintain, and most importantly, the online community has embraced them wholeheartedly. The reason is, they can't agree with their "partners" -- publishers and artists -- on how to share the money. The same greed that got them into their current problem prevents them from extricating themselves from it.

Let's suppose I'm a kid. I have a fixed allowance or a minimum wage job. I have $100 a month to spend on entertainment, if I'm lucky. With that cash, I can rent or buy DVDs, pay for my Internet connection, go to a concert, a movie, or a sporting event (at which I might buy some merchandise), buy a video game, pay my mobile phone bill, drive through the drive-thru, or buy a CD. From that list of options, what's the least likely thing I'm going to spend money on? I think the answer would be the CD, even if downloaded music didn't exist. I would argue that it's not the presence of a "free" alternative that has caused the decline in CD sales, it's the presence of competing choices offering more value and fewer hassles.

III. An Argument for Downloaded Music

It could be argued that MP3s are the greatest marketing tool ever to come along for the music industry. If your music is not being downloaded, then you're in trouble. If you can't give it away, you certainly can't sell it. Daniel Bedingfield recently had a top 3 song on the radio, with "Gotta Get Thru This." However, his music was hardly available through any of the P2P networks. His record lasted on the Billboard Top 200 for less than a month, even though the single had been on radio playlists all over the country for several months. It's also been widely reported that the most downloaded album of all time was "The Eminem Show," by Eminem. It was downloaded so heavily that Interscope took the unusual step of releasing the album a week early due to the rampant online sharing of tracks from the album. Fast-forward to the end of 2002, and "The Eminem Show" is the best-selling album of the year. This seems to indicate the opposite of what the RIAA would have you believe. When people share MP3s, more music is sold, not less.

As VH1.com recently reported, at least one company believes that file-sharing is good for business, and that it's a "promotional tool and boosts the sales of albums that deserve it." M.S.C. Music & Entertainment is encouraging listeners to download 20 tracks from rapper Tech N9ne's new album, for free. "The major labels can no longer fool the consumer. They don't want you to sample their music because they know that if the fans realize there are only two good songs on a record, you will not buy it ... We believe in our product."

50 Cent, Eminem's newest talent and rap's current street king, sees an advantage to having his debut album, "Get Rich or Die Trying," available before the release date:

"The bootleggers are gonna go crazy with this record. They understand how much of a presence I have in the streets. They'll probably get the record two weeks before the album actually drops and it'll be all over the place ... I believe word of mouth is just gonna generate more sales. Consistency is the key to all success. If I consistently put out good music, if they buy the bootleg this go-around, it'll guarantee that they purchase the real CD when my next album comes out. I'm in a good space financially so I'm not worked up about the few dollars the bootleggers are gonna get."

There's a provocative piece on P2P.com regarding piracy and on-line distribution titled "Piracy Is Progressive Taxation, and Other Thoughts on the Evolution of Online Distribution," by Tim O'Reilly. His article discusses a number of subjects, including:

Obscurity is a far greater threat to authors and creative artists than piracy.
Piracy is progressive taxation.
Customers want to do the right thing, if they can.
Shoplifting is a bigger threat than piracy.
File-sharing networks don't threaten book, music, or film publishing, they threaten existing publishers.
"Free" is eventually replaced by a higher-quality paid service.

Tim O'Reilly is the founder and president of O'Reilly & Associates, thought by many to be the best computer book publisher in the world. He has been a pioneer in the popularization of the Internet. His Global Network Navigator site (GNN, sold to AOL in September 1995) was the first Web portal and the first true commercial site on the World Wide Web. O'Reilly takes a long-term view of the intellectual property problem, as opposed to the short-term view that is characterized by the "sky is falling" rhetoric of both the music (RIAA) and movie (MPAA) business.

O'Reilly's observations about the book business apply to the music business. As with the record industry, the publishing world enjoys only a 10 percent success rate. "More than 100,000 books are published each year ... yet fewer than 10,000 of these new books have any significant sales." And like recording artists and the music business, "Authors think that getting a publisher will be the realization of their dreams, but for so many, it's just the start of a long disappointment."

O'Reilly continues:

"For all of these creative artists, most laboring in obscurity, being well-enough known to be pirated would be a crowning achievement. Piracy is a kind of progressive taxation, which may shave a few percentage points off the sales of well-known artists (and I say "may" because even that point is not proven), in exchange for massive benefits.

"I have watched my 19 year-old daughter and her friends sample countless bands on Napster and Kazaa and, enthusiastic for their music, go out to purchase CDs. My daughter now owns more CDs than I have collected in a lifetime of less exploratory listening. What's more, she has introduced me to her favorite music, and I too have bought CDs as a result. And no, she isn't downloading Britney Spears, but forgotten bands from the 60s, 70s, 80s, and 90s, as well as their musical forebears in other genres. This is music that's difficult to find -- except online -- but, once found, leads to a focused search for CDs, records, and other artifacts. eBay is doing a nice business with much of this material, even if the RIAA fails to see the opportunity."

O'Reilly makes other persuasive observations:

"Piracy is a loaded word, which we used to reserve for wholesale copying and resale of illegitimate product. The music and film industry usage, applying it to peer-to-peer file sharing, is a disservice to honest discussion...

"The simplest way to get customers to stop trading illicit digital copies of music and movies is to give those customers a legitimate alternative, at a fair price...

"The question before us is not whether technologies such as peer-to-peer file sharing will undermine the role of the creative artist or the publisher, but how creative artists can leverage new technologies to increase the visibility of their work. For publishers, the question is whether they will understand how to perform their role in the new medium before someone else does. Publishing is an ecological niche; new publishers will rush in to fill it if the old ones fail to do so...

"New media have historically not replaced but rather augmented and expanded existing media marketplaces, at least in the short term. Opportunities exist to arbitrage between the new distribution medium and the old."

O'Reilly compares an on-line music subscription service to people paying $19.95 a month for an ISP when "free" Internet is available, or $20 to $60 a month for TV programming when there is "free" TV programming:

"Why would you pay for a song that you could get for free? For the same reason that you will buy a book that you could borrow from the public library or buy a DVD of a movie that you could watch on television or rent for the weekend. Convenience, ease-of-use, selection, ability to find what you want, and for enthusiasts, the sheer pleasure of owning something you treasure."

Comparing TV to music, O'Reilly says a lesson that can be learned from television "is that people prefer subscriptions to pay-per-view, except for very special events. What's more, they prefer subscriptions to larger collections of content, rather that single channels. So, people subscribe to 'the movie package,' 'the sports package,' and so on. The recording industry's 'per song' trial balloons may work, but I predict that in the long term, an 'all-you-can-eat' monthly subscription service (perhaps segmented by musical genre) will prevail in the marketplace."

People want what they want and they have made their choices. They will still buy CDs, but they want to download music. The failure of the music business to provide a comparable alternative to peer-to-peer networks is the most logical explanation for the "illegal" downloading of music. And rather than address the problem by examining their own behavior, the music companies declare the consumer to be their enemy, support intrusive, overreaching legislation, and act precisely against their best interests. This remains true even in the face of the recent truce the RIAA agreed to with several technology groups. Rather than realize the profit potential of that about which they complain, they try to kill it, then they try to control it. Now they're trying to control the consumer. As O'Reilly points out in his final paragraph:

"And that's the ultimate lesson. 'Give the wookie what he wants!' as Han Solo said so memorably in the first 'Star Wars' movie. Give it to him in as many ways as you can find, at a fair price, and let him choose which works best for him."

The RIAA tries to "give the wookie what he wants" by giving him what they want. Their newest attempt is with a handful of half-baked music subscription services. The New York Times recently reported that "Jupiter Research expects consumers to pay about $79 million for downloaded songs and CDs in 2003. Subscription services ... are expected to collect about $107 million next year." The Times continues:

"The brewing battles among these services will be over how they package songs, what kind of exclusive access they can offer subscribers to particular artists and whether they can be used for portable devices, stereos and cars."

If subscription services offer a broad range of music and no digital rights management schemes, and properly labeled high-quality files, at a reasonable price with fast downloads, they will have a chance to compete against "free." Unfortunately, it is unlikely that the music business will avoid copy protection issues. Instead, copy protection remains the No. 1 priority for both the music and movie industries. The future of digital media will have movies or songs offered in various ways for various prices. If you want to just play it once, or for a 24-hour period, it will be cheaper than if you want to download it to your hard drive and copy it. If you want it to play on all of your players, you will pay more than if you just want to hear it or see it over the Internet. 2003 will be a crucial year for industry online music subscription services PressPlay (Universal/Sony), MusicNet (BMG/Warners/EMI), and Rhapsody. They will have to develop an approach to these issues that satisfies the demand currently being met by the P2P networks if they hope to compete in this emerging market. Consumers are reluctant to accept limitations on use, so it is unlikely that copy protection will lead to a cure for what ails the music business.

The music business isn't like the movie business, even though both are involved in the digital dissemination of intellectual property. A song is not the same as a movie. Listening to a song on the Internet isn't the same as watching a movie for free on the Internet. It is arguable that downloading a song functions as a substitute for radio, a first step in the process of consumption, while watching a movie is, arguably, the last step in the process of consumption. Consumers may accept limitations on the use of a movie, making it more akin to the licensing of software, but they find it more difficult to accept limitations on the use of a CD they buy or music that they acquire by way of a subscription service. Consumers are used to renting movies; they're used to buying and owning music.

Music companies are more egregious in their abuse of consumers than the movie companies. Consumers don't hate movie companies, but they do hate record companies. The question is, why is this happening and what is going to be done about it? Digital copy protection (known as digital rights management or DRM) will only add fuel to this fire, so expect a very big blaze in 2003. In the end, it will be the music companies that run the risk of being consumed by it. Music companies have the opportunity to adjust to the new realities of digital distribution but instead they cling to their existing business models where they control as much of the distribution channel as possible. It is doubtful that this behavior will be rewarded with increased sales.

The Digital Millennium Copyright Act (DMCA) was passed by Congress in 1998 to address how technological innovation would affect intellectual property. In drawing up the document, Congress looked to the RIAA and similar groups for guidance as to what the law should contain. The Electronic Frontier Foundation (EFF) recently released a study titled "Unintended Consequences: Four Years Under the DMCA" which goes on to detail how the "anti-circumvention" clauses of the DMCA have been used to stifle innovation, censor free speech, and threaten academic/scientific research. These chilling effects of the DMCA contradict and limit the "fair use" doctrine that is an important part of copyright law. Additionally, the digital rights management (DRM) initiatives that the RIAA and MPAA propose to protect their copyrights do nothing to protect the "fair use" rights of consumers.

Record labels are confused and contradictory. They use MP3s in private while they deride them in public. If they're promoting a new band, they'll post the band's songs on P2P networks (often in a covert manner) with the hopes that they'll be traded and talked about in chat rooms. If it's an established act with a history of sales, they'll "spoof" the P2P networks with fake files (also in a covert manner). It's just another way of using MP3s, albeit a subversive and anti-customer way. The RIAA has apparently engaged in "poisoning" P2P networks.

The biggest damage done by downloaded music is the paralysis it has inflicted upon the traditionalists in the music industry. The path to profitability does not include a long and drawn-out legal battle with consumers, yet this is exactly what the RIAA is doing. The choice for NARAS is whether to lead the fight for what's best for the artists or whether to endorse the self-serving positions of the music industry's congressional lobbying group, the RIAA.

There is a convincing piece by Damien Cave on Salon.com titled "File Sharing: Innocent Until Proven Guilty," which argues that there is no proven correlation between downloaded music and the decline in CD sales. He continues to argue in "File Sharing: Guilty As Charged?" that a good deal of the "sky is falling" rhetoric created by the record companies and the RIAA is based on supposition and self-interest. In addition, the article "RIAA's Statistics Don't Add Up to Piracy" analyzes the RIAA's own statistics and argues that they do not support the RIAA's conclusion that downloaded music is the cause for the decline in CD sales. In this detailed analysis, George Ziemann argues that the record industry released 11,900 fewer titles in 2000 than it released in 1999, a 25 percent decrease, yet the total number of units shipped decreased only 10.3 percent and the dollar value of these units fell by only 4.1 percent. It seems that the RIAA is misinterpreting its own statistics.

IV. Record Company Complicity

It could be argued that the record companies are responsible for their current predicament. Again, how did they turn themselves into one of the most hated corporate sectors, and what are they going to do about it? Five years ago nobody gave a second thought about record companies; now they are reviled. Record companies need to realize that music is now viewed as a commodity with a shelf-life of 90 days, and that they made it so. As Prince recently put it:

"So are most citizens really being completely disrespectful of the value of art and the need 2 provide appropriate compensation 2 the artists 4 their works? We've said it b4 and we'll say it again: the rise of digital technology and peer-2-peer file sharing has little 2 do with people's intrinsic respect 4 art and artists, and everything 2 do with the cynical attitude of big industry conglomerates, which have consistently pushed 4 more and more commercial, highly profitable products at the xpense of authentic art and respect 4 artists.


"If people do not feel enough guilt 2 prevent them from making digital copies of the latest episode of a popular TV show or hit pop song, it is precisely because the industry giants have succeeded in making these works purely commercial products, with little or no consideration 4 their actual artistic value. It is precisely because these companies have been consistently promoting commercial products at the xpense of artistic works.

"The fact that actual works of art still manage 2 seep thru the cracks of this huge profit-driven industry does not change anything about the fundamental equations that have been driving and still drive the industry, 2day more than ever -- i.e. that art = money, artists = money-makers, and art lovers = consumers.

"As a simple xample of how little music is valued as an art 4m by the industry, it is estimated that only about 20 percent of music ever recorded is currently available -- and, of this 20 percent, what proportion is actually readily available 2 music lovers? What proportion is not the current 100 top albums on the SoundScan charts?

"It simply appears that the instinctive reaction of the lover of art (b it music, TV shows, movies, or other 4ms of art) is such that, if the industry has no respect 4 his or her identity as an appreciator of art, then he or she has no reason 2 have any respect 4 the industry as a purveyor of art. By making digital copies of so-called cultural products, many people r not demonstrating their lack of respect 4 art and 4 artists, but r xpressing -- consciously or not -- their frustration with the way the entertainment industry profits from art at the xpense of both art makers and art lovers.

"The consumers of the commercial products of the entertainment industry r only as cynical as the industry has deliberately made them, by dumbing down their products, by xploiting artists, by making profit-driven choices and decisions, and by providing their own kind with obscene compensations and legal impunity that r completely out of touch with the real world of ordinary people."

There is good reason for consumer cynicism. AOL Time Warner owns Warner Bros. Records (along with America Online, Time, Life, Fortune, Elektra, Sports Illustrated, HBO, Turner Broadcasting, CNN, Cinemax, Entertainment Weekly, New Line Cinema, Warner Bros. Studios, In Style, Warner/Chappell Music, Time Warner Cable, WBN, ICQ, Warner Music Group, Netscape, People, Reprise, Rhino, Atlantic, WEA, TNT, MapQuest, WinAmp, In Demand, Erato, Moviefone, and Road Runner). AOL makes a lot of money as an Internet service provider. There is no question that a large portion of the people using AOL's service are downloading the very music that Warner Bros. Records claims as being stolen. There is no question that the executives at AOL Time Warner know this. Also, let's not forget that it was AOL that bought Time Warner. Service trumped content.

The conglomerates are reeling from the impact the Internet and digital downloads are having in changing how the consumer thinks. But it is not the downloads that are wrecking the music business, it is the inability of the conglomerates to adjust to the Internet and the new ways consumers want to consume music. AOL Time Warner just posted a year-end loss for 2002 of $98.7 billion. Sony, the only multinational corporation to have interests in both the music and consumer electronics worlds, has relinquished its leadership in the portable market to Apple's iPod due to Sony's conflicting interests in music copyrights (Sony Music) and in hardware. Sony hardware comes with anti-copying features, making it cumbersome and inflexible. For example, as reported in the Wired magazine article "The Year the Music Dies," the five major music companies sold $20 billion worth of music last year, but Sony alone had $42 billion in electronics and computer sales, making their music business much less significant. "If Sony wants to sell MP3-capable cell phones -- a big thing in Japan and potentially worldwide -- how much attention will it pay to Sony Music's protests?"


In another recent article in Wired magazine Frank Rose writes:

"As a member of the Consumer Electronics Association, Sony joined the chorus of support for Napster against the legal onslaught from Sony and the other music giants seeking to shut it down. As a member of the RIAA, Sony railed against companies like Sony that manufacture CD burners. And it isn't just through trade associations that Sony is acting out its schizophrenia. Sony shipped a Celine Dion CD with a copy-protection mechanism that kept it from being played on Sony PCs. Sony even joined the music industry's suit against Launch Media, an Internet radio service that was part-owned by -- you guessed it -- Sony. Two other labels have since resolved their differences with Launch, but Sony Music continues the fight, even though Sony Electronics has been one of Launch's biggest advertisers and Launch is now part of Yahoo!, with which Sony has formed a major online partnership. It's as if hardware and entertainment have lashed two legs together and set off on a three-legged race, stumbling headlong into the future."

Sony is also the largest manufacturer of writeable CD drives. It, along with Philips, co-developed the CD and collects royalties from various CD patents. All CDs, whether used by commercial replicators or bought by the general public, are subject to these royalties, which currently stand at $0.033 per disc. There were over 500 million blank CDs sold last year. The advantage of being a multinational corporation is the ability to use one asset to create another asset. Sony may make less money on music but is using it to make money elsewhere.

Similar internal conflicts exist within AOL Time Warner, Vivendi Universal, and the Bertelsmann polygon. Nevertheless, they continue to engage in businesses that infringe on their own copyrights. They are trying to have it both ways, in all ways. Instead of dealing with their own inconsistencies, they direct and fund the RIAA to lobby politicians to support legislation like the "Peer to Peer Piracy Protection Act." This act gives record companies the right to invade your hard drive (an otherwise illegal activity) if they suspect that you have illegally obtained their copyrights, their music. This anti-piracy law is actually an anti-privacy law, and it also limits fair use and threatens academic freedom. The RIAA and the music business are trying to legislate profitability. NARAS needs to take a position with respect to the copyright issue, but it should be an independent position. NARAS should come up with its own ideas. The RIAA is acting irrationally.

Also, the record companies recently settled a price-fixing suit in which they admitted they were overcharging consumers. This point seems to be overlooked by the RIAA in its attempt to place all blame for the woes of the music business at the feet of file-sharing. Is it possible that the decrease in CD sales is related to the conspiracy by the major record labels to fix inflated prices?

V. Opportunity and the Future

One other word about the 3 billion music downloads each month: That's a lot of music. There aren't 3 billion songs. Music has become fungible. People are going through it faster than toilet paper. Never in the history of the world has there been more music in the air and never have more people listened to music. Out of this incredible desire and need for music, surely some good must come. I think more opportunity than ever is available to the musician and songwriter, and the record company too. They just have to create new ways to deal with this opportunity, and it won't be by the old rules. Janis Ian is a good example. Downloaded music has resurrected her career. She's actually making money because of downloads. I think that if it weren't for all of this activity on the Internet and all of this downloaded music, the CD market would be suffering more than it is. MP3s are lessening the decline of the music business, not creating it.

Record companies are not logical, righteous entities. They are ramshackle, profit-driven enterprises. They act in their perceived best interests, and they act ruthlessly and, in many cases, irrationally. The people who run them still have their e-mail printed out by their secretaries. We have to wait for the next generation to take over, the "software" generation, the generation of people who don't remember growing up without a computer around. I would argue that the future of music is multimedia, the future of multimedia is DVD, and the future of music companies is software. In five years, record labels will be software companies and I don't think they know that yet. The music business will be saved by someone from the software business who can impose a new business model on music assets.

In the future there will be no record stores as we know them, no tangible product as we know it. The CD is going the way of the 8-track and the cassette. Soon there will be no need for the tangible thing. Consumers have made their choice. They want to listen to music while they're working at their computers, on a portable device like an iPod or MiniDisc player, or on a home theater jukebox (similar to a feature of Microsoft's Xbox). Digitally available music has given the consumer choices, and they like those choices. They don't want music just from commercial radio. They also want it from their hard drives and from the Internet. Yet record companies still want to force tangible, overpriced media on consumers who want to obtain data files and temporarily store them on their hard drives or on cheap, disposable discs (CD-Rs). If record labels don't start trying to be part of the future they will be bought up and converted to it by someone who is.

People have always listened to music while they were doing something else. That's almost the essence of "American music." Record companies guessed right on the "something else" for a long time, but that was before the myriad of other choices became available to consumers. At one time in this country, listening to music on the radio was a miracle. It's no longer a miracle, and when you look at the technological developments in the last 70 years, there's little wonder why. It's been one miracle after another. And yet even to this day, radio is the sine qua non of a hit record. This is especially true in the era of radio consolidation, where corporate Goliaths like Clear Channel are allowed to exist. Maybe that's the only way radio can remain relevant: It has to become one big punch. In a world where diversity is an evolutionary step, radio moves furiously towards consolidation, aided and abetted by the FCC. Someone should ask the question, why is this allowed?

The way things are going, a few corporations are going to control access to all digital information, and if the current administration has its way, these activities will be monitored. The reason why the RIAA is screaming bloody murder about little ol' MP3 is because it means that they are losing control. People are making their own individual choices, and they aren't going along with the program of manipulation that has always limited those choices. Now that they're making choices, industry executives and politicians are shocked.

The same argument extends to the television industry with respect to TiVo and other personal video recorders (PVRs). Jamie Kellner, chairman and CEO of Turner Broadcasting, which encompasses everything from CNN to TNT and is a part of AOL Time Warner, was asked in an interview why PVRs were bad for his industry. He responded that it's "because of the ad skips ... It's theft. Your contract with the network when you get the show is you're going to watch the spots. Otherwise you couldn't get the show on an ad-supported basis. Any time you skip a commercial ... you're actually stealing the programming." Viewers might find that reasoning less than persuasive, but they'll probably be very persuaded by the threatening, accusatory tone, and dismiss Mr. Kellner and his concerns. This is another example of an old media being unable to adjust to technology. Yes, Jamie, your business is threatened. You will have to change your way of thinking to save it. Abandon failing tactics.

VI. The Role of NARAS

In order for the record industry to remain relevant it will have to determine how to get people to buy something they can get for free. In addition to the cable television business, print publications, and ISPs, there is an industry that has found a solution to this problem, and the music industry should take notice. That industry is the bottled water industry. Bottled water is a growth market. But common sense would indicate that when water is virtually free (i.e., tap water) that people wouldn't want to pay $1 for 16 oz. of water. Yet, most of us frequently do just that. Why? Because it is convenient and because we have been persuaded that it is safer, more pure, that it is "better" water. Convenience becomes necessity, belief becomes profit.

The bottled water industry is built on customer service. If the music business were to take this approach and ally themselves with consumers rather than fight them, it's quite possible that their profits would still be growing. But record companies distrust their customers even more than their customers distrust them. The circle is unlikely to be broken, which in turn creates wide open spaces for the entrepreneur, for a "new" way. NARAS has to appeal to the new, not the old. NARAS supersedes the short-term interests of the record companies. NARAS has an obligation to art and to the artists who create it, to creative excellence in its presentation, and it is those obligations, above all, that should define its actions. The relevance of NARAS exists in direct proportion to its independence.

Charlie Feldman suggested that the board undertake a "study" of the matter. He's right, only we should go further. I think we need a symposium, a gathering of eagles. NARAS should take the lead in this matter. Those who are taking it now are leading us over a cliff. The RIAA has staked out an untenable position that is as unrealistic as it is anti-consumer and anti-artist. Their interests and the interests of NARAS are not the same. Their solutions are not good solutions. They cling unsuccessfully to the past rather than embrace the stunning opportunities offered by the future. They will be unsuccessful in their attempts to criminalize the society, and in their attempts to stretch the drum head of old laws onto the drum of new technology. It is one thing to be unsuccessful, it's one thing to argue a bad position, but it's quite another to be silly and laughed at, and that's where the RIAA has ended up. They appear to be totally irrelevant except as bagmen. It's more than just bad P.R., it's bad science. The RIAA reached its conclusions, then looked for supporting arguments, all the while ignoring reality, opportunity and fact. They overstate their position, misinterpret their own data, and make dubious claims for artists' rights when the biggest abusers of artists' rights are their benefactors, the record companies themselves.

ZDNet reported that the sale of illegal CDs increased 50 percent from 2000 to 2001. This translates into $4.3 billion dollars in sales from 950 million illegally sold CDs. This strikes me as a much more serious and obvious problem than downloaded music. So serious in fact that the problem of MP3s pales by comparison. This is where the record companies and RIAA should be putting their moral outrage, their money and energy. Those bad guys really are bad guys, profiting from the mass counterfeiting of someone else's property, unlike 14-year-old kids, who download music because they can't afford $18 for two songs that are going to be replaced in a couple of weeks anyway. Equating the downloading of music with counterfeiting for profit brings disrepute to the RIAA's more important and necessary efforts to stop counterfeiting. Then again, it's ironic that if the RIAA is successful in shoving everyone back into the CD market, almost half of the CDs they buy will be counterfeits.

With respect to the question of downloaded music, NARAS should embrace new technologies, be the voice of reasoned analysis, and act as an arbiter to reconcile the conflicting views of the various parties involved. In the past, NARAS aligned itself with the RIAA and the record companies. This is a mistake, in my opinion, and I hope that the opinions expressed in this paper will at least give us reason to pause and to thoroughly examine our position, as well as the position, claims and statistics of the RIAA and their corporate backers. Above all else, NARAS must not rubber-stamp what is quite clearly a self-serving position (as happened on last year's Grammy broadcast when Mike Greene berated and branded music consumers as thieves and shoplifters). NARAS must be the independent voice, a voice of objectivity. NARAS should be the "think tank" of the music business, not an enforcer or a PAC. What we have here is the potential to become a leader in the new frontier of intellectual property rights, artists' rights, consumers' rights, the future of music, and the power of the art itself. I say let's seize the day. In my opinion, there is a vacuum of leadership with respect to these pivotal and crucial issues and NARAS should step in and fill that vacuum. It is a golden opportunity.


- - - - - - - - - - - -

About the writer
John Snyder is president of Artist House Records, a board member of the National Association of Recording Arts and Sciences, and a 32-time Grammy nominee.

Ben Snyder, John's son, works for It's a Gas Marketing/Management, a grassroots marketing company that serves the music industry.

culater

lol-Hip Gadget Guide 2003 Preview
by Jason Newport

"Hit me on my 2-way" is going to mean quite a bit more this year than last. Gadgets are getting more powerful, smaller and cheaper. But with so many devices on the market, it's tough to decide what to cop and what to leave on the shelf. We have your back. SOHH takes a look at three devices currently generating the most buzz on the block. Do they pass the street litmus test? Read on to find out.
....
Treo 15

The Treo 15 won't be the benchmark by which other portable digital audio players will be measured (the iPod currently holds court), but the latest release from e.Digital certainly exceeds performance expectations and, perhaps more importantly, breaks a barrier that has been a significant adoption issue for many music lovers to date: price.

With an MSRP of only $189, and available from a number of online merchants for less than $165, the Treo 15 gives you more than 225 hours of music for less cake than you'd expect.

MP3 players have made significant strides over the last year in terms of battery life, capacity, sound quality, and size. The Treo 15 delivers in all of the above categories, giving you up to 12 hours of play on a single charge, a 15-gigabyte hard drive, and rich sound - all in a diminutive device of little more than eight ounces.

There is, however, a caveat to offer those of greater vanity. It ain't pretty. It looks like the thermostat in your crib. I gotta give e.Digital props for functionality and all-around great performance and value, but I gotta be real too. Imagine if Porsche forgot that half the reason they sell so many cars is because they look good. This is not a flossible device. Please do not try to floss with the Treo on your belt. Please.

Buy it, transfer your music and stick it in your bag. You won't be disappointed.

$189 - http://www.edigital-store.com/treo15.html
...."
http://sohh.com/entertainment_guide/read.php?contentID=4237

Bluetooth connects it all together [Saab 9-3]

As the first car equipped with Bluetooth wireless technology, the 9-3 links all the car's wireless devices that obey the driver's voice—cellphones, PDAs, computers—through a voice-control system. If you're wearing a headset, you can make a telephone call from up to 10 meters away. The car, which lists for US $26 000 to $39 000, can access the Internet as well as satellite navigation, including a guidance system that helps avoid traffic jams.

Other gadgetry includes a range of a driver's own custom-set preferences for features ranging from the temperature controls to the rain-tolerance of the windshield wipers and whether or not the burglar alarm is armed. Safety features, always a Saab specialty, include head restraints that move closer to your head during a crash, plus air bags all over the place. Oh, yes, it also has an engine: a 2.0-L, turbocharged version of the four-cylinder Ecotec, made by Saab's owner, General Motors
http://www.spectrum.ieee.org/WEBONLY/publicfeature/feb03/tcar.html
culater

Odyssey 1000

Sleek 20 GB MP3 and Windows Media™ file player
Now Shipping!

$349.00
http://www.edigital-store.com/mp3-players.html

Not the Echo They Were Looking For
A consortium of CD retailers launches a new digital music service -- with a thud.
By Jimmy Guterman, January 29, 2003

The leading American music retailers are doing a lousy job of selling CDs in their stores. Maybe they can do a better job digitally.

That seems to be the idea behind this week's move by six large record chains -- Best Buy (BBY), Hastings, Tower, Trans World (TWMC), Virgin, and Wherehouse -- to form a consortium to sell music digitally. Their new company, Echo, takes its name (and its URL, www.echo.com) from Echo Networks, a now-defunct streaming site. The name is the only thing the new Echo appears to retain from the older company -- which, you'll recall, cut a deal with Warner Bros. in 2001 to sell music online, an arrangement that was so unsuccessful it isn't even mentioned on the new site.


Echo is not going to work. Just look at the introductory statement from executives associated with the six record chains: Monday's announcement did not even hint that Echo is anywhere near securing licenses from the major labels. Even more important, none of the industry execs -- the folks crucial to such deals -- were part of the announcement. And why should they be? Echo is positioning itself as a competitor to the major labels' own far-from-successful digital-distribution endeavors, MusicNet and Pressplay. In the statement, Strauss Zelnick, former CEO of BMG Entertainment (and an Echo investor), called Echo "an attractive alternative to label-backed initiatives such as MusicNet and Pressplay." But that will be true only if the major labels agree to license music to a well-funded consortium that will compete against their own efforts in the sector.


Even if the major labels think it is in their interest to make a deal with Echo (it might make sense as a way to build the legitimate digital-distribution market), it's unclear whether the six members of Echo are the ones who can take digital distribution to the masses. The press release contains one boilerplate quote after another from executives who talk about how they're "more than simply selling CDs" and how they're "in the customer relationship business." That's true, of course, but not in the ways retailers want to admit. Most record stores are selling items other than CDs, out of sheer desperation, and one of the reasons these retailers are struggling is that they've failed to maintain customer relationships.


Echo says it will be using kiosks, despite the fact that one of the selling points of over-the-Net systems is that you don't have to leave your house to get the tunes. And it's worth noting that previous kiosk-based attempts to sell customized CDs inside stores have flopped. The Best Buys of the world, which have been unable to develop websites that indicate whether an item is in stock, have much to learn from the Amazons of the world about customer relationships. Of course, with Best Buy about to close 100 of its Musicland stores and with Wherehouse in Chapter 11 (as of a week ago), the members of Echo might not be looking to expand right now.


It's turning out to be a busy week for those of us watching the digital music business. The website of the Recording Industry Association of America has been hacked, and Kazaa, the world leader in unauthorized online distribution of music, is accusing the labels of antitrust action. And now, it seems, the big record retailers may turn out to be as clueless as the big record manufacturers.

Jimmy Guterman was the editor of Media Grok and its successor, Media Unspun. He has written or edited for more than 90 periodicals (some of which still exist), has written five books (half of which are still in print), and has produced CDs for every major record label (all of which have consolidated). He is the founder and president of a consultancy, the Vineyard Group.
culater

OT-SURVEY: THE INTERNET SOCIETY

Digital dilemmas

Jan 23rd 2003
From The Economist print edition

Despite the dotcom boom and bust, the computer and telecommunications revolution has barely begun. Over the next few decades, the internet and related technologies really will profoundly transform society, argues David Manasian

“GOVERNMENTS of the industrial world, you weary giants of flesh and steel, I come from cyberspace, the new home of mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.”

Ah, it all seems so long ago. In 1996 John Perry Barlow, a former cattle rancher, lyricist for a rock band, the Grateful Dead, and commentator on technology, posted these words in an online discussion group. His “Declaration of the Independence of Cyberspace” was an 800-word credo which claimed that users of the internet inhabited a new world of creativity, equality and justice which would forever remain beyond the reach of existing governments. “We will create a civilisation of the mind in cyberspace. May it be more humane and fair than the world your governments have made before,” he concluded with a flourish.

It is hard to believe today, but Mr Barlow's musings struck a chord at the time, spreading rapidly through the internet. The declaration encapsulated the exhilaration and wonder of millions of people as they logged on to the world wide web for the first time. It really did seem possible that the internet had launched a spontaneous revolution that might lead to a brave new borderless world.

Seven years later, Mr Barlow's claims sound absurd: just another example of the 1990s hype that produced the dotcom boom and bust. The internet, it seems, has turned out to be simply another appliance, a useful new medium like radio or television, not something likely to usher in a “civilisation of the mind”. Cyber gurus like Mr Barlow have also lost heart, and now issue equally exaggerated warnings about the internet's strangulation by government and corporate interests. With the help of governments, big entertainment companies are trying to “control everything that we know”, Mr Barlow says. “The fight about this will, in my view, determine the future of humanity.” Lawrence Lessig, a Stanford professor who is also a leading commentator on the internet, is almost equally apocalyptic: “The existing dinosaurs are succeeding in stifling the creativity inherent in this new medium.”

The taste for hyperbole of Mr Barlow, Mr Lessig and their sort may be easy to mock, but they are right in their fundamental claim: the internet and its related technologies are capable of transforming society. Far from being over, the computer and telecoms revolution that created the internet has barely begun. These technologies will change almost every aspect of our lives—private, social, cultural, economic and political. In some areas, the changes may be marginal, but in most they will be profound, and unprecedented.

For good or ill
This is because new electronic technologies deal with the very essence of human society: communication between people. Earlier technologies, from printing to the telegraph, have done likewise, and have wrought big changes over time. But the social changes over the coming decades are likely to be much more extensive, and to happen much faster, than any in the past, because the technologies driving them are continuing to develop at a breakneck pace. More importantly, they look as if together they will be as pervasive and ubiquitous as electricity. Whether this will be for good or ill is impossible to predict, because how they are applied will be a matter of social and political choice. Many of these choices will be difficult and divisive.

Billions of dollars have been lost betting on the idea that the internet would quickly change everything from retailing to entertainment. Internet usage has continued to grow, but most dotcoms have failed, and the telecommunications industry, which raced to build the infrastructure for cyberspace, is staggering under $1 trillion of debt. Yet it would be wrong to conclude that this is the end of the internet revolution. Boom and bust often follow the introduction of radically new technologies. In the 1870s America's railroad industry boomed in much the same way as the world's telecoms industry in the late 1990s, only to collapse in a similar heap of bankruptcies, accounting scandals, stockmarket losses and enormous debts. America's economy fell into recession.

A few years later, a reviving economy together with advances in railway engineering triggered a new wave of investment. Railroads quickly revived, changing American business forever. The same sort of thing happened when the internal combustion engine came along. In the first few years of the 20th century there were thousands of people tinkering with carmaking, most of whom went bust. A decade later only a handful survived, but the car was about to become the icon of progress.



The reason to think that the internet revolution will not only resume but accelerate is that advances in its underlying technologies show no signs of slowing down


The reason to think that the internet revolution will not only resume but accelerate is that advances in its underlying technologies show no signs of slowing down. The power of computer chips continues to race ahead. Moore's law—according to which the power of a computer chip will double about every 18 months (see chart 1)—has proved to be true since 1965, when it was first propounded by Gordon Moore, a co-founder of Intel, a chip maker. Intel is confident that it will be able to maintain this pace of improvement in silicon for another 15 years. Recent breakthroughs by researchers at IBM and Hewlett Packard in molecular electronics lead many experts to believe that Moore's law will continue to apply for perhaps another 50 years. Similarly dramatic advances in storage and transmission technologies are also in prospect.

Meanwhile, existing or impending technology is being applied ever more widely. Victor Zue, director of MIT's Laboratory for Computer Science, expects high-speed access to the internet to be virtually free in rich countries within five years. His laboratory's Project Oxygen is building an office on MIT's campus in Cambridge, Massachusetts, that will be wired to demonstrate the kind of “pervasive, human-centred computing”, driven by voice and involving a range of devices, that he believes will become possible in the near future. Many of its components are already being tested at MIT's laboratory and by its corporate partners.

On another front, Mr Zue's colleague, Tim Berners-Lee, famous as a founder of the world wide web, is trying to win agreement from a coalition of companies to establish the standards for what he calls the “semantic web”, a more intelligent version of today's internet that will take the drudgery out of searching for information by evaluating its context.

Even the sense of physical touch might some day become possible in cyberspace. Late last year, scientists at University College in London and MIT in Boston demonstrated a system that allows users at each end of a high-speed connection to manipulate objects, either alone or together. Microsoft researchers are now working on ways for consumers to store and catalogue every photograph, e-mail, document or telephone conversation they have had during their entire lifetime (though it is not clear why anyone not writing an autobiography would want to do this).

There's a chip in my shoulder
On a more mundane level, third-generation mobile telephones, despite all the delays and the billions squandered on 3G licences by telecoms firms, are still expected to offer consumers high-speed, always-on mobile internet access, complete with video, in the next few years. Rapidly proliferating “wi-fi” networks already offer wireless access on a local basis. Tiny tracking chips called radio-frequency identification devices are being used as pet passports. Soon they will be small, powerful and cheap enough to be implanted into everything from humans to milk cartons, recording and transmitting real-time medical data or serving as a form of inventory control. Sensors of every kind, including video cameras, should also become much smaller and cheaper. Forrester Research, a technology consultancy, predicts that 14 billion such devices will be connected to the internet by 2010.

How rapidly such new technology is introduced will depend on a number of factors—the state of the economy, the supply of investment capital and the appetite of consumers for new products or services. Fortunes will be made and lost many times over. But whatever happens, the power of computing and communications looks set to continue to grow, and its price to fall, at a steady rate for the next few decades. That will make it possible, at least in rich countries, to record most human interactions, wherever and whenever they take place, and to store and analyse this ocean of data at low cost.

For the sake of argument, this survey will assume that we are heading towards a networked society of ubiquitous, mobile communications capable of constant monitoring. Whether this arrives in 20, 30 or 40 years does not really matter. The point is that the destination seems not merely possible, but probable, so it is not too soon to ask: what do we want this technology to do?

The internet has already thrown up a host of legal and political conundrums, but these are only a small foretaste of the dilemmas—about privacy, security, intellectual property and the nature of government itself—that will have to be faced over the coming decades. The debate has already begun. This survey will outline some of main issues, and speculate on the way they are likely to go.

No hiding place

The protection of privacy will be a huge problem for the internet society

THE next time you are on the internet, try an experiment. Change the default setting for “cookies” in your web browser from “accept” to “prompt”, or “warn”, or whatever equivalent is offered, then browse the web for a few minutes. You will soon be bombarded with messages telling you that almost every website you visit is trying to plant cookies—small text files that collect information about your browsing habits—on your computer. The Economist website is no exception. Your every move on the internet is being recorded by someone, somewhere.

Cookies caused a furore when their widespread use was first publicised years ago, but now they are accepted as standard practice; indeed, their use has expanded vastly, and using the web without them is now virtually impossible. Information they provide is shared by thousands of websites through advertising-network companies. The largest of these, DoubleClick, has agreements with over 11,000 websites and maintains cookies on 100m users. These can be linked to hundreds of pieces of information about each user's browsing behaviour. In addition, users are being tracked through other methods by internet service providers, website hosts and e-mail services.

Cookies caused a furore when their widespread use was first publicised years ago; now they are accepted as standard practice

Offline, too, monitoring of people's behaviour has increased by leaps and bounds in recent years. The use of credit, store and debit cards leaves a trail of electronic data. So does turning on a mobile phone, even if no calls are made or received. The phone operator can not only monitor calls but also record the location of the phone. Electronic systems for public-transport tickets, road tolls and access to buildings of all kinds are expected to spread rapidly. Governments around the world are moving to record their own transactions and the provision of services to their citizens electronically. Monitoring of telephone calls, voicemail, e-mail and computer use by employers is easier and more widespread than ever before.

The use of video surveillance cameras is also growing. Britain has an estimated 1.5m cameras monitoring public places. According to one estimate, the average Briton is recorded by CCTV cameras 300 times a day. As cameras have become cheaper, smaller and more effective, they are proliferating and can now be found almost anywhere: airports, aeroplanes, buses, shopping malls, schools, public buildings, offices, factories and increasingly in people's homes too. Digital cameras allow the images collected to be stored and analysed much faster and more cheaply than in the past.

And this is only the beginning. Engineers are now developing cameras that employ low-level radiation to “see” through clothing, walls or cars. Miniature bugging devices capable of transmitting video or audio signals for miles and for years, commercial satellites powerful enough to recognise objects as small as one metre across, and tiny tracking chips cheap enough to be attached to many products or people are already available. Cheaper and more powerful versions are expected in the next few years. Technologies such as face-recognition software and biometric identification, which security experts say are not yet reliable enough, are being installed nevertheless, and will improve over the coming decade, as will the ability to crunch and analyse the mountain of data generated by all this monitoring.

Get off my back
In other words, a society capable of constant and pervasive surveillance is being rapidly built around us, sometimes with our co-operation, more often without our knowledge. Opinion polls consistently show that the public would prefer more privacy, and is concerned about its erosion. Occasionally there is a burst of publicity about some particularly intrusive new method of data collection. But once the fuss is over, the public acquiesces in the surrender of more information—until the next revelation.

This is what has happened since the terrorist attacks of September 11th 2001. Governments everywhere, not just in the United States, have rushed to expand their powers of surveillance. Even the European Union, which has long been at loggerheads with America about data protection, performed a sharp U-turn, relaxing legal restraints on the collection and use of information by governments. Last June the EU adopted a new directive to allow member states to require firms to retain data on everyone using mobile phones, landlines, e-mails, chatrooms, the internet or any other electronic device. In America, the USA Patriot Act, passed in the wake of September 11th, made it much easier for the authorities to obtain court permission to monitor internet traffic and obtain wiretaps. The technology to do this is being built into the internet's infrastructure. Campaigners for privacy protection sometimes give the impression that the battle is already lost.

That may be the wrong conclusion. Instead, privacy is likely to become one of the most contentious and troublesome issues in western politics. There will be constant arguments about what trade-offs to make between privacy on the one hand and security, economic efficiency and convenience on the other. Most people are repelled by the idea of near-constant surveillance, but they either find it difficult to believe that it will really happen, or they do not know how to stop it.

Salami technique
One problem is that privacy is hard to define or protect in the abstract. Presented with the prospect of losing it, many people might well prefer to eschew the substantial benefits that new technology offers. But they will not, in practice, be offered that choice. Instead, each benefit—more security against terrorists or criminals, better government services, higher productivity at work, better medical care, a wider selection of products, more convenience, more entertainment—will seem worth the surrender of a bit more personal information, or a marginal increase in monitoring. Yet the cumulative effect of these bargains, each seemingly attractive on its own, will be the relentless destruction of privacy.

A second difficulty is that privacy is such a subjective concept. Some people will love being able to keep track of their partner every moment of the day or night, others will loathe the idea. Some people will resist being observed by video cameras at work, at play and everywhere in-between, others will find it comforting. Individuals are likely to find it hard or impossible to opt out of these new systems. Decisions on where to draw the line on privacy must, for the most part, be collective ones, and stopping the introduction of new privacy-destroying technology will call for a degree of consensus that will be hard to achieve.

The debate is being complicated by the distinction between the collection of information by governments and by the private sector. For understandable reasons, governments remain the larger worry for most people. In the 20th century it was Big Brother governments, not marketing firms, that became nightmares. And yet in the networked society of the future it could well prove easier to tame an overly intrusive government than a private sector hungry for more and more information. An entrepreneurial private sector, driven by competition to seize on every new technological possibility, is likely to find ways round most obstacles placed in its way. And whatever information the private sector collects will be accessible to the government too, through subpoenas and search warrants. E-mails have already become a staple of court cases.

In the networked society of the future it could well prove easier to tame an overly intrusive government than a private sector hungry for more and more information

It does not help that the issue of privacy does not fit conveniently into existing political frameworks. Privacy defenders have come from across the political spectrum, as have its opponents, and the debate has already produced some strange political bedfellows. Social conservatives are usually suspicious of government meddling, but many, especially in America, think that personal privacy is being used as a cover for activities they disapprove of, such as abortion or homosexuality. Their opponents among radical feminists and left-wing advocates of political correctness have also sometimes argued against privacy rights, but for different reasons, dismissing them as a means of cloaking patriarchal oppression, racial abuse and a host of other evils. Both, in their way, have supported intrusions into private lives to achieve social-engineering goals.

Even some libertarians, for whom individual privacy should be a precious good, have argued against regulating the collection of data by companies as an infringement of corporate rights, both of free speech (in reporting transactions with their customers) and of the general right of human beings to learn about one another in an open society. At the other end of the political spectrum, Amitai Etzioni, America's leading communitarian, detects a “pro-privacy” bias in American life, though mainly because, unlike his libertarian opponents, he wants to let the government exploit the advantages of new technologies through a national ID card and greater access to private databases.

Nothing is perfect
If any degree of privacy is to be retained in the face of technological advances already on the horizon, an array of measures must be employed—though all have drawbacks:

• Legislation. The right to privacy is enshrined in most national constitutions as well as in international human-rights treaties, and protected by a host of laws, but legislation has proved a porous barrier to the rising tide of electronic monitoring. By its nature, the law tends to lag behind new technological developments, so it often regulates past rather than present or future threats to privacy. And in a globally wired world, nationally based privacy laws may no longer be effective. Moreover, legal remedies must be pursued by individual citizens, who may not have the time or the resources required.

America's consumer-credit laws, passed in the 1970s, give individuals the right to examine their credit records and to demand corrections. The EU Data Protection directive, which came into force in 1998, goes a lot further, aiming to give people control over their data and requiring “unambiguous” consent before a company or agency can process them. But so far it has had little effect. One giant loophole was left by the lack of agreement with the United States, which refused to pass a similar law. To avoid a trade war over the issue, the EU had to offer a “safe harbour” from EU legal action for American firms that promised to abide by a set of rules guaranteeing the rights of EU consumers. In fact, few individuals have been determined enough to pursue their rights either under the EU law or through the EU-American “safe harbour” agreement. And yet in a recent survey of 10,000 people by the European Commission, most said they felt their personal information was insufficiently protected.

• Market solutions. Self-regulation, the approach favoured by the United States, seems to have left consumers even less reassured. Last August, Microsoft agreed that the Federal Trade Commission, which had accused the company of breaching its privacy promises to consumers, should monitor Microsoft's Passport identification system for the next 20 years. The company is a key member of “Truste”, one of the computer and telecommunications industries' leading self-regulatory groups, but Truste clearly failed to notice the breach.

A popular idea in the 1990s was that firms called “infomediaries” would emerge as brokers of information between consumers and other companies. They would release only such data as individuals were happy to reveal, and protect the rest. So far, however, the only real infomediaries have been firms such as Microsoft and AOL, which have the most to gain by commercially exploiting their huge databases on users. Many companies already promise that they will not sell information they collect about their customers, but such pledges are not always kept. In a world where most transactions in life are conducted electronically, consumers who want privacy would have to be ever vigilant, constantly making decisions about how much information they were willing to give away in exchange for other benefits. As is already clear, this is more than most can manage. Besides, market solutions are unlikely to be able to deal with growing government databases or increased surveillance in public places.

• Technology. In the 1990s a fierce war was waged between encryption fans on the internet on the one hand and governments, especially America's, on the other. The governments argued that they needed access to encryption keys to be able to enforce the law. They largely lost, mainly because they could find no guaranteed way to crack sophisticated new codes, though most governments retain the legal right to demand keys from suspects in criminal cases. In fact, few people, even terrorists, use encryption regularly. Fewer still use specialised internet portals that guarantee anonymous browsing. This could change if concern about web privacy grows. But technology can only ever be a partial answer. Privacy will be threatened not only by government or private snooping, but by the constant recording of all sorts of information that individuals must provide to receive products or benefits—which is as true off as on the internet.

Ironically, the most effective solution to the privacy problem may be something that most privacy defenders fiercely resist: a highly secure identification system, perhaps linked to two or three different biometric measures. True, this would give a great boost to ubiquitous monitoring, but it would also make it possible to track precisely who taps into databases. This seems essential if access to databases is ever going to be properly controlled.

Try transparency
Given the sheer difficulty of protecting privacy in the face of ever more sophisticated technology, is it worth even trying? David Brin, a physicist and science-fiction writer, has attracted a lot of attention with his 1998 book “The Transparent Society”, in which he argues for much less, not more, privacy protection. Attempts to protect privacy usually benefit only the rich and powerful, or else the government, he says. Transparency is almost always a better option. Let everyone have access to databases, peer through CCTV cameras and listen in on conversations, Mr Brin says. “Mutually assured surveillance” would see to it that most people did not abuse their access to information.

The trouble is that, on current evidence, most people would be unwilling to live with such an arrangement. In “The Truman Show”, a recent Hollywood film, the hero abandons the only life he knows to evade the pitiless gaze of the cameras, having discovered that he has been the subject of a reality-TV show since birth. His bid for freedom is a desperate attempt to retrieve his humanity, something that most people would sympathise with. Every society, however primitive or poor, has had some concept of privacy, and has employed mechanisms to protect it. Despite the relentless advance of monitoring, the odds are that, in some form difficult to specify as yet, privacy will survive.

Only disconnect


A taste of life in 2033

JANE remembers her parents saying they spent a lot of time getting the kids off to school and then fighting their way into work through rush-hour traffic to sit at a desk in front of a big square box that would often “crash”. Thank heavens life is so much easier now. Rush hours were eliminated years ago: Jane works when it suits her, and carries her office around in her pocket. The files she needs from work fit on a square-inch memory chip. Anything else she wants, including the three dozen newspapers and magazines she likes to skim regularly, she can get anywhere from the web. Sometimes she still meets her colleagues in the same room for “face time”, but she thinks this is overrated. Usually three-dimensional video does just as well.

The vast increases in productivity over the past decade mean that Jane has a lot of free time. She loves being involved in the big issues of the day, so she briefs herself on politics and votes on some of the half-dozen referendums held every day. A pity that so few people bother.

Crime and terrorism were virtually eliminated a decade ago. A few people still misbehave, but with constant surveillance it is hard to get away with anything. Fraud and stalking were wiped out when DNA-matching instant identification was narrowly approved in a national referendum a few years ago.

Jane barely remembers that initial terrorist attack on September 11th 2001, but recalls the years of constant fear afterwards, leading to the referendum that gave the authorities almost complete surveillance rights over everyone and everything. And when web technology gelled a few years later, terrorism just stopped.

Private life, too, has got a lot easier. Most of the “drudge” shopping for food and other essentials is done automatically: all Jane has to do is to set the inventory levels in her kitchen. That leaves more time for fun shopping, say for clothes. She also likes the reassurance she gets from the implanted medical chips that transmit her data to her doctor's information base.

Jane always knows where her kids are because she can call them up on screen. They are too busy to get into much mischief anyway, with the round-the-clock edutainment she has scheduled for them. Indeed, she knows the whereabouts of everyone who matters to her, and can contact them at the press of a button. If only her husband Dick would cheer up.


You'll never walk alone
Dick is depressed. He does not feel it is enough to talk to Jane on video a dozen times a day, and get together a few times a week for sex. Yes, watching the football together last night via video was fun, and Jane picked some great camera angles to look at the game from. They laughed so much that he wanted to send a clip from Jane's video to Harry at university, but the boy had someone with him and had blocked the cameras in his room. That made Dick feel wistful. It would have been nice for Jane and him to be in the same room together too. If she would just stop attending political meetings and voting so much, they might have more time to spend with each other.

Dick is bored with his job, but that isn't his main problem. He just feels watched all the time, even though Jane has explained to him that only those with authorised access can know what he is doing. He is not so sure. Certainly, all kinds of strangers—his personal tax collector, officials at the town hall—seem to know an awful lot about him. And he really dislikes the idea that everything he does is poured into a database. He wants another beer, but everyone will know about it—the supermarket, Jane, his doctor. The trouble is, he is slightly older than Jane, and can still remember a time when it was possible to be alone.

Certainly he doesn't agree with Jane that everything is perfect. Yes, travel is much easier than it used to be, because everything is arranged instantly on the web. But there are parts of the world he cannot visit any more because the political oppression there is just too frightening. And life at home is such a treadmill. Dick's boss is demanding live access for more and more hours of the day, and video messages are always piling up. To escape these pressures, Dick spends too much on entertainment, but to pay those big bills he has to spend yet more hours at work. He deeply resents Microdisneysoft charging for absolutely everything, and Timesonywarner isn't much better.

Maybe his father has the right idea. Dick hardly sees the old man these days because he always seems to have his video image and live-communicator access blocked. Blocking access is considered rude, even suspicious, but Dick wonders if he shouldn't do the same.

A fine balance

How much copyright protection does the internet need?

THE subject sounds as dry as dust, but the debate on copyright has been extremely lively. On one side stand the entertainment and publishing industries, and the intellectual property lawyers who make their living from them. On the other is a motley collection of consumer advocates, law-school professors and cyber-libertarians. Both sides claim that nothing less is at stake than the future of creative endeavour itself. Will the internet and related technologies unleash an unprecedented burst of intellectual and artistic effort, benefiting producer and consumer alike? Or will the web end up as an intellectual wasteland, deprived of content by the fear of rampant copying?

It may seem that both sides are being alarmist. After all, huge quantities of copyrighted material circulate on the web every day, and as yet neither the content industries nor the internet seem to have done each other much harm. Even the record companies have failed to prove their claim that file-sharing services such as Napster, which they succeeded in closing down last year with a copyright-infringement suit, have done much damage to their sales, which may have declined for a variety of other reasons.

But both sides are less concerned with the present than with the future, when a more powerful and ubiquitous internet could make child's play of the perfect copying and global distribution of any recorded material—text, images, music or video. So far, neither side has come up with any persuasive ideas on how copyrighted material can be protected on the internet without extinguishing many of the web's promised benefits.

What the content industries envisage is a combination of tough legal and technological protections that will enable them to stamp out nearly all unauthorised copying and to exert direct control over what their customers can do with their products. The music, television and movie industries, initially befuddled by the rapid growth of the web and the sudden proliferation of file-sharing programs, soon launched a concerted effort to stop what they view as large-scale theft. They have had mixed success. The record companies managed to shut down Napster, but other, less centralised file-sharing services have sprung up in its place. Large quantities of music continue to circulate on the internet. The swapping of movies and television shows is also slowly taking off and could soar as high-speed internet access spreads.

In 1998 Hollywood, already foreseeing the mortal danger that digitisation might bring, conducted a vigorous lobbying campaign to win two pieces of legislation from America's Congress. One extended the length of American copyrights. The second, and far more controversial, was the Digital Millennium Copyright Act (DMCA), which declared that “no person shall circumvent a technological measure that effectively controls access to a work protected” by copyright. In other words, the DMCA made it a crime not only to copy a protected work, but to unscramble an encrypted work without authorisation. It also made it illegal to manufacture, release or sell any tools, hardware or software designed to help anyone crack encryption of a copyrighted work.

The content industries are currently seeking yet more legal weapons, including a requirement to install anti-piracy software or chips in computers, handheld organisers and so on. But their schemes for copyright protection have not got very far, partly because there is no agreement on technological standards, and partly because the software and electronics industries are reluctant to annoy their customers, or possibly torpedo their own sales, by helping to impose restrictions on the use of content. This conflict of short-term interests could delay an agreement between Hollywood and Silicon Valley for some time. But it would be foolish to assume that no agreement is possible in the long term. Computer makers and consumer-electronics firms need a steady stream of enticing content to sell their goods. Eventually equipment manufacturers and content providers will come to some agreement on how to protect digital content.

Fair enough?
Whatever deal they do strike will not necessarily be in the best interests of the public, and is likely to enrage the growing band of vocal cyber-activists who consider Hollywood's aims as an assault on basic liberties. “Rather than ‘wait and see', the law has become the willing tool of those who would protect what they have against the innovation the net could promise,” writes Stanford's Mr Lessig in his most recent book, “The Future of Ideas: the Fate of the Commons in a Connected World”.

Mr Lessig and others point out that most cultural and intellectual creativity makes use of existing work in some way. Blocking access to the immediate cultural past with a battery of legal and technological barriers, they claim, will crush creativity just at the moment when technology has given the tools for creativity to hundreds of millions of people. Moreover, if the content industries get their way, the “fair use” provisions which have always ensured access even to copyrighted works will be brushed aside. Government should stay its hand and let new business models emerge as technology develops.

Hollywood and the music industry fear that as technology improves, their existing assets will simply evaporate into cyberspace. They are not going to sit idly by and watch that happen. Yet their critics have some powerful points. To understand these, it is necessary to take a closer look at copyright law itself.

Ever since its foundations were laid in Britain and America in the 18th century, copyright law has tried to strike a balance between offering an incentive to writers and publishers to create and disseminate works, and guaranteeing public access to the flow of ideas. The thought behind this is that “intellectual property”, as published work and inventions have since become known, is different in kind from tangible property. Economists call ideas, and their expression, “non-rivalrous”—for example, if I take your car, you are left without a car, but if I borrow or steal your idea, we can both use it. As Thomas Jefferson famously put it: “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” Whereas all tangible property is scarce, ideas or their expression are not. Copyright is the grant of a temporary monopoly, through a ban on copying, to offer those who generate ideas a chance to garner a profit.

Over time, copyright has repeatedly been strengthened and extended as the publishing and entertainment industries have become ever more important and as new technology has posed new problems. For example, the first American copyright law of 1790 borrowed the contemporary British scheme of granting 14-year copyrights, renewable for another 14 years. Today both American and European copyrights, harmonised by treaty, are for 70 years beyond the life of the author and 95 years after publication, or 125 years after creation for works made “for hire” and owned by corporations.

Copyright has also been extended far beyond printed works to cover almost any medium from choreography to music, movies and computer programs. In the process, one initial element of copyright, the notion that only the specific expression of an idea could be protected, not the idea itself, has been eroded by the extension of copyright to translations and derivatives of the original. Moreover, constraints such as the need to register a copyright have been swept away. The mere creation of a work in some tangible form results in a copyright.

Despite these extensions, the balance between the public's access to new ideas and the incentive to creators to produce and publish them has largely been preserved. Some important exemptions to copyright have been retained. Copying works solely for private use is allowed, as is small-scale copying by schools and libraries. And “fair use” provisions allow others to quote short sections of a work to comment on it. Big advances in the technological ability to copy works, such as photocopying and the video cassette recorder, have produced much debate but failed to upset this delicate balance.


Perfect reproduction
Digital technology, though, may shatter it once and for all. The technology is reducing the cost of publishing and distributing works to almost zero, which should be a boon for creative people, but has also made the unauthorised copying of works virtually costless and, more important, perfect. In retrospect, the copyright balancing act has survived only because of the imperfections of earlier copying methods.

Content industries want to respond by abandoning the idea of balance altogether. Through a combination of software encryption and new hardware, known as Digital Rights Management (DRM), they want to make digital copying of their work impossible without their permission. They also want a legal framework that allows them to enforce and protect their rights. For them, intellectual property is property, pure and simple.

Their critics claim that this defeats one of the main purposes of copyright—to ensure the public's access to intellectual products—just as the internet should be making that easier than ever. If content industries get their way, the critics say, content providers will gain unprecedented control over consumers. It is impossible to view or listen to digital content without making a copy of it, so even this simple activity could be subject to a payment. Private copying that is now entirely legal, for listening to music or reading text on more than one device for example, would also become subject to the permission of the record company or publisher. “Fair use” would no longer apply, which would inhibit perfectly legitimate comment and debate and pose a threat to the vitality of democracy as well as future creativity. Moreover, once the DRM architecture is built into the software and hardware of the internet, critics say, it will quickly be put to other uses by governments and companies, destroying any chance of privacy and perhaps making even the circulation of works in the public domain difficult or impossible.

Some intriguing suggestions have been made for trying to restore the copyright balance in the digital age. In her book “Digital Copyright”, Jessica Litman argues that any attempt to regulate copying should be abandoned. Instead, the law should give creators the exclusive right of commercial exploitation of their works. Most of the public, she maintains, believe that copyright laws already incorporate that distinction. They do not, but in practice this is what their enforcement often means.

William Fisher, the co-director of the Berkman Centre for Internet and Society at Harvard, proposes that access to the internet and all electronic equipment that uses digital content be taxed, and that the revenues from this tax be distributed to content providers. Under this scheme, all digital content would be “watermarked”, and estimates of downloads would be made using data provided by content providers. A similar system is already used to compensate musicians for free-to-air radio broadcasts of their work. Under Mr Fisher's proposal, consumers on the internet would experience content as “free” but would be paying for it through taxes.

Mr Lessig favours a range of old and new measures. He wants to return to registering copyright, rather than automatically granting it to all content at the moment of its creation. Copyright holders would have to renew their copyright every five years to retain it, with a limit on the number of renewals. Moreover, given the ease of publication in the digital era, the rule would be “use it or lose it”. If a copyright holder was not making a work available to the public, he would be obliged to grant a licence to anyone who did want to publish and distribute the work. The terms of these licences would be set by the government to reward creators, but also to encourage the maximum distribution and use of their work.

Imperfect remedies
These are ingenious remedies, but inevitably there are problems with all of them. Ms Litman's proposal would be likely to produce a wave of litigation as courts struggled to define commercial exploitation and to determine whether a content provider's right to it had been damaged by, for example, someone else's mass copying of their output even if the copyist did not do it for a profit. Mr Fisher's scheme would not only require large-scale government intervention, but make differential pricing by content providers next to impossible and tax the very products that are making the digital revolution possible.

Mr Lessig's ideas may be the most practical, but these, too, would require more government meddling in all types of digital output. There would be constant disputes about the terms of his compulsory licences. Moreover, what he is suggesting amounts to a dramatic reduction in the reach and value of copyrights. On balance that would probably be good for the public, as he claims, but the content industries could be expected to fight it tooth and nail.

What would happen if the content industries, through a combination of law and technology, were to achieve total copyright protection of their works? Oddly enough, this might not be as comfortable for them as they believe, nor as disastrous for the public as their critics fear, for two reasons. First, one of the most startling things about the internet has been the vast volume of free content that it immediately made available, and that has continued to grow by leaps and bounds. Not everyone wants to get rich from creative work. Millions of people seem more intent on reaching an audience than generating revenue, and do not need the incentive of copyright protection to create something. They include some established writers, artists, musicians and film makers, as well as legions of wannabes.

If content industries overplay their hand, they could end up alienating and losing much of their audience

Second, digital technology is not only making it easier to copy and distribute content, but also to generate it. This is true even of the most expensive medium of all, movies. If content industries overplay their hand, they could end up alienating and losing much of their audience. They are, after all, only intermediaries between creators and consumers. The public may not be willing to tolerate the control of their behaviour that DRM schemes would impose. People may accept copy protections on some products, but are likely to refuse to buy machines which make it hard to copy content in the public domain.

Conversely, what would happen if copyright were to be abolished entirely, as many cyber-libertarians advocate? Again, this might not prove as liberating as they hope, at least in the short term. Content industries would be unlikely to realise their threat to withhold their products from the digital marketplace. Instead, they might digitise everything as fast as possible, but rely more than ever on technological rather than legal protection. In any race with hackers trying to break through encryption barriers, the media companies would probably stay far enough ahead to suppress most piracy. Governments might do more to criminalise attempts to break these barriers, as Congress did in passing the DMCA. But even if they balked at this, they would be unlikely ever to ban the erection of such barriers.

In this scenario, the most commercial books, music and movies would remain behind a pay barrier. “Fair use” of these would be lost, unless granted by the creator, and copies that consumers could make for private use would be tightly controlled. It is true that, without legal backing, this control would endure only as long as the copy protection withstood technological advances, but content providers would probably also experiment with business models other than outright sale, such as subscription and advertising.

Ironically, these two outcomes seem rather similar. So is the debate about copyright irrelevant? Eventually, perhaps. But first there will be constant warfare between those who see copyright protection as a threat to the new digital world, and those who see that world as a threat to their wallets. Certainly, the content industries are likely to experience the most upheaval. They may be able to retard the growth of copying on the internet for a time, but they cannot hold back the advance of technology altogether. This will undermine their existing business models, based as they are on print, analogue broadcasting and the sale of physical products such as compact discs. Even if the “total copyright protection” scenario sketched above prevails, content providers will have to reinvent themselves. But whatever happens, creativity is unlikely to grind to a halt. The show must go on.

Power to the people

A pervasive web will increase demands for direct democracy


IN THE early, heady days of the internet, many of its most zealous proponents expected cyberspace to transform the political landscape. Autocratic governments, they thought, would be scuppered by their inability to control the free flow of information. That could yet happen (see article). But cyber-optimists' hopes were even higher for established democracies, where they saw the internet restoring the electorate's civic engagement. Citizens would no longer have to rely on information spoon-fed by politicians, but be able to find out for themselves. Eventually, people would vote directly from the comfort of their own homes. The political apathy which has spread through western countries in recent decades would be reversed. Democracy would be rejuvenated, at last achieving its original meaning of “power of the people”.

Judging by the most obvious political effects of the internet, so far this has not happened. Established democratic governments have published enormous amounts of information on the internet and moved towards the electronic delivery of some services, but this does not seem to have made much of a difference to the conduct of politics. The structures of democratic government remain intact. Political parties and candidates have set up websites and flooded voters with e-mails. But internet campaigns, according to most studies, have appealed to the same band of already committed voters who are also reached through letter boxes and by knocking on doors. Broadcast advertising still dominates campaign spending.

Governments in Britain and the United States have conducted experiments with electronic voting in real campaigns. A number of European countries are also planning trials. Some experiments have produced a rise in voter turnout, as hoped, but most have not. On the whole, the internet seems to have had remarkably little impact on mainstream politics.

That will not remain true for much longer. Communication is the lifeblood of politics, and every big change in communication technology, from the printing press to television, has eventually produced big, and often unexpected, changes in politics. As the internet becomes mobile and ubiquitous, it will bring about changes of its own. Precisely what these will be is not yet clear, but the earliest claims of cyber-dreamers—that the internet will produce a shift of power away from political elites to ordinary citizens—may well become reality. One of the big political debates of the next three decades will be about the relative merits of direct versus representative democracy.

A different kind of politics
Indeed, it has already got under way. In a recent book, “Democratic Phoenix: Reinventing Political Activism”, Pippa Norris, a political scientist at the Kennedy School of Government at Harvard, rejects the conventional view that there has been a pervasive decline in political participation in western democracies. Voter turnout and membership of political parties may have declined in some countries, she concedes, but much more political activity is now being channelled through single-issue, grass-roots organisations and expressed by means of “protest politics”, such as petitions, demonstrations and consumer boycotts. This trend was well established before the internet, but the web's arrival has accelerated it. The ability to organise, proselytise and communicate at low cost has been a huge boost to such groups, be it a locally based effort to block an airport expansion or a global environmental campaigner such as Greenpeace.

Joining in a protest or a web discussion is not the same as stuffing envelopes for a big political party, but it is political participation nevertheless. According to Ms Norris, survey evidence shows that this kind of protest politics is particularly strong among the well-educated managerial and professional classes in post-industrial societies, and that it is no longer confined to the young. In other words, the bulk of those who are organising themselves on the internet and engaging in “direct action” politics are not anarchists or anti-globalisation protesters, but the kind of people who join political parties and are most likely to vote.

The growth of “protest” politics is not the only evidence for a slowly mounting demand for direct democracy. Over the past few decades, the popularity of direct voting by electorates has sharply increased. Through a variety of mechanisms—local and national referendums, initiatives placed on the ballot by citizens, and advisory votes—governments are now consulting their electorates directly.

Not all such plebiscites are respectable. When Saddam Hussein pushed up the proportion of voters approving his rule from 99.96% to 100% in a referendum last October, the rest of the world could only laugh at the sick joke. But such manipulation does not invalidate the device itself, properly used. Referendums have helped establish popular approval for new constitutions in eastern Europe, accompanied the periodic reforms of the European Union, sometimes with surprising and awkward results, and have been embraced even by Britain, a country with a strong tradition of parliamentary sovereignty.


Vote often
In Switzerland, where various forms of direct democracy have long been an integral feature of government, the number of direct ballots has climbed sharply in recent decades. The same is true in the United States, where direct votes of one kind or another have been used since colonial times. Since 1980 there have been more than 600 state-wide direct votes, and thousands more at city and county level. Twenty-seven American states now have a provision for some form of direct ballot. In some states, such as California, Oregon and Colorado, voters face a slate of referendums every year.

Moreover, public-opinion polling has become endemic in most democracies, with politicians, political parties, the media and even governments continually conducting polls to gauge opinion. Instant, and blatantly unscientific, polls have become a regular feature of news shows and websites. Even that most passive of all media, broadcast television, has spawned scores of websites where couch potatoes passionately debate popular shows such as “The Sopranos” or “Buffy the Vampire Slayer”. These sites are now monitored by television producers to see how audiences are reacting, episode by episode.

In modern societies, in other words, the public is now accustomed to being consulted regularly, and when most people get the chance, they like expressing their view on anything under the sun. Although representative democracy is the basic structure of all western governments, it is accompanied today by a penumbra of direct popular control. Opinion polls in America and Europe suggest that large majorities are in favour of referendums.

Not everyone is happy about this. Politicians are regularly derided for being “poll driven”, as if that were a synonym for public pandering. David Broder, a veteran political reporter and columnist on the Washington Post, entitled his recent book about America's initiative campaigns “Democracy Derailed”. Mr Broder is appalled by the intrusion of direct ballots into the governance of American states, believing that such ballots are too vulnerable to control by powerful moneyed interests—a remarkable claim for someone who has been covering America's Congress for most of his career.

And yet despite his scathing criticism of such initiatives, Mr Broder is honest enough to report that his view is not widely shared by voters. “In every state I visited in my reporting, the initiative process was viewed as sacrosanct,” he writes. “In most of them, the legislature (even though term-limited) was in disrepute.” Moreover, he is convinced that it will not be long “before the converging forces of technology and public opinion coalesce in a political movement for a national initiative—to allow the public to substitute the simplicity of majority rule by referendum for what must seem to many frustrated Americans the arcane, ineffective, out-of-date model of the constitution.”

Mr Broder is right, and not just about America. The growing expectations of an educated public for whom individual choice is an important value, combined with the technology of an increasingly pervasive internet, will challenge the structures of all western governments based on representative models of democracy. Once reliable methods for validating electronic votes have been found and internet penetration rates approach saturation, the internet will remove the biggest single obstacle to direct democracy—the physical difficulty of distributing information to a large population, engaging it in debate and collecting its votes. When this happens, probably during the next decade, many people will come to see national elections every few years as an extraordinarily blunt instrument for expressing the popular will, a remnant from the age of steam, when most representative institutions were invented.

Constitutional change is never easy, nor should it be; and moves towards direct democracy are likely to be fiercely resisted, by politicians and lobbyists out of self-interest, by many others out of a genuine fear of the unknown and by some, like Mr Broder, out of a principled belief that, even if technically possible, government by referendum would be a “tragic mistake”.

The many faces of democracy
Assuming that frequent mass polls will become a practical possibility, critics of direct democracy will argue that, without intermediary institutions such as political parties and legislatures, the kind of rational trade-offs necessary for good government will become impossible. The bargaining that takes place in legislatures may not be pretty, but without it successive referendums are likely to result in contradictory policymaking and instability. Critics will also say that most citizens simply do not have the expertise or the time to examine the complex issues that must constantly be decided in modern societies. Impatient or distracted by other demands on their attention, voters will be prone to snap judgments and vulnerable to manipulation. Professional politicians, for all their faults, do serve a useful purpose.

Those arguing for more direct democracy will reply that regular polls of the electorate should go a long way towards avoiding irrational policymaking. If voters find that they have made conflicting decisions, then another ballot can be held to resolve them. Moreover, even in a direct democracy not all intermediary institutions, such as political parties, government departments or even legislatures, will necessarily be abolished. Legislatures might survive to monitor elected governments, just as they do today, and to formulate and propose legislation. Voters might confine themselves to making the final decision about what legislation to enact. Evidence from the hundreds of initiatives held in Switzerland and in American states does not bear out fears that voters will take undue risks or oppress minorities. Electorates are generally risk-averse, upholding the status quo unless they are thoroughly convinced that change is needed.

Even in a direct democracy, most people do not want to live, eat and sleep politics, so new intermediate institutions may have to be found. James Fishkin, a political scientist at the University of Texas, has experimented with “deliberative polls”, both national and local, in the United States, Britain, Denmark, Australia and Bulgaria. These polls are, in effect, large juries of ordinary voters (200-500 people at a time), selected to mirror the general population, who gather to interrogate experts on both sides of an issue over a couple of days and then debate among themselves in moderated groups. Participants are polled both before and after their discussions to see what difference these have made.

Mr Fishkin's results have been encouraging. Minds were opened and some attitudes changed. Judging by the evidence of lengthy questionnaires before and after each poll, it seems that all socio-economic groups (not just the rich or well-educated) are capable of considering complex issues; that participants are able to absorb information even if it clashes with their own views; and that such groups are able to weigh alternatives and set priorities even when difficult trade-offs are involved.

The jury is out
In a direct democracy, voters might well trust such juries of fellow citizens more than they would groups of professional politicians. With a ubiquitous, video-enabled internet, such juries would not need to assemble physically, as did most of Mr Fishkin's. Voters could follow the deliberations of the group as it wrestled with a decision, review the evidence presented to the jurors, and consider the jury's decision when it was made. Juries could be used as advisers to the electorate before votes, or some decisions could be delegated directly to the juries themselves. A poll by the Center on Policy Attitudes, a Washington-based think-tank, found that two out of three Americans believed that such a jury would make better decisions than Congress, mainly because it would be less subject to lobbyists' attempts to influence it.

Such innovations may still seem a long way off. But in trying to hold back the demand for more direct democracy, the defenders of traditional representative institutions will have a fundamental problem: any criticism they make will sound as though it is aimed at democracy itself. If voters are not wise enough to make direct policy choices, how can they be wise enough to choose legislators, or governments, to do it for them?

The financial corruption and lobbying by special interests that plague all democracies today are much harder to stamp out in a representative system than they would be in a system with more direct voter involvement. Mr Broder is right that big-money interests have also tried to manipulate many American initiative ballots. But it is hard to bribe an entire electorate, or even to mislead it for very long, if there is a free flow of information and open discussion. In any case, most research by political scientists has found that, contrary to Mr Broder's view, state-wide initiative campaigns are, on the whole, remarkably difficult for big spenders to control.

To function effectively, of course, even direct democracies will need rules, procedures and an array of institutions. Most of these are likely to be adapted from existing ones. Others will have to be invented, and voters persuaded of their merits. One of democracy's greatest virtues is its flexibility, but the changes about to be wrought by new communication technologies will stretch the adaptive abilities of western democracies to their limit.

Caught in the net

Instead of undermining repressive regimes, the internet might strengthen them

IF THE internet will force difficult changes on democracies by handing power to individual citizens, it seems reasonable to believe that it will have a devastating impact on dictatorships. But it is not impossible that instead of undermining repressive regimes, the internet could become the most effective tool of social control that autocratic rulers have ever wielded.

New communication technologies have long been thought of as unequivocally on the side of political freedom. Authoritarian regimes invariably go to great lengths to control the flow of information, and are especially obsessed with communications between individuals. Surely, then, increasing flows of information will undermine the power of such regimes? Optimism about techno-liberation soared when western television and radio broadcasts were seen to play a role in bringing down the Berlin wall. “Technology will make it increasingly difficult for the state to control the information its people receive,” said Ronald Reagan soon after stepping down as America's president: “The Goliath of totalitarianism will be brought down by the David of the microchip.” Speaking ten years later, Bill Clinton argued that China's efforts to crack down on the internet were “like trying to nail Jell-O to the wall.” Most people agreed.

But so far the internet has not proved as subversive to authoritarian regimes as expected. A report published this month by the Carnegie Endowment for International Peace, “Open Networks, Closed Regimes: The Impact of the Internet on Authoritarian Rule”, by Shanthi Kalathil and Taylor Boas, looks at the internet in a range of countries from China to Saudi Arabia and concludes that the conventional wisdom is wrong: “The internet is not necessarily an insurmountable threat to authoritarian regimes.” The political impact of the internet varies from country to country, say the authors, and depends more on social or economic circumstances and the government's own policies than on the catalytic effects of the internet itself. In societies where the government holds all political power and is willing to crack down hard on any dissent, a mere connection to the outside world has not been enough to force change. “Rather than sounding the death knell for authoritarianism, the global diffusion of the internet presents both opportunity and challenge for authoritarian regimes,” they write.


We'll do without
Many autocratic regimes may choose to forgo the internet's benefits to maintain political control, and others may remain too poor for wide public access to be an issue. In Myanmar or Iraq, for example, access to the internet is so tightly controlled that the few people who are allowed to go online, mostly government officials, are easy to monitor. Cuba has used networking technologies in its health system, through a national intranet, but has also succeeded so far in allowing a small selection of others to use the global web while denying access to the general public. Vietnam has followed a similar course.

And even where wider access has been allowed, the effects have sometimes been surprising. In Singapore, where a solid social consensus seems to support the restrictions of a semi-authoritarian regime, widespread internet usage has not encouraged the growth of an opposition. In Saudi Arabia, the authorities employ sophisticated filtering technologies purchased from western firms to block offensive web sites. This has been made easier by the extreme social conservatism of Saudi society. In a clever move, the country's official internet censors have asked for the public's help in deciding which sites to block. They receive some 500 suggestions a day, five times the number of requests they receive for unblocking sites (a list that may be just as useful to them).

But for other authoritarian countries the dilemma of the internet has been more acute. They are desperate to exploit its enormous economic potential. The biggest obstacle to development in poor countries is isolation from the world economy, and even the very poor sometimes benefit from an internet connection. Fishermen gain access to weather forecasts, farmers to the latest prices paid for produce in distant urban markets. Connecting a poor country could help its economy take off, a potent lure for any government. At the same time repressive regimes are determined to limit the internet's threat to their political control. Can they do both?

The most interesting example is China, which with 46m users already has the world's third-largest number of internet connections after the United States and Japan. Rapid growth in usage has been actively encouraged by the Chinese government, which sees electronic commerce as a main plank for modernising the economy and maintaining growth. At the same time it uses a panoply of techniques to curb the internet's political effects. Last September it attracted worldwide attention by blocking some access to Google and Altavista, two popular search engines, though after protests inside and outside China it partially restored the service. In addition to blocking sites, the Chinese government has deployed a range of other technical tools, from sophisticated monitoring of e-mail traffic and chatrooms to hacking attacks and viruses aimed at hostile websites. But even more effective has been its encouragement of self-censorship among internet service providers, content companies and users.

Although China has welcomed private investment into its telecoms infrastructure, it has carefully retained control over operating licences and over the system's backbone. This allows the authorities not only to use sophisticated monitoring techniques, but to punish any firms that step out of line. Most, including many big western firms, have been eager to comply. Likewise, by occasionally cracking down harshly on individuals, the authorities have intimidated most Chinese into staying within accepted boundaries on the internet. Chinese users never know who might be watching the way they use it, or when the axe might fall.

So far, this approach has been highly successful. The Falun Gong, the only direct challenger to the government's domination of public life in recent years, won a large following in the late 1990s by using e-mail and websites, but today the group's dwindling membership inside the country communicates mostly by payphone, which is harder to trace than e-mail.

The Chinese government's approach to the internet is a microcosm of its effort to liberalise the economy without relinquishing the Communist Party's monopoly of political power. Its attempt to control the internet's development will both mirror and feed back into political events. Future technological developments may play an important part, but are not likely to be the determining factor.

China's employment of advanced technologies to filter and monitor web usage has outraged many computer programmers in the West. These so-called “hacktivists” are combining hacker skills with political activism to fight what they see as a perversion of the internet's promise. The Chinese authorities are probably already working on counter-measures. This cat-and-mouse contest is likely to go on for years. With millions of programmers of its own, China is bound to get some home-grown hacktivism as well.

But the contest looks decidedly lopsided. On one side are small bands of political dissidents, human-rights activists and hackers; on the other stand not only authoritarian regimes but also western governments, who want to stay one step ahead of the hackers and are reluctant to support hacktivism even against dictatorships. They are supported by most of the commercial world, which wants to monitor and record web usage to make money, enforce copyrights, acquire customers, deliver new services and protect its own operations from malicious hacker attacks. American and European companies have fallen over each other in their eagerness to sell the latest surveillance gear and software to China and Saudi Arabia.

Worryingly, the same technological trends that are so rapidly eroding privacy in the West could put powerful tools in the hands of repressive regimes. As more human interactions are conducted and recorded electronically, as the ability to analyse databases grows and as video and other offline surveillance technologies become cheaper and more effective, it will become ever easier for authoritarian governments to set up systems of widespread surveillance. George Orwell's Big Brother of “1984” might yet become a reality, a few decades later than he expected.

Through a glass darkly

The biggest decisions about the internet's future will be political and social, not technological

FOR some readers, this survey may have suggested that the risks and uncertainties of the new internet-related technologies are too big to be worth incurring, and that the world should therefore choose to forgo their benefits. But that no longer appears to be an option. The technologies that have built the internet are racing ahead on many fronts, and are already too pervasive to stop in their tracks. However, that still leaves plenty of choices, many of which will require a new consensus to be built outside existing categories of social or political debate. The outcome will be determined by people, not technology.

Many of these choices will not be a matter for legislatures or courts, but will involve the informal renegotiation of interpersonal relations. This has already begun. For most people the convenience of e-mail, mobile phones and voicemail has proved irresistible, but many have also begun to feel the downside of being constantly in touch. Some feel obliged to respond to messages immediately. Others try to limit the expectations of their boss or family by taking longer to reply, or switching off. As it becomes easier to know where people are at any time, and to communicate with them, the burdens as well as the benefits of being “always on” will become more acute, and private bargains between workmates, friends, lovers, parents and children will have to be struck.

Similarly, the most potent antidote to the rapid erosion of personal privacy may prove to be not new laws but new rules of etiquette. As the volume of information in the public domain continues to grow, it may come to be seen as rude to do a web search about your neighbour or a casual acquaintance. Employers may find themselves competing with each other for the best workers with promises not to monitor their e-mail traffic or web-browsing habits, or by offering strict limits on the use of corporate surveillance cameras.

Where social norms fail, clashes over privacy and access to information will end up in the law courts, and new laws will be needed. This, in turn, will highlight one of the most important questions presented by the internet: in a networked world, what will be the nature of government power? The fact that the internet spans the world, and is indifferent to borders, squarely challenges the idea of geographically specific legal jurisdictions that has been the basis of the nation state. Already the web is in constant use not only by governments, companies, news media and law-abiding individuals but also by fraudsters, child pornographers and terrorists. As the growing power of electronic technology makes it possible to conduct more social interactions on a global network, the internet will force governments to decide whether they should act alone or together on a wide array of issues, from law enforcement to tax collection to the regulation of obscenity.

What governments can do
There appear to be three possible routes, and so far governments are travelling down all three of them simultaneously. The first route is to negotiate transnational laws and rules to govern the growing areas of life affected by a global web. This has worked well where there is already agreement about what the rules should be. For example, the use of e-mail, mobile phones and electronic transactions has made it easier, not harder, to hunt down terrorists such as those responsible for the September 11th attacks, and governments have had little trouble co-operating in gathering such evidence.

But where national sensitivities differ, international agreement can be hard or even impossible to reach, as the EU and the United States have already found in negotiations over privacy protection. Another notable example is the refusal of an American court in 2001 to enforce a French ruling against Yahoo! for allowing French browsers to view Nazi memorabilia on its online auction site. The courts are coming up against this sort of problem with increasing frequency. A group of record companies managed to shut down Napster for copyright infringement in 2002. But when they took another file-sharing service, Kazaa, to court late last year, they discovered that Sharman Networks, the distributor of its software, is incorporated in the South Pacific island of Vanuatu and managed from Australia; its computer servers are in Denmark; its source code is thought to be stored in Estonia; and its developers, who still control the underlying technology, live in the Netherlands. The service has 60m users in over 150 countries. Even if the American court decides against Kazaa, it may not be able to enforce its judgment.

Filtering and barriers may grow as the cross-border nature of the internet brings it into increasing conflict with the enforcement of national laws

A second route for governments is, in effect, to turn away from the idea of a global web and to build technological, legal and regulatory borders into the network itself. As described earlier, countries such as China and Saudi Arabia invest heavily in erecting barriers and monitoring web usage to exert political control over their populations. Private firms also employ such technology, but only to stay out of trouble. Last October a study by the Berkman Centre for Internet and Society at Harvard discovered that Google, an internet search engine, had blocked more than 100 racist and Nazi websites from its French and German versions to avoid legal liability. Filtering and barriers may grow as the cross-border nature of the internet brings it into increasing conflict with the enforcement of national laws.

The third route is for governments not to respond at all, either because they are flummoxed by the complexity of the task or because they believe that, as a matter of policy, it is better to leave well alone. This is what happened when the web unexpectedly took off in the 1990s, and to some extent governments remain uncertain. And yet they seem unlikely to remain paralysed indefinitely, or even to choose self-restraint as a deliberate policy, because by doing so they would be steadily undermining their own powers, not just internationally but domestically as well. That might well promote freedom and creativity, but it would also do the same for criminality and legal chaos.

Some observers think that the future of the internet society will be shaped not by governments but by technological decisions and the companies that take them. Mr Lessig has written two books arguing that “code”, the technical communication protocols of the internet and the structure of the web, is as effective as law in dictating what is possible and what is not. He is especially concerned that large companies which make these decisions to suit their own interests are pre-empting democratic debate. He is also worried about the lobbying power of the large software and entertainment companies when relevant laws are under discussion.

These are valid points. Technological decisions often have important legal and social implications, as do seemingly minor legal and regulatory changes. Most people glaze over when geeks debate which form of packet switching is best, or argue over the merits of placing the intelligence of a network at the centre or the edge. The possible effect of such decisions should, as Mr Lessig urges, be more carefully examined and widely discussed.


The best is yet to come
But Mr Lessig is being too pessimistic when he gives warning that future choices are being eliminated by code. There is so much innovation still in progress that nothing will be set in stone for decades yet. The internet and all the communication technologies related to it will be re-engineered over and over again. These technical changes may influence social choices but, except at the extremes, they will not determine them. Instead, the application of these new technologies will come to reflect the balances which society strikes between freedom and stability, accessibility and privacy, private ownership and public goods, democracy and authority, global and local control. Far from dictating such choices, future versions of the internet will make them more urgent and inescapable.

The dream of John Perry Barlow and others that cyberspace would be free of such choices, a community entirely liberated from the lumbering governments of the tangible world, always seemed eccentric. With the benefit of hindsight, it can now be seen as an escapist fantasy made plausible only by the confusion that followed the startlingly rapid growth of the internet in its early days. The truth is that we all live in the internet society now, whether or not we spend any time online. The future will bring exciting, disorienting change as electronic communication reaches ever deeper into everyone's life. The prizes will be great. A more productive and safer society is possible. But things could also go nastily wrong.

Audio interview

A discussion with David Manasian, Legal Affairs Editor, The Economist

“Software that can analyze huge chunks of data will become more powerful, the cost of storing is going to decline, the points at which interactions are recorded are going to multiply tremendously. What are we going to use all this data for? It's going to bring truly wonderful things, make society much more efficient, increase productivity, increase convenience in lots of ways. It's also going to create a lot of dilemmas related to privacy, the reach of government, how we govern ourselves, how we pursue our own private lives.”

Listen to the interview (12:42)

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Windows Media Player

Sources


The author is grateful to the many people who generously gave him their time and assistance. An enormous amount of material has been published about the internet and its future development. The following books and articles were helpful in preparing this survey:

“The Future of Ideas: the Fate of the Commons in a Connected World”, by Lawrence Lessig. Random House, 2001.

“Code and Other Laws of Cyberspace”, by Lawrence Lessig. Basic Books, 1999.

“The Enemies of the Internet: Attempts to Block the Circulation of Information on the Internet”, by Reporters sans Frontières and Transfert.net, 2001.

“The Internet Galaxy: Reflections on the Internet, Business and Society”, by Manuel Castells. Oxford University Press, 2001.

“Click on Democracy: The Internet’s Power to Change Political Apathy into Civic Action”, by Steve Davis, Larry Elin and Grant Reeher. Westview, 2002.

“Open Networks, Closed Regimes: The Impact of the Internet on Authoritarian Rule”, by Shanthi Kalathil and Taylor C. Boas. Carnegie Endowment for International Peace, 2003.

“Democratic Phoenix: Reinventing Political Activism”, by Pippa Norris. Cambridge University Press, 2002.

“The Populist Paradox: Interest Group Influence and the Promise of Direct Legislation”, by Elisabeth R. Gerber. Princeton University Press, 1999.

“Democracy Derailed: Initiative Campaigns and the Power of Money”, by David S. Broder. Harcourt, 2000.

“The New Challenge of Direct Democracy”, by Ian Budge. Polity Press, 1996.

“Digital Copyright: Protecting Intellectual Property on the Internet”, by Jessica Litman. Prometheus Books, 2001.

“Copy Fights: The Future of Intellectual Property in the Information Age”, edited by Adam Thierer and Clyde Wayne Crews Jr. Cato Institute, 2002.

“Copyrights and Copywrongs: The Rise of Intellectual Property and How it Threatens Creativity”, by Siva Vaidhyanathan. 2001.

“The X Internet”, by Carl D. Howe. Forrester Research, May 2001.

“Invisible Mobile Reignites Mobile Telecom”, by Lars Godell. Forrester Research, May 2002.

“The Politics of Bandwidth: International Political Implications of a Global Digital Information Network”, by Geoffey L. Herrera. Review of International Studies, Vol 28, No 1, January 2002.

“Referendums around the World: The Growing Use of Direct Democracy”, edited by David Butler and Austin Ranney. Macmillan, 1994.

“Privacy and Human Rights 2002: An International Survey of Privacy Laws and Developments”, by the Electronic Privacy Information Center and Privacy International, 2002.

“The Voice of the People: Public Opinion and Democracy”, by James S. Fishkin. Yale University Press, 1997.

“The Unwanted Gaze: The Destruction of Privacy in America”, by Jeffrey Rosen. Random House, 2000.

“Philosophical Dimensions of Privacy: An Anthology”, edited by Ferdinand David Schoeman. Cambridge University Press, 1984.

“The Transparent Society: Will Technology Force Us to Choose Between Privacy and Freedom?”, by David Brin. Addison-Wesley, 1998.

“The End of Privacy: Personal Rights in the Surveillance Society”, by Charles J. Sykes. St Martin’s Press, 1999.

“The Limits of Privacy”, by Amitai Etzioni. Basic Books, 1999.

“The Heavenly Jukebox”. by Charles C. Mann, The Atlantic Monthly, September 2000.

“The Death of Distance: How the communications revolution will change our lives”, by Frances Cairncross. Texere, 2001.
http://www.economist.com/displayStory.cfm?Story_id=1534303
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Samsung's audio player takes on iPod
Mark Farish, product manager, Samsung
January 27, 2003, 11:22 AM PT
2 minutes 43 seconds

CNET Radio's Brian Cooley talks with Samsung's Mark Farish about the Yepp 900, a new digital audio player that stores up to 2,000 CDs or 10GB of music.
http://news.com.com/1601-2-982240.html
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The Civil War Inside Sony


Sony Music wants to entertain you. Sony Electronics wants to equip you. The problem is that when it comes to digital media, their interests are diametrically opposed.

By Frank Rose

For Keiji Kimura, the problem is small enough to fit in his pocket and just heavy enough to weigh on his mind. Kimura is a senior VP at Sony headquarters in Tokyo, and the problem in question is Apple's iPod, the snappy little music player that's revolutionizing consumer electronics the way Sony's Walkman did some 20 years ago. By rights, Sony should own the portable player business. The company's first hit product, back in the '50s, was the transistor radio, the tinny-sounding invention that took rock and roll out of the house and away from the parents and allowed the whole Elvis thing to happen. A quarter-century later, the Walkman enabled the kids of the '70s to take their tapes and tune out the world. But the 21st-century Walkman doesn't bother with tapes or CDs or minidiscs; it stores hundreds of hours of music on its own hard drive. And it sports an Apple logo.

"It's a good product," Kimura says of the iPod. "It's exciting. I am positive the hard disk is a key device that will change our lifestyle."

A broad-shouldered man with a shock of thick black hair and a ready smile, Kimura is in charge of nearly every Sony device that's portable, from laptops and handhelds to Handycams and Walkmans. And he's right: When the average consumer has a hard disk not just in the PC but in the set-top box and in half a dozen other gizmos - all connected by wireless networks that zap their contents painlessly from one to another - life will be richer. In fact, this is the vision his boss, Sony president Kunitake Ando, laid out more than a year ago as the company's core strategy.

Ando wants nothing less than for Sony to reinvent itself. But that will never happen as long as the company is frozen by its fear of piracy. Sony's digital Walkman device is a good example. Where the iPod simply lets you sync its contents with the music collection on your personal computer, Walkman users are hamstrung by laborious "check-in/check-out" procedures designed to block illicit file-sharing. And a Walkman with a hard drive? Not likely, since Sony's copy-protection mechanisms don't allow music to be transferred from one hard drive to another - not an issue with the iPod. "We do not have any plans for such a product," says Kimura, the smile fading. "But we are studying it."

Really? No plans? When the world leader in consumer electronics takes a pass on the hottest portable music player out there, you have to wonder what gives. Sony became a global giant on the basis of innovative devices manufactured by the millions on nothing more than a hunch that people would buy them. Now Apple is delivering the innovation while Sony studies the matter.

What's changed since the original Walkman debuted is that Sony became the only conglomerate to be in both consumer electronics and entertainment. As a result, it's conflicted: Sony's electronics side needs to let customers move files around effortlessly, but its entertainment side wants to build in restraints, because it sees every customer as a potential thief. The company's internal divisions reflect those in the marketplace, where entertainment executives have declared war on consumers over file-sharing. But Sony's position is unique. It can settle the fight and flourish, or do nothing and be hobbled.

Instead, it's tried to play both sides. As a member of the Consumer Electronics Association, Sony joined the chorus of support for Napster against the legal onslaught from Sony and the other music giants seeking to shut it down. As a member of the RIAA, Sony railed against companies like Sony that manufacture CD burners. And it isn't just through trade associations that Sony is acting out its schizophrenia. Sony shipped a Celine Dion CD with a copy-protection mechanism that kept it from being played on Sony PCs. Sony even joined the music industry's suit against Launch Media, an Internet radio service that was part-owned by - you guessed it - Sony. Two other labels have since resolved their differences with Launch, but Sony Music continues the fight, even though Sony Electronics has been one of Launch's biggest advertisers and Launch is now part of Yahoo!, with which Sony has formed a major online partnership. It's as if hardware and entertainment have lashed two legs together and set off on a three-legged race, stumbling headlong into the future.

This is not how it's supposed to work.

Outside Sony's surprisingly modest Tokyo headquarters, traffic is backed up as usual on the gently curving street people call Sony Avenue. Here, in the tree-shaded neighborhood of Gotenyama Heights, the company's home since 1947, its presence looms so large the whole area is known as Sony Village. Gracious houses with blue-tile roofs are folded into the hills alongside humble storefronts and Sony's utilitarian white tile-and-stucco office buildings. This is an outfit with 168,000 employees and annual sales of $57 billion. As president, Kunitake Ando hopes to transform Sony into a company that doesn't just sell entertainment as well as hardware but delivers it in digital form to products that are part of in-home networks. "If we can combine the strength of hardware and the strength of entertainment, we could build a unique business model," Ando says excitedly, his wide grin and even wider glasses making him seem more like an overeager kid than the second in command to CEO Nobuyuki Idei. It's a bold strategy built on a big if.

As an electronics company, Sony makes some of the coolest gadgets on the planet, even without an iPod. In its last fiscal year, it sold a staggering 56 million of them: 19 million Walkmans, 6 million stereos, 10 million television sets, 5 million video players, 4 million PCs, 4 million computer screens, 5 million camcorders, 3 million digital cameras - some $36 billion worth in all. Year after year, it beats out the likes of Ford and Coca-Cola to top the Harris Poll of brands Americans consider the best. "Wow-type products - that's Sony," Ando exclaims, waving his arms as he sits perched on the edge of his chair in a mammoth conference room. "I call it the power of hardware."

The problem of hardware is more like it, because for all this, Sony lost money on the stuff. Japan's consumer electronics giants are being squeezed by upstarts in China, Taiwan, and Korea, where manufacturing costs are far cheaper. Without entertainment, which provided 30 percent of the company's revenue and nearly all its profits, Sony would be as bad off as Matsushita, NEC, and Toshiba, its traditional Japanese rivals. "The big dinosaurs are struggling to survive," Ando admits. "And Sony is one of them, of course."

On the entertainment side, Sony is one of seven global media conglomerates that dominate the industry. The weakest link is its New York-based music arm, where sales are dropping despite hits from Jennifer Lopez, Shakira, Bruce Springsteen, and the Dixie Chicks. (A separate Japanese label is doing slightly better.) Sony Pictures is Hollywood's hottest studio, producing blockbusters like Spider-Man and Men in Black II along with some of America's top soap operas, popular sitcoms in Germany, and hit movies in China. And Sony's PlayStation unit, located in Tokyo, is the undisputed king of videogames, leading the industry in sales of game consoles and software despite a determined onslaught from Microsoft.

The theory behind Ando's "ubiquitous value network," as his strategy has awkwardly been dubbed, is that the whole company will get a lift by enabling content to move freely through its hardware. Gadgets increase in value to consumers as they're linked to other gadgets; digital delivery of entertainment creates the tantalizing possibility of luring those same consumers into a direct sales relationship. But the different entertainment units have a hard time talking with one another, much less with the sprawling electronics operations in Tokyo, San Diego, New Jersey, and Berlin. "Sony is not one company, it's about 50 companies, and there's nothing other than the CEO's office to bring them together," says Frank Sanda, CEO of Japan Communications, which provides mobile phone services to Japanese corporations. "I'm a student of Sony - I like and admire it. But it's a bunch of vertical poles that don't even hit one another in the breeze because they're too far apart."

Ando knows that things are awry. "Our intent is to provide rich content and services to users without any frustration, without any stress," he says. "Initially, because of our content group, we tried to protect the rights of labels and artists too much, so this made it very difficult for consumers to use the machine. Now we know that for the industry to grow, we have to find an optimum balance point. We have to consider ease of use for consumers but at the same time protect content holders' rights. We think it's almost an advantage for Sony that we have both - we can understand the content side and we have hardware, so we can start thinking about this way ahead."

But the entertainment and electronics industries were at odds long before Sony tried to marry the two. Sony and the Dutch electronics firm Philips pioneered digital music two decades ago with the development of the CD, only to have music-industry execs attack it as an incitement to piracy and a threat to vinyl. Meanwhile, Universal and Disney were suing Sony over its new Betamax videocassette recorder, which they claimed promoted illegal copying as well. The overheated rhetoric was a dress rehearsal for today's music piracy debate: The president of Universal called Sony's top US executive a highwayman on national television, while Jack Valenti, Hollywood's lobbyist in Washington, compared the VCR to the Boston strangler.

In the end, of course, these technologies created a bonanza for show business. CDs triggered years of double-digit sales increases as people rushed out to replace their records; home video now accounts for 40 percent of Hollywood's worldwide film revenue, more than double its box office take. But while Sony scored big with its CD players, it lost out on the VCR when Betamax was eclipsed by VHS. So in the late '80s, with the minidisc in development and cofounder Akio Morita convinced that Betamax would have won if he'd controlled a film library, the company spent billions to buy CBS Records and Columbia Pictures.

Later, when profligacy and mismanagement resulted in a $3 billion write-off, Sony's enthusiasm for the American media business faded: Reached on the golf course in January 2000 with the shocking news that AOL and Time Warner would merge, Idei told Sony's North American chief it was "a regional problem." As things turned out, it was.

Now, with the AOL Time Warner deal an acknowledged fiasco, Sony is on the front lines of digital convergence. The job of making a business out of entertainment and hardware combined falls to Sony's chief strategist, Yuki Nozoe. Having spent several years at the company's Hollywood studio, Nozoe is one of the few in the inner circle who know both sides of the business. Sony has more than 100 online offerings up or in development in various spots on the globe - sites for videogames, video-on-demand, soap operas, even insurance. (Sony is one of Japan's biggest insurers.) Most are designed for broadband, which means they might just about be ready by the time the world switches over from dialup.

What works now is music, so chief among the prototypes for Sony's vision of the future are sites like bitmusic in Japan and pressplay, a joint venture with Universal Music in the US. But pressplay has delivered a hapless performance to date. Subscribers face a complicated set of limits on what they can do with the music they buy, and until recently they weren't able to get anything at all from Warner, EMI, or BMG, which have a competing joint venture called MusicNet with even tougher restrictions.

So pressplay subscribers haven't even topped the 50,000 mark, while Kazaa, the leading file-sharing service, has 60 million users.

Nozoe appears unfazed. He considers everything an experiment, and he isn't counting on any one service to succeed on its own. Sitting in his nondescript office overlooking the flat, harborside district of Shinagawa, where gleaming new Sony towers rise above rail yards and worker quarters, he points to a small vase of flowers on the windowsill and says, "A single service may not attract many customers. But when it becomes a bouquet..."

Moments later, a woman's voice emerges from his office walls. It's 3 pm, break time at Sony factories throughout Japan, and the voice implores us to stand up, stretch, relax. It's been saying this for decades, ever since Akio Morita decreed it. Set to ethereal Japanese music, the message exudes an eerie calm, but it's a ghost from the industrial past, a reminder of how far Sony still has to go.

Idei has been focused on making Sony able to compete in an age of digitally networked products almost from the moment he was named president in 1995. "He had a vision that AV and IT would merge someday," says Ando, who was a Sony insurance executive before Idei put him in charge of a project to break into the personal computer market. "We knew that everything must be connected." The product that resulted, an entertainment-oriented PC that was named Vaio, for video-audio integrated operation, was a big success in Japan, and eventually it made inroads in the US. After Idei was named CEO in 1999, he made Ando president and put veterans of the Vaio team, like Keiji Kimura, in charge of key divisions. The message was clear: IT rules.

Now Sony offers PCs with a variety of standard networking options - USB, Bluetooth, 802.11b (known in the US as Wi-Fi) and its heftier cousin 802.11a, which has the bandwidth to handle high-quality video - as well as portable gadgets, like Handycams and the NetMD Walkman, that connect to them. Yet many products don't link well. Take the NetMD Walkman: Not only does it rely on a painfully slow USB 1.0 connection to transfer music to and from a PC, but it's bound by the rules set by Sony's copy-protection software, OpenMG. Introduced in 1999, OpenMG is responsible for the cumbersome check-in/check-out process and for other, even more annoying restrictions, like no copying of MP3 files without a time-consuming conversion to Sony's proprietary Atrac3 format.

Other products don't connect at all, among them Sony's new high-end car audio system, which combines a standard CD player with an in-dash hard drive. A hit in Japan and just introduced in the US, it lets you rip CDs to your car stereo and leave the originals at home - a big deal to anybody who's ever tried to dig under the seat for a lost disc while driving. Strangely, though, you can't connect it to a Walkman or to anything else. Kimura, the man in charge of these gadgets, certainly sees Wi-Fi in Sony's car-audio future: He's excited about the idea that you could go online when you pull into a gas-station hot spot, or download a customized mix of songs from your PC before you leave the garage. But since OpenMG doesn't yet permit file transfers from one hard drive to another, that's out for now. "We have many things to resolve," Kimura acknowledges. "Protection is one side of it - of course we have to protect our copyrights. But the challenge is how to excite the user."

Twelve time zones from Tokyo, at Sony Music headquarters in the upper reaches of a postmodern skyscraper in midtown Manhattan, you'd need a nanometer to detect much urgency about developing online services that give fans what they want. "There is a desire for the industry to live in a world of digital delivery as well as packaged goods," maintains Fred Ehrlich, the label's head of new technology. "But you have a lot of forces that need to be aligned." By "a lot of forces," Ehrlich means everything: How much can the labels charge? Should they charge by the month or by the song? Should they offer streams or burns or downloads? How long should a download last? How many devices should you be able to play it on? And so on, until you've reinvented the entire business.

Within the music industry, Sony is regarded as the technology leader, the one the other labels look to on issues like peer-to-peer distribution - if anyone can figure out how to adapt Napster-like technology for authorized downloads, the thinking goes, it's Sony. And Ehrlich, a nonpracticing attorney whose job is to evaluate the business potential of things like P2P, is considered one of the more forward-thinking people within Sony Music. "Tommy Mottola doesn't understand any of this stuff," says an insider, referring to the label's CEO. "He wants it all to go away. Fred sees where it's headed." But Sony also has a reputation as the most aggressive label legally, as exemplified by the massive breach-of-contract suit it filed last year against the Dixie Chicks when they claimed accounting irregularities. (The dispute was settled out of court after the group countersued, alleging "systematic thievery" by the label.) Put these two impulses together and you have a company that understands the future just well enough to go after every nickel it can get.

The key issue is online services - who'll own them, what they'll offer, and how much they'll cost. The Big Five labels staked their claims early on but divided into two rival camps; only now are all five agreeing to offer their output through both. Major acts like Radiohead have flatly refused to make their music available online, though file-swapping sites are of course beyond their control. And independent providers like Listen.com have trouble getting releases while they're hot: Months after the latest Springsteen album was on pressplay, for example, Listen still hadn't gotten clearance to offer it. The site's founder, Rob Reid, downplays the idea that the delay could be deliberate. But the Justice Department has been investigating both pressplay and MusicNet, and the judge who shut down Napster agreed to look into charges of collusion, declaring that the two ventures "look bad, sound bad, and smell bad."

Users of online services are offered only "tethered" downloads, which come with limitations on how files can be copied or burned to a CD, or transferred to a portable player. It's as if Macy's used anti-shoplifting tags to set limits on how many times your pants could be put in a suitcase or where you could go in them. "The idea of crippling legal music services is so completely misplaced I have a hard time getting inside the logic of it," Reid says. Some day, Ehrlich concedes, online music will offer the same flexibility you get with a CD - you'll be able to keep it forever and play it anywhere.

"I just don't think it's right now," he adds.

Comments like this explain why industry execs are considered emotionally incapable of facing the future. But there are other obstacles, and pricing is one of the biggest. When the labels offer downloads or burns, they effectively set the price at $1 per song - about the cost on a CD. User surveys show that something like 50 cents would be more realistic. But the labels don't want to undercut the retail chains that sell CDs, even if that's what it takes for Web-based services to thrive. "In theory, Sony Music would like all these services to become successful," Erlich says. "But we look at the business based on the past, while the services compete against the online world, where music has been free. It's a dance for both parties to understand each other."

Yet another hot-button issue is Internet radio, which is supposed to be just like broadcast radio except you get it online. If only it were that simple. Radio stations can play any song they want, while interactive services like pressplay have to get clearance for the songs they offer. Hence Sony's suit against Yahoo! Launch, which it argues is not a radio station but an interactive service, because it lets listeners specify which artists and genres they want to hear. Then there's the question of whether online stations should have to pay royalties when US broadcast stations do not. With broadcast radio controlled by two conglomerates that keep extremely limited playlists coast to coast while sucking up hundreds of millions each year in promo fees, you'd think the labels would embrace Internet radio as a cheap way to break new talent. But they want to collect royalties, even if it means sending Net stations under.

"If you're looking for logic in this situation - hey, it's the music business," says Launch founder Dave Goldberg. "There's not a lot of logic in what they do." But to Ehrlich, the logic is in not letting another company play music gratis when it could be paying. Precedents matter: If broadcast radio hadn't been exempted from royalty payments decades ago, for reasons hardly anyone can remember, the music industry could be collecting an extra $2 billion or so a year. "It's hard to change the old world," Ehrlich declares.

"But that doesn't mean you can't change the new world."

Ando expects 2003 to be a pivotal year in Sony's transformation into a combined electronics and entertainment powerhouse. At this winter's Consumer Electronics Show, he's demonstrating some of the products he hopes will make it so. There's CoCoon, a personal audio-video recorder that has a hard drive and can be programmed from a mobile phone. There's RoomLink, a networking hub that lets you stream video from a Vaio to a Sony Wega TV (both are already available in Japan). More important, perhaps, Sony is developing a new version of OpenMG that's supposed to make it easier to transfer files from one device to another.

The new OpenMG is one of the fruits of a program Ando and Idei started more than a year ago to get everybody at Sony working in harmony. Known internally as Symphony, the effort began with a content and technology committee that meets a few times a year - October in New York, May in Tokyo; Nozoe and Ehrlich and a couple dozen other top execs, Japanese and American, together in a room trying to hash out the company's issues. "With the arrival of digital everything, you can't get away from each other," says Howard Stringer, CEO of Sony Corp. of America, which includes the music label and film studio. "We all have to invent the business plan for the future. And even though we have sides of Sony that will disagree, finding a consensus is Sony's style."

The grunt work on the copy-protection issue is done by a subcommittee that includes Takayuki Sasaki, who heads the division in charge of OpenMG. Sasaki reports to Nozoe, who's told Sony hardware execs they can't make their decisions in a vacuum. At a meeting last May, "the content guys beat the hell out of Sasaki" because they wanted additional capabilities built into the software, says one executive. What they covet is flexibility - the ability to set the rules any way they like. "You want to be able to control the distribution of music," Ehrlich explains. "If you want to say it can go to two devices, you can do that. If you want it to time out after 30 days, you can do that."

At this point, one might reasonably conclude that Sony doesn't need a symphony, it needs some headbanging.

With OpenMG X, the version being developed, Sony will no longer set blanket rules for its own devices; it's created a digital rights management system that works on any manufacturer's hardware and allows the content owner to set the rules. Sony wants OpenMG X to be accepted across the entertainment industry - an ambition that puts it face-to-face with Microsoft. "The whole security/digital rights management/copyright arena is a critical battlefield," Stringer declares. "We're racing - racing - to get to a solution that has an open standard so that Microsoft doesn't waltz in and develop the audio-video operating system."

A digital rights management system isn't just a traffic cop; it's a powerful tool that gathers all kinds of information about consumers, from credit card numbers to listening habits, and dictates which devices can talk to the PC and how. Microsoft's DRM software, a key feature of its Windows Media platform, promises total flexibility for entertainment companies, and it's designed to work not just on PCs but with consumer gadgets like Sony's. "If it is the de facto standard for all digital rights management," says Stringer, "then at some point it migrates into all the networked devices, including the television set and everything else. Sony's nightmare is that the TV set becomes a monitor."

This puts Sony in a bind. Except for the Xbox, Microsoft doesn't really sell hardware. All it has to do is keep entertainment executives happy and watch them adopt its DRM platform. If Sony fails to offer every bondage option the entertainment folks can imagine for their customers, it opens the door for Microsoft to take control of its hardware. But if Sony's devices don't break out of the DRM straitjacket, it could be overtaken by manufacturers with less to lose - like Apple. To save its electronics business and make its dream of digital services a reality, Sony needs a system that doesn't punish consumers yet somehow satisfies the entertainment industry. It needs to square the circle on digital rights.

Sony thinks OpenMG X is a step in that direction. But there's no indication that other entertainment companies would rather have Sony control DRM than Microsoft - which is why Sony recently partnered with Philips to buy InterTrust, a struggling Silicon Valley outfit that holds key DRM patents. Years ago, Sony and Philips jointly developed the CD and licensed it so widely that it became an industry standard. Now they hope to do something similar with DRM technology, so that all such systems, Sony's included, can work interchangeably. A bonus twist is that InterTrust is suing Microsoft in its own intellectual property dispute. InterTrust maintains - and Redmond vigorously denies - that Microsoft illegally appropriated its DRM algorithms for the Windows Media platform. Should InterTrust win the suit, Sony and Philips could bring Microsoft into the fold as well. But Sony won't win with consumers until its two halves, electronics and entertainment, join forces to offer online services with all the freedom consumers already enjoy offline.

The stakes are huge - and yet if Sony pulls it off, the company will be unrecognizable in a few years. The networked devices and services being developed now are just an interim step. "Nobody can create a clear picture of what is a winning business model for 2010," says Idei. "The reality is transformation and constant change. We are on the sea of uncertainty, but sometimes there are small islands, and we have to navigate our company to the nearest. There are many, many Internet business trials at Sony, because we don't know if we can find a small island we want to go to, and this is the way."

Idei's ultimate goal is more distant and more radical: the dematerialization of Sony and its products. Instead of boxes stuffed with electronics, Sony will sell screens. Instead of CDs, Sony will sell sound. Ken Kutaragi, the creator of Sony's PlayStation, has made a deal with IBM and Toshiba to develop a "supercomputer on a chip" that can power network servers, pumping games with stunning 3-D graphics to Sony devices no bigger than a wristwatch. This is the future Idei envisions: invisible, interactive networks that bring sound and light to almost any nearby surface. Sony networks, Sony sound and light, Sony surfaces. If only it didn't depend on a bunch of music men who've yet to wean themselves from shiny plastic discs.
culater

Controlling Digital Rights And Wrongs With DRM Technology -The Cornerstone Of The Mobile Content Industry
Jan 27 2003

Mobile DRM solutions could be the spark needed to ignite a greater enthusiasm in the wireless content market and demand for services. As fixed and wireless DRM markets develop and mature, DRM solutions will ultimately be at the core of all digital content and multimedia services, enabling a seamless convergence of access across all networks and devices.
DRM solutions seek to provide robust protection of digital content by empowering owners of premium text, images, audio and video content by enabling persistent control and management of their digital content.

According to Frost & Sullivan, the international market consultancy, key wireless players across the value chain will play a central role in implementing DRM solutions and driving the market forward. The introduction of open industry-wide standards will foster interoperability and competition in the process.

Mobile network operators, solutions providers, content owners and entertainment companies, and equipment vendors are all in pole position to monetise content and to lay the foundation for revenue-generating multimedia content and services that will drive up subscriber Average Revenue per User (ARPU).

DRM should be transparent to consumers, facilitating instead of impeding their ability to access content and data services. Companies active in this space will need to strike a balance between content security and a simple, seamless experience for the end-user.

"As a key enabler for the secure transfer of wireless content services, Mobile DRM will facilitate new business models that we believe can generate significant new revenue opportunities, increase subscriber ARPU and popularity of multimedia content services," underlines Allison Webb, Industry Analyst at Frost & Sullivan.

Superdistribution is the ultimate goal and is a highly attractive proposition due to its ability to unleash the potential of mobile commerce. Superdistribution protects premium content from unauthorised usage while enabling viral distribution among users, which results in more transactions, translating into more revenue generation from content downloads and from network traffic.

The attention that high profile cases like Napster have received in the media, and the upsurge of imitator as well as legal digital music sites, gives an indication of the economic importance of copyright infringement and illegal content distribution. Content and Intellectual Property (IP) protection provides a major impetus for growth in the DRM solutions market.

Although the vast majority of SMS traffic is person to person (P2P), Europe's love affair with SMS shows consumers' inclination to use their mobile phones for more than just voice-based communication and their desire to share experiences.

Faster 2.5G and 3G networks, multimedia handsets with colour screens and enhanced features, coupled with a greater variety of personalised and interactive multimedia services, will drive the wireless DRM market forward. With all of these drivers in place, the wireless data market should be poised to grow data ARPU.

Ms Webb adds: "Wireless has the advantage of subscribers being conditioned to pay for voice and data services, and not being accustomed to access free content. This is a fundamental difference between fixed and wireless content services. Free content on the internet and the proliferation of illegal file sharing services like Napster have been a restraint for DRM in the fixed internet domain. Because the wireless content market is still in the growth stage, it is a good time for these issues to be addressed and mobile DRM solutions put in place."

Large content owners and entertainment companies are looking at wireless as a new content distribution channel, but thus far are taking a wait-and-see approach. Hence, the market tends to be dominated by small independent players that are testing the market.

A lack of published standards for digital rights management (DRM) is restraining large brands and media companies from making their content available for fear of piracy and loss of revenues from illegal file sharing and distribution.

Frost & Sullivan concludes that widespread internet and wireless penetration, interoperable devices, seamless global roaming, store, forward and copy capabilities in networks and terminals are all contributing factors to the present and future relevance of mobile DRM and content protection.
culater

New Lobbying Group Takes on Digital Fight
Thursday January 23, 9:57 pm ET
New Lobbying Group Bolsters Tech Fight Against Hollywood in Battle Over Access to Digital Music


SAN JOSE, Calif. (AP) -- Technology companies and advocacy groups announced a new lobbying organization Thursday to counter Hollywood in the battle over access to digital music, movies and books.
Founding members of the Washington-based Alliance for Digital Progress -- which one Hollywood executive demeaned as "a bit strange" -- include Microsoft Corp., Dell Computer Corp., Motorola Inc. and the Information Technology Association of America.

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The group wants to fight Hollywood efforts to require anti-copying technology in digital entertainment devices. Technology advocates say embedding such technology in computers and software would crimp product innovation -- and trample consumers' rights.

"Hollywood leaders ... would have organized the monks to burn down Gutenberg's printing press, if they were alive during that period of rapid change and innovation," ITAA President Harris N. Miller said. "Legislators have heard Hollywood's pleas to stifle innovation, but more education will help them make informed decisions. We look forward to working with ADP to make sure all sides are heard when it comes to digital rights management."

But Hollywood executives say too many consumers are duplicating creative works illegally, and they blame Silicon Valley companies for creating products that make it easy to copy and distribute creative works on the Internet.

Entertainment executives say the 1998 Digital Millennium Copyright Act, which did not require technology firms to embed copyright protections in their equipment, fails to protect the intellectual property of artists and entertainment companies. They also fear emerging technologies such as "media center" computers that link televisions, stereos and DVD players through high-speed Internet connections.

"Consumers will be the beneficiaries of a digitally honest world," Jack Valenti, president and CEO of the Motion Picture Association of America, said in a statement about the new lobbying organization. "We are not the enemy. We are not at war with the IT community. ... I am shaking my head in wonderment at this million-dollar campaign to deride us."
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ot-Fonix(R) Speech Solution Ships in Microsoft Xbox Development Kit (XDK)
Thursday January 23, 9:43 pm ET
Microsoft Reports a February Ship Date for Game Developers


SALT LAKE CITY, Jan. 23 /PRNewswire-FirstCall/ -- Fonix Corporation (OTC Bulletin Board: FONX - News), a leading provider of speech interface solutions, announced today that Microsoft has reported the availability of the Fonix speech interface solution to be included in the Xbox development kit (XDK) for game developers.
Early this week, in a separate announcement, Microsoft reported, "The Microsoft February Xbox Development Kit (XDK) will be shipping with Fonix Speech Recognition Technology. Game developers for the Microsoft Xbox will now be able to easily add Fonix speaker-independent speech recognition to games. Fonix speaker-independent speech recognition allows the game developer to author multiple vocabulary sets and to select between various active vocabularies. These vocabularies are then used as voice activated commands during game play." ( http://www.fonix.com /).

"We are delighted with the release of the new XDK and the ability to showcase the Fonix speech interface in Xbox games," said D. Lynn Shepherd, vice president of product development at Fonix. "We see our speech interface dramatically changing the way games are played. Combining the Fonix speech interface with the Microsoft Xbox platform will greatly enhance and simplify the creation of the next generation of user interaction within games."

About Fonix Corporation

Fonix Corporation (OTC Bulletin Board: FONX - News) is a leading provider of natural-user interface technology solutions for wireless and mobile devices, Internet and telephony systems, and vehicle telematics. Leading chip manufacturers, independent software and hardware vendors, and Internet content and service provider's incorporate Fonix technology to provide their customers with an easier and more convenient user experience.
culater

ot-Digital dilemmas

Jan 23rd 2003
From The Economist print edition

Despite the dotcom boom and bust, the computer and telecommunications revolution has barely begun. Over the next few decades, the internet and related technologies really will profoundly transform society, argues David Manasian

“GOVERNMENTS of the industrial world, you weary giants of flesh and steel, I come from cyberspace, the new home of mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.”

Ah, it all seems so long ago. In 1996 John Perry Barlow, a former cattle rancher, lyricist for a rock band, the Grateful Dead, and commentator on technology, posted these words in an online discussion group. His “Declaration of the Independence of Cyberspace” was an 800-word credo which claimed that users of the internet inhabited a new world of creativity, equality and justice which would forever remain beyond the reach of existing governments. “We will create a civilisation of the mind in cyberspace. May it be more humane and fair than the world your governments have made before,” he concluded with a flourish.

It is hard to believe today, but Mr Barlow's musings struck a chord at the time, spreading rapidly through the internet. The declaration encapsulated the exhilaration and wonder of millions of people as they logged on to the world wide web for the first time. It really did seem possible that the internet had launched a spontaneous revolution that might lead to a brave new borderless world.

Seven years later, Mr Barlow's claims sound absurd: just another example of the 1990s hype that produced the dotcom boom and bust. The internet, it seems, has turned out to be simply another appliance, a useful new medium like radio or television, not something likely to usher in a “civilisation of the mind”. Cyber gurus like Mr Barlow have also lost heart, and now issue equally exaggerated warnings about the internet's strangulation by government and corporate interests. With the help of governments, big entertainment companies are trying to “control everything that we know”, Mr Barlow says. “The fight about this will, in my view, determine the future of humanity.” Lawrence Lessig, a Stanford professor who is also a leading commentator on the internet, is almost equally apocalyptic: “The existing dinosaurs are succeeding in stifling the creativity inherent in this new medium.”

The taste for hyperbole of Mr Barlow, Mr Lessig and their sort may be easy to mock, but they are right in their fundamental claim: the internet and its related technologies are capable of transforming society. Far from being over, the computer and telecoms revolution that created the internet has barely begun. These technologies will change almost every aspect of our lives—private, social, cultural, economic and political. In some areas, the changes may be marginal, but in most they will be profound, and unprecedented.



For good or ill
This is because new electronic technologies deal with the very essence of human society: communication between people. Earlier technologies, from printing to the telegraph, have done likewise, and have wrought big changes over time. But the social changes over the coming decades are likely to be much more extensive, and to happen much faster, than any in the past, because the technologies driving them are continuing to develop at a breakneck pace. More importantly, they look as if together they will be as pervasive and ubiquitous as electricity. Whether this will be for good or ill is impossible to predict, because how they are applied will be a matter of social and political choice. Many of these choices will be difficult and divisive.

Billions of dollars have been lost betting on the idea that the internet would quickly change everything from retailing to entertainment. Internet usage has continued to grow, but most dotcoms have failed, and the telecommunications industry, which raced to build the infrastructure for cyberspace, is staggering under $1 trillion of debt. Yet it would be wrong to conclude that this is the end of the internet revolution. Boom and bust often follow the introduction of radically new technologies. In the 1870s America's railroad industry boomed in much the same way as the world's telecoms industry in the late 1990s, only to collapse in a similar heap of bankruptcies, accounting scandals, stockmarket losses and enormous debts. America's economy fell into recession.

A few years later, a reviving economy together with advances in railway engineering triggered a new wave of investment. Railroads quickly revived, changing American business forever. The same sort of thing happened when the internal combustion engine came along. In the first few years of the 20th century there were thousands of people tinkering with carmaking, most of whom went bust. A decade later only a handful survived, but the car was about to become the icon of progress.



The reason to think that the internet revolution will not only resume but accelerate is that advances in its underlying technologies show no signs of slowing down


The reason to think that the internet revolution will not only resume but accelerate is that advances in its underlying technologies show no signs of slowing down. The power of computer chips continues to race ahead. Moore's law—according to which the power of a computer chip will double about every 18 months (see chart 1)—has proved to be true since 1965, when it was first propounded by Gordon Moore, a co-founder of Intel, a chip maker. Intel is confident that it will be able to maintain this pace of improvement in silicon for another 15 years. Recent breakthroughs by researchers at IBM and Hewlett Packard in molecular electronics lead many experts to believe that Moore's law will continue to apply for perhaps another 50 years. Similarly dramatic advances in storage and transmission technologies are also in prospect.






Meanwhile, existing or impending technology is being applied ever more widely. Victor Zue, director of MIT's Laboratory for Computer Science, expects high-speed access to the internet to be virtually free in rich countries within five years. His laboratory's Project Oxygen is building an office on MIT's campus in Cambridge, Massachusetts, that will be wired to demonstrate the kind of “pervasive, human-centred computing”, driven by voice and involving a range of devices, that he believes will become possible in the near future. Many of its components are already being tested at MIT's laboratory and by its corporate partners.

On another front, Mr Zue's colleague, Tim Berners-Lee, famous as a founder of the world wide web, is trying to win agreement from a coalition of companies to establish the standards for what he calls the “semantic web”, a more intelligent version of today's internet that will take the drudgery out of searching for information by evaluating its context.

Even the sense of physical touch might some day become possible in cyberspace. Late last year, scientists at University College in London and MIT in Boston demonstrated a system that allows users at each end of a high-speed connection to manipulate objects, either alone or together. Microsoft researchers are now working on ways for consumers to store and catalogue every photograph, e-mail, document or telephone conversation they have had during their entire lifetime (though it is not clear why anyone not writing an autobiography would want to do this).



There's a chip in my shoulder
On a more mundane level, third-generation mobile telephones, despite all the delays and the billions squandered on 3G licences by telecoms firms, are still expected to offer consumers high-speed, always-on mobile internet access, complete with video, in the next few years. Rapidly proliferating “wi-fi” networks already offer wireless access on a local basis. Tiny tracking chips called radio-frequency identification devices are being used as pet passports. Soon they will be small, powerful and cheap enough to be implanted into everything from humans to milk cartons, recording and transmitting real-time medical data or serving as a form of inventory control. Sensors of every kind, including video cameras, should also become much smaller and cheaper. Forrester Research, a technology consultancy, predicts that 14 billion such devices will be connected to the internet by 2010.






How rapidly such new technology is introduced will depend on a number of factors—the state of the economy, the supply of investment capital and the appetite of consumers for new products or services. Fortunes will be made and lost many times over. But whatever happens, the power of computing and communications looks set to continue to grow, and its price to fall, at a steady rate for the next few decades. That will make it possible, at least in rich countries, to record most human interactions, wherever and whenever they take place, and to store and analyse this ocean of data at low cost.

For the sake of argument, this survey will assume that we are heading towards a networked society of ubiquitous, mobile communications capable of constant monitoring. Whether this arrives in 20, 30 or 40 years does not really matter. The point is that the destination seems not merely possible, but probable, so it is not too soon to ask: what do we want this technology to do?

The internet has already thrown up a host of legal and political conundrums, but these are only a small foretaste of the dilemmas—about privacy, security, intellectual property and the nature of government itself—that will have to be faced over the coming decades. The debate has already begun. This survey will outline some of main issues, and speculate on the way they are likely to go
http://www.economist.com/surveys/displaystory.cfm?story_id=1534303
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ot-Logical combination?
Richard A Quinnell, Contributing Editor -- 1/23/2003
CommVerge


As convergence continues to drive communications and multimedia functions into more and more devices, product-development teams face a daunting challenge. They must build in ample capacity for both general-purpose processing and specialized signal processing while also adhering to cost, size, and power commandments.

Meeting this tall order has often meant including both a data-oriented RISC processor and a specialized DSP (digital signal processor). But in recent times, RISC processors have become fast enough—and thus powerful enough—that they appear to threaten purebred DSPs. Meanwhile, chip vendors are cooking up recipes that blend RISC and DSP elements in various proportions.

Are such concoctions palatable? Or is this a case of never the twain should meet? When it comes to combining RISC and DSP, today's product team enjoys more options than ever before. That's great news, but it also translates into more gut-wrenching decisions.

This air of competition arose as RISC processors began pushing their clock speeds toward 1 GHz. At the same time, interest in signal-processing functions, such as digital audio and modems, increased. The mainstreaming of these signal-processing applications, along with the growing surplus of conventional processing power, turned RISC and DSP into competitors for the same sockets.



“The majority, if not all, applications need...a combination of abilities: decision-making, a robust user interface, and real-time performance for multimedia, communications, and the like.”
—Andrew Soukup, Texas Instruments

The trend has accelerated in the last few years, as DSP functions became increasingly commonplace in embedded systems. "The embedded world is moving from data processing to signal processing," says Stefan Steyerl, strategic marketing manager at Analog Devices. "Data processing dominated the last decade, but growing interest in different media, networking, and wireless is driving it toward signal processing." Victor Berrios, strategic marketing manager for Motorola's DSP operation, agrees. "Applications that have traditionally been handled by 8- and 16-bit microcontrollers are needing extra performance and some analog processing as requirements increase," he says.

Why can't one type of processor handle everything? In theory at least, it can. The early descriptions of digital computers by mathematician Alan Turing indicate that any such "Turing machine" can be programmed to behave like any other. With a fast enough clock, then, a RISC device can do everything a DSP can do, and vice versa.

"In the limit that's a true statement," says Joe Circello, Motorola's chief architect for its Coldfire processor. "But practical applications have a tremendous sensitivity to cost and power. You wouldn't use a 2-GHz processor that costs several hundred dollars to handle an application being served by DSPs that cost $10. The best solution will depend on the application environment."

Evolutionary paths
The two processor architectures certainly evolved for different application environments. RISC processors support bit-and byte-wide operations, necessary for designs in which interpretation of binary data varies from word to word. Control functions, where individual bits represent signals from sensors and to switches, need such flexibility of interpretation. So do networking functions, where each byte in a stream of data has a different use. This flexibility of data interpretation also makes RISC systems well suited to running operating systems and user interfaces, where one word may represent a character of text while the next is the color palette of an image pixel. Flexibility sacrifices efficiency, however, making the RISC processor a jack-of-all-trades but master of none.

DSPs, on the other hand, are built specifically for efficient computation, with binary data usually representing numerical values having a consistent interpretation. Because the data is all in the same format, DSP architectures can maximize their speed of operation, adding hardware accelerators where the data's interpretation is fixed in the logic. This consistency of data format allows great numerical processing throughput, but makes the DSP poor at handling information in other formats, such as control signals.

When these architectures were first developed, they targeted entirely different applications. But convergence is changing that. "The majority, if not all, applications need some of both," says Andrew Soukup, program manager for the OMAP product line at Texas Instruments. "They need a combination of abilities: decision-making, a robust user interface, and real-time performance for multimedia, communications, and the like. Every semiconductor manufacturer looking at these applications is looking for a combination of abilities, and they have come up with a variety of solutions."

Double trouble
The most intuitive solution is to use two processors: one RISC CPU and one DSP. But this approach has several drawbacks. One is simply the extra cost of a second processor and its memory in terms of component expense, board space, and power.

A second, and more subtle, drawback is the cost of software development. "Where the dual processor design comes up short is in the development environment," says Brett Black, DSP marketing manager at Motorola. Two processor architectures means two different tool chains and parallel software-development efforts that are difficult to blend. "A common tool chain would make software development easier," Black says. "Instead, you end up with separate compilers that historically have been hard to integrate."

To address these issues, semiconductor manufacturers have made numerous attempts to combine the two architectures. These generally break into three categories: a DSP-enhanced RISC CPU, a control-enhanced DSP, and a new, blended architecture. Each has found its own application niche.



“There are designs where a CPU has been stretched to do DSP, and at the low end that’s enough. It’s if you try to do too much that you run into problems, mostly with power consumption.”
—Victor Berman, Improv Systems


Vendors starting with a RISC architecture typically begin by adding MAC (multiply and accumulate) hardware to their design, because that is a major function essential to all DSP algorithms. Often, that's as far as they go. "If you take a general-purpose processor and add a MAC, you've covered most of what you need," says Tom Riordan, vice president and general manager of the MIPS processor division at PMC-Sierra.

Not everyone fully agrees. "This is just the tip of the iceberg," notes Brian Carlson, marketing manager for the ZSP product at LSI Logic. "A MAC may give the [chip] 20 to 30 percent better performance, but DSPs still run many times faster." Victor Berman, director of marketing at Improv Systems, takes a moderate stance. "There are designs where a CPU has been stretched to do DSP, and at the low end that's enough. It's if you try to do too much that you run into problems, mostly with power consumption. To do DSP you have to boost the processor's clock rate, because it's a very inefficient way of doing it."

Yet for many applications, a 20 to 30 percent boost in performance is all that's needed. In this category you'll find devices that have complex user-interface or system-control functions and that also need simple modems or the ability to handle basic media such as audio and still images. Examples include audio players, Internet appliances, and basic PDAs, as well as printers and copiers.

At the other end of the spectrum are parts that started from a DSP and added control features. They, too, have a place. "A characteristic of those applications," says TI's Soukup, "is that they don't need a high-level operating system and don't have a high level of real-time requirements. They need mid-level signal processing with high integration for cost effectiveness." Digital motion control is a prime example of an application for such enhanced DSPs.

Reaching the limit
To handle applications where the blend of signal processing and control needs is more balanced, however, simple enhancement of an existing RISC or DSP architecture quickly runs into problems. "You pay a big penalty when an architecture is extended where it's not meant to go," says Bob Markunas, vice president of market development at Ziptronix. "DSPs trying to do control burn power because they're wasting all their computational hardware. RISC processors doing DSP have low performance. When you try to extend an architecture you just end up with a case of bloat."

That leaves the third approach: a hybrid architecture that handles DSP and control operations with balanced facility. "People want to move to a hybrid because it allows the adaptation of a design's features to a wider range of applications, both for DSP and control," says Motorola's Black. "It also allows an integration of function types."

This integration comes about because the hybrid processor uses a single tool chain and produces a unified code, making the coordination of tasks easier. Designing with a hybrid processor can also help to futureproof designs. Developers can avoid having to make an architectural shift away from RISC as their product's needs for signal-processing performance grow. "It used to be that if you needed more performance you had to jump to a 24-bit DSP," says Motorola's Berrios. "The blended architecture allows designers to still experience the RISC environment," adds Black. "It's somewhat of a half step into the realm of higher performance."

The blended architecture isn't as optimized for computation as a DSP, but it is more than a RISC processor with a MAC attached. "In a blended architecture you find both types of features," says Finbarr Moynihan, product line manager at the DSP division of Analog Devices. "It has the hierarchical memory and pipelining of a CPU with the hardware pointers and special addressing modes of a DSP to access data efficiently. There's no point in having a MAC if you can't get the data in and out fast enough."

Duality wins
Despite its advantages, the blended-processor approach hasn't caught on for most high-volume applications. One reason is that it does represent a compromise in performance. The blended architecture is well suited to applications that have modest signal-processing requirements, such as wireless messaging and industrial systems like bar-code scanners. But high-performance applications, such as digital video, need more. "When you get into higher-performance applications, the blended architecture starts to fall down," Black observes.

What many vendors are thus realizing is that even with all its difficulties, the dual-processor approach remains the best way to tackle leading-edge convergence applications. "Using dual processors lets you get the right architecture doing the right job," says Ziptronix's Markunas. "You can't do better than that. The middle ground, while incremental and seductive in that respect, will lose out to a dual architecture."

Embracing the dual architecture brings vendors right back to the problems—size, cost, and development effort—that prompted the search for a unified architecture in the first place. Their latest answer to the size and cost problem, at least, is straightforward: Use two processors, just put them on a single chip.



“The market is broad, and there will be an area where each approach fits.”
—Brian Carlson, LSI Logic


With today's SOC (system on chip) process technologies, the dual-core chip can offer cost and size advantages similar to that of a hybrid architecture. "Processors are pretty cheap, and you can add a second core for very little money," says Improv's Berman. "Chip cost is typically set by gate count. To build a DSP/RISC hybrid you would need pretty much the same gate count as for two processors."

Ian Ferguson, strategic marketing manager for IDT's integrated processor division, goes further, pointing out that the second core doesn't add that much overhead to a chip. "There is enough space to put multiple processor cores on chip," Ferguson says. "In fact, buses and memory take up most of the room." Motorola's Black agrees. "Memory and peripherals drive die size," he says, "not cores."

As to the software-development concerns, they may be sorting themselves out. Silicon vendors have recognized the impact of software development on processor design wins and are trying to make development easier. "Silicon drove the business a few years back," notes Motorola's Berrios. "Now the development environment and software availability are becoming important. So, we're providing algorithms, drivers, and sample applications code."

Vendors are also trying to structure their tool sets to simplify software development. For its new OMAP product, for instance, Texas Instruments has created a software-development approach that turns the DSP into a coprocessor for the ARM core. "The heart of the software infrastructure is a DSP-BIOS bridge," says OMAP program manager Soukup. "Developers program the ARM architecture in its native tools, then set up and control DSP tasks using API calls in the BIOS bridge."

Familiarity breeds contentment
Time is also helping to lessen concern over software development. Developers are becoming accustomed to multiprocessor designs and dual software efforts, and are starting to prefer them. "There's a lot of inertia due to existing designs," says Improv's Berman. "People tend to not want to make radical changes to those designs unless they have to. Our early architecture was a blend, and there was a lot of resistance to it. It's not the way people want to design. There's a lot of investment in DSP software, RISC operating systems, and interface code that people want to preserve."

With cost and software issues apparently resolving, the once-maligned dual-processor approach is becoming the design of choice for convergence applications, at least for now. Looking ahead, vendors foresee chips with three or more processor cores as the next logical step. "The trend is to have a control processor and one or more signal processors," says IDT's Ferguson. Bob Payne, deputy chief technical officer at Philips, agrees, noting "all of our digital media platforms have both a RISC and a DSP. Future video platforms will have two DSPs, and we see a megatrend toward even more, offering lots of parallel computing."

“When you get into higher-performance applications, the blended architecture starts to fall down.”
—Brett Black, Motorola

One of the motivations for this trend is the desire to increase performance without increasing clock rates and, by extension, power demands. "We'd rather have 10 processors at 100 MHz than use a gigahertz machine," Payne says. "The gigahertz machine needs a relatively high supply voltage, while the 100-MHz devices can run at a minimum voltage." Because power varies with the square of the voltage, keeping the voltage down more than offsets the power demands of the added circuitry.

Evolving elements
The desire to increase performance is also affecting the nature of the signal processing elements. They are becoming simpler and more focused. "Rather than time-share a fast machine, use lots of simpler dedicated machines, computing in space rather than with time sequencing," Payne says. Designers would use these simplified processors to handle individual signal-processing tasks, each working on its own data stream. The design would employ as many processing elements as needed to handle the application.

Some of the newest architectures starting to enter the market are embracing this approach, providing a controller core with a collection of configurable signal processing elements in a single chip. Elixent, for instance, combines a RISC CPU with an array of 4-bit ALUs (arithmetic logic units) in its D-Fabrix device. Intrinsity offers a MIPS core with a configurable matrix computation engine in its FastMath adaptive signal processor. Chameleon Systems has an ARC core with a collection of 108 computational units in its reconfigurable communications processor.

While the emergence of these new architectures underscores the continued viability of the separate-processor approach for designs with both control and signal-processing needs, it does not necessarily signal a demise for any of the alternatives. Whether it's a dual core, enhanced DSP, RISC with MAC, or blended architecture, all of the products remain viable for certain classes of applications. "The market is broad, and there will be an area where each approach fits," notes LSI Logic's Carlson. "It always comes down to performance, power, price, and ease-of-use," adds TI's Soukup. "And having the right processor for the right task supports all of these
http://www.e-insite.net/commvergemag/index.asp?layout=article&stt=000&articleid=CA270443&...
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Mercedes-Benz, NEC, Siemens mobile and SingTel Mobile jointly showcase the first car with integrated 3G-UMTS services worldwide


This industry-first 3G-UMTS car made its debut in Berlin, Germany recently and is presented in Asia-Pacific for the very first time (1/17/2003)

In a specially fitted Mercedes-Benz S-Class, the partners demonstrated a portfolio of multimedia services which has become possible through the use of the broadband 3G-UMTS mobile phone standard, based on Wideband Code Division Multiple Access (WCDMA).

The 3G-UMTS services in the test vehicle cover a broad range of mobility and infotainment services. In addition to live video conferencing capabilities between two parties, there is high-speed video-streaming, which facilitates heavier email downloads and video-on-demand. Other applications included an interactive City Guide, broadband access to the various partners' portals and the Internet, a video monitoring system, access to traffic observation cameras international radio and a multi-player soccer game. The off-board navigation system includes location guide and routing and traffic information in part with video support.

The 3G-UMTS vehicle marks a breakthrough in mobile data applications for businesses as well as entertainment and information offered with video support. Content is transferred to the 3G-UMTS vehicle at an average transmission rate of 256 kBit/s. UMTS allows a maximum bandwidth in the vehicle of 384 kBit/s, up to six times the normal dial-up speeds.

Mercedes-Benz equipped the UMTS test vehicle with the appropriate operating units and monitors and the link to the car infrastructure and the specification of the UMTS services. "The UMTS test vehicle already created huge public interest at its first presentation in Berlin some months ago. It helps us today to create the necessary expertise to satisfy the demand of our customers for mobile UMTS services of the future",says Frank Messer, President & CEO of DaimlerChrysler South East Asia.

NEC provides the entire solution for the UMTS radio network to the world. In Singapore, NEC has been working with Siemens Mobile through the strategic alliance in the 3G business arena in establishing the UMTS infrastructure in the current test 3G network in the CBD (Central Business District) area since 2001. "The advent of 3G will lead to many new business opportunities and, apparently, this 3G-UMTS car is one of them," said Ben Nakamura, Senior Vice President of NEC Corporation. "NEC is the industry leader in the 3G area supplying commercial infrastructure and handsets for the very first phase of 3G rollout in the world. New solution utilising 3G applications such as 3G-UMTS car will accelerate the expansion of 3G. NEC will fully support this project with our extensive technical know-how and expertise in the 3G and mobile Internet field as well as the Intelligent Transport Systems (ITS) field."

The Siemens Information and Communication Mobile Group (Siemens mobile) supplies the entire technology for the UMTS core network and participates in the development and implementation of the UMTS applications for the test vehicle. "Worldwide Siemens mobile is one of the three leading suppliers for 3G-UMTS infrastructure. Through this demonstration, Siemens is aligning itself fully to 3G- UMTS, the new generation in mobile telecommunications," commented Mr Thomas Frischmuth, Managing Director, Siemens Pte Ltd. "And we are pleased that we can present, together with our partners here today, innovative new ways to deliver 3G-UMTS services and demonstrate UMTS technology's versatility and adaptability."

SingTel Mobile provided the customisation and localisation of the applications and content for the 3G-UMTS car showcase. It also undertook the provisioning of the local telecommunications infrastructure.

Said Mr Lucas Chow, Chief Executive Officer, SingTel Mobile: "Even as we work towards a 3G network rollout, it is important for our customers to see the potential benefits of having faster, more wide-ranging and more innovative applications as promised by a broadband, high-speed wireless network.

"The 3G-UTMS car showcase today is an excellent example of how we are leveraging convergence across all broadband access platforms to provide our customers with seamless access to an entire suite of services and applications anywhere and anytime ... even when you are on the move."

* The UMTS S-Class is a pure test vehicle - the operating elements, user interfaces and interaction processes in the test vehicle were developed exclusively for the demonstration of the possible UMTS services. They do not correspond with the requirements of a future UMTS solution for serial production of any Mercedes-Benz vehicles.http://www.telematicsupdate.com/print.asp?news=34416
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Tech Firms Aim to Link the PC, Stereo


The Dallas Morning News Doug Bedell 01/16/2003

It is, perhaps, the ultimate modern-day convergence conundrum: How can music stored on the household computer be delivered to the living room stereo?
The answer lies somewhere in a swirl of development activity within the consumer electronics industry. This year, manufacturers are producing an ever-expanding set of devices and connections, each finding its own niche with audiophiles.

From clumsy, $40 cables to $1,000 wireless set-top jukeboxes, the choices are as wide as the chasm between PC and stereo.

"Now that consumers have built huge collections of songs on their computers, the ability to use their personal music libraries away from the computer becomes essential," said Carl Holec, analyst for the ARS research service.

"Today's market has certainly not determined what the best price/feature combination is, which is why the current market includes such a broad gamut of solutions," Holec said.

For many, the best are too pricey and too kludgy.

"There's a lot of complicated hardware that is being rolled out," said Jeff Tribble, CEO of the Deep Ellum, Texas-based Streamwaves Internet subscription music service. "Many of the available systems have just been over-engineered when it's really pretty simple stuff."

In a survey conducted last year by eBrain, a service of the Consumer Electronics Association, more than half of the surveyed 1,067 Internet-connected homeowners said they were interested in creating a network for distributing audio and video throughout the house. For ages 18 to 34, this interest jumped to 65 percent.

As manufacturers wrestle with standards and new-fangled set-top entertainment options, home users can create links between their PC and their current entertainment centers using both wired and wireless solutions already on the market.

The thought of stringing wire throughout the house is sometimes daunting, especially if the PC is far from the entertainment center. However, most electronics stores now sell long lengths of standard audio cable designed for transferring sound from the PC sound card to stereo inputs.

The $40 MP3 Jukebox Starter Kit from Monster Cable (www.monstercable.com) contains a 20-foot audio cable plus a copy of MusicMatch Juke Box, which can be used to organize playlists and sort though PC-based music collections.

But sound can deteriorate over long cable lengths, so several manufacturers are now producing wired appliances that convert the PC's digital signals to analog stereo after they arrive at the entertainment center.

These $150 wired alternatives include the Harman/Kardon EzLink (www.harmankardon.com) and the Stereo-Link Model 1200 (www.stereo-link.com). Both are palm-sized boxes that hook into the PC via USB port.

For transferring PC music wirelessly, several manufacturers make small transmitter-receiver units that can beam either audio or video through walls with some dexterity.

Although many of these units advertise effective ranges of 100 feet or more, performance can degrade over long distances. Because they operate on the same radio frequencies as some microwave ovens and cordless phones, interference can be a problem. Noise from other household devices can be almost impossible to eliminate from the stereo feed, even when there are multiple channels available on the radio units.

However, many high-end video and audio buffs have found products like the Wavecom Senior, Leapfrog WaveMaster 20 by Terk and Kima KS-110 Wireless Audio System to be delightful alternatives to hard-wiring their homes. Most sell for $200 or less.

The big problem with all these lower-cost gizmos is that they rely on the home computer for navigation through the music stored on hard drives. The listening experience may be in the living room, but all the action is still on the PC.

Enter a second tier of music player - the wired Ethernet contraption with remote control. At about $250, this breed includes the SliMP3 ("Slim-Pea-Three") from Slim Devices (www.slimdevices.com). This midpriced gadget is a decided advance over its lower-priced competitors.

First, its fluorescent display can be controlled with a remote from the living room. Users can toggle through selections stored on their PCs, even choosing playlists they've compiled on their hard drives.

Second, the Ethernet configuration allows the home computer to be used for other tasks.

And, last, the SliMP3 can be connected wirelessly with the addition of a wireless Ethernet bridge, like the Linksys WET 11 ($115.)

At the high end of the spectrum are digital set-top jukeboxes like the $1,000 HP Digital Entertainment Center de100c. These sleek set-top boxes offer hard drive storage of their own, rather than using the PC as a base for launching music. The de100c's 40GB hard drive can hold more than 750 CDs, which can be navigated via remote either on the unit's display or through a television menu. The HP product also can rip CDs to MP3 and off-load tracks to some portable digital music devices like the Rio 500.

Although they can be connected using a wireless Ethernet bridge, most jukeboxes in this range are still hard-wired to computer hubs for any interaction.

Thankfully, a more affordable segment of set-top music box is now emerging. It is represented by the Motorola Simplefi, a $379 player that smartly bridges the PC-to-stereo gap with a hybrid technology. Using RF wireless signals, the Simplefi connects to any PC within 100 feet. Music is still played from the PC, streamed across the wireless connection. But navigating through songs is done with a unique 12-button remote control.

Industry analysts predict the coming months will produce even more products to mine the PC's music treasure trove. Clearly, they say, an entire generation is addicted to the MP3 and other digital music formats.

"Overall," said Tribble of Streamwaves, "I think you'll see a wide consolidation of equipment with the entertainment center. Wireless, tuners, amplifiers and Internet connections are all going to come together in smaller and smaller units."
http://www.technologyreview.com/offthewire/3001_1612003_2.asp
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sentinel-hear,hear-right on/culater

Wi-Fi takes to the skies
By John Leyden
Posted: 15/01/2003 at 13:01 GMT


A big fat Register hello to Hans Reiger, Fujitsu Siemens PR bunny, who sent us an email today - from 30,000 feet in the air. And he replied to our reply. OK, so it's not exactly an Alexander Graham Bell moment, and the pricing for emails from airplanes, will probably be horrendous, but yes, we were impressed.

Hans emailed us from today's Lufhthansa 747-400 flight from Frankfurt, Germany to Washington, DC which is using an onboard broadband network for the first time on a commercial flight. The PC hardware is supplied xourtesy of Fujitsu Siemens, which is lending 50 Lifebook S6010s with integrated WLAN technology for use in the Lufthansa trials.

British Airway is set to introduce on-board broadband services next month.

Connexion By Boeing, the mobile information services division of the aircraft manufacturer, is providing the infrastructure that allows two-way-live data between the plane and the ground, with speeds of 3 Mbps downstream and 128 Kbps upstream. Cisco Systems is providing the technology for the onboard network with Wi-Fi (IEEE 802.11b) compliant wireless connectivity, in addition to Ethernet connectors in the passenger seats (in first and business class). The service will be delivered at no extra charge to passengers, with plans to offer wireless to economy seat passengers too as the trial progresses.

Connexion By Boeing has received to go ahead from the US Federal Aviation Administration to use WiFi networks with satellite links aboard planes, after satisfying the authority that the technology is safe.

Five Cisco Aironet 350 Series Access Points have been fitted throughout the plane, along with one Cisco 3640 Router and nine Cisco Catalyst 3548 XL Series Switches. The Cisco standard equipment has been modified, tested and certified by Lufthansa to meet civil aviation regulations.

The passenger trial on the Frankfurt, Germany to Washington, DC route will last for three months. If successful, Lufthansa hopes to roll out broadband connectivity on its entire intercontinental fleet over the next two years.

Cisco has embarked upon a major push to deliver broadband connectivity to vehicles and planes. The Cisco 3200 Series Mobile Access Router is specifically designed for incorporation into mobile vehicular systems, such as airplanes. It meets requirements for seamless mobility while roaming among wireless networks with Mobile IP in Cisco IOS Software as well as well as power, size and weight specifications suitable for airplane deployment. ®
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Music Industry Won't Seek Government Aid on Piracy
By AMY HARMON


he major recording companies said yesterday that they would not seek government intervention to prevent digital piracy, in a compromise with computer companies that may hurt the movie industry's efforts to win support for its own anti-piracy plan.

The music industry and two trade groups representing computer makers and software companies said they had agreed on several basic principles that would help ease the tensions among their industries. Announcing their agreement in Washington, they said they planned to convene a meeting of senior industry executives to discuss technical solutions to combat the illegal copying of digital material.

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"This agreement says that those who seek to put the burden of piracy on the technology are simply missing the point," said Robert Holleyman, president of the Business Software Alliance, which has Microsoft, Apple Computer and Adobe among its members. "Technology can be part of the solution, but it is not the entire solution."

As part of the agreement, the Recording Industry Association of America said that under most circumstances it would oppose legislation that would require computers and consumer electronics devices to be designed to restrict unauthorized copying of audio and video material. Technology executives have hotly opposed such measures, which they say would slow innovation, make their devices more expensive and do little to stop piracy.

"We think businesses are capable of meeting these challenges," said Hillary Rosen, the recording industry association president. "Our industries need to work together for the consumer to benefit and for our respective businesses to grow."

In turn, the Business Software Alliance and another technology group, the Computer Systems Policy Project, said they would not support legislation that seeks to clarify and bolster the rights of people to use copyrighted material in the digital age, which the recording industry has opposed as unnecessary.

One such proposal, made by Representative Rick Boucher, Democrat of Virginia, and supported by several consumer groups and some technology companies, including Intel and Gateway, would seek to relax some of the restrictions imposed on users by the 1998 Digital Millennium Copyright Act. The statute makes it a crime for a consumer to make a backup copy or use a clip of video from a DVD, for instance.

"As a matter of first order we believe the marketplace should address these issues," said Ken Kay, executive director of the Computer Systems Policy Project, whose group represents Dell Computer, Intel, Hewlett-Packard and others.

Consumer electronics industry officials did not join the agreement. They said that legislation like Mr. Boucher's is necessary to ensure that consumers can make fair use of digital copyrighted material even when it is secured with technology meant to prevent illegal copying.

An Intel spokesman said yesterday that his company continued to support Mr. Boucher's legislation, despite signing onto the basic principles of agreement.

The recording industry's agreement with the computer trade groups is a departure from its longtime alliance with the motion picture industry on the anti-piracy front and underscores for the first time the divergent concerns of music companies and Hollywood.

With Napster and other file-sharing Internet services in recent years, the music industry may already have taken the hardest hit from digital piracy that it will have to face, as it begins to experiment with technological copy-protection on CD's.

But the motion picture industry is worried mainly about the future, concerned that digital television broadcasts and movies copied from DVD's will soon be traded over the Internet in the same high volumes as music is currently. Hollywood movie and television studios view federal intervention as a crucial element in avoiding the same fate as their record industry colleagues.

Jack Valenti, president of the Motion Picture Association of America, said yesterday that his organization still believed that "no reasonable alternative course of action should be eliminated from consideration."

"We are not prepared to abandon the option of seeking technical protection measures via the Congress or appropriate regulatory agency, when necessary," Mr. Valenti, said in a statement. "Designing ways to protect valuable creative works is very much in the long-term best interests of consumers and indispensable to the nourishment of our nation's economy."

Because the recording industry had never been a strong supporter of legislation that would mandate technical solutions to digital piracy, industry analysts said Ms. Rosen appeared to have conceded little that would have a far-reaching effect on the companies she represents. But the decision not to seek government intervention on the piracy issue may make it harder for Mr. Valenti's group to achieve its aims.

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ot-Inflight Internet takes off
Tuesday, January 14, 2003 Posted: 9:39 AM EST (1439 GMT)

One Lufthansa jet will offer the Internet service from January 15.

BERLIN, Germany (CNN) -- Europe's third largest airline Lufthansa will become the first airline to offer inflight Internet connection.

The German airline will begin testing the service on one jet from January 15, Lufthansa said.

The Boeing 747-400 operates solely between Frankfurt and Washington. Passengers will be able to use a broadband Internet connection -- the first from a plane in flight.

The service will be offered free for the first three months. Free access to news and weather information provided through a Lufthansa portal will continue, but to log on to a private server will cost "roughly" between 30 and 35 euro ($31-$37) per flight, Lufthansa spokesman Michael Lamberty told CNN.

Plane modified
The plane has been modified with antennae that "must always be aligned to the satellite at an altitude of 36,000 kilometers above the Equator," the airline said.

Antennae are linked to the aircraft's on-board navigation system to ensure they are aligned.

Each seat in first class will have a connection, while there will be one connection between every two seats in business class and economy class.

Lufthansa successfully sent the first e-mail from a flying plane last October, when an employee on the plane received an e-mail from a colleague on the ground, then forwarded it with a photo attachment to other colleagues.

Lufthansa has installed onboard a computer network equivalent to that of a medium-sized company to cope with 390-seat capacity.

Widespread interest
A survey conducted by Lufthansa in 2001 revealed widespread customer interest in inflight Internet access.

More than 50 per cent of those asked said they would welcome the offer and that -- particularly among business travellers -- they were willing to pay for this service.

However, most respondents wanted to use their own computers.

An "internationally standard interface between the aircraft system and the various end devices used by passengers has to be created. Passengers will be able to use this service from 2004," Lufthansa said.

Negotiating for wireless devices
Currently wireless devices cannot be used on planes, but Lufthansa was negotiating with authorities to allow passengers to use the devises, Lamberty said.

Europe's largest airline British Airways will begin a similar trial in February, charging $32 on a flight between London and New York, spokeswoman Amanda Allan told CNN.

The connection will be available in first and business class seats for a three-month trial. http://www.cnn.com/2003/TECH/internet/01/14/flight.net/index.html#
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Web music service reaches for home networks
By Rick Merritt, EE Times
Jan 14, 2003 (12:37 PM)
URL: http://www.eetimes.com/story/OEG20030114S0028
LAS VEGAS — In a sign that fledgling Internet music services are expanding beyond the PC, subscription service Listen.com is making its software compliant with the Universal Plug and Play (UPnP) specification spearheaded by Microsoft Corp., which will make the service available on a range of home networking systems and consumer electronics devices.

"This is a key push for us in 2003," said Listen.com's chief executive officer, Sean Ryan. "This is the year of going beyond the desktop. We are developing the relationships to take the full experience of Internet music to the next level."

Listen.com showed its Rhapsody service running on a number of Web-enabled consumer systems at the Consumer Electronics Show (CES) here last week, including Motorola's Simplifi, Rockford Corp.'s Omnifi and Thomson's RCA Lyra RD900W wireless home gateway.

By supporting UPnP, Listen.com said it will also be able to link with consumer-oriented products from companies such as Escient, Intel, Mediabolic, NetGear, Philips Electronics, SimpleDevices, Texas Instruments, Turtle Beach, Terk Technologies and Xitel.

Studios' first steps


The move comes at a time when observers say music studios have taken the important first steps toward allowing digital distribution of their content, but add that much work remains.

"Record labels don't press [onto CDs] 90 percent of their library. Almost all of that is still not available on the Net despite the fact companies want to digitize it for them, and it would be found money," said Ken Hertz, a senior partner with Goldring, Hertz, Lichtenstein and Haft LLP, which represents artists and has lobbied for so-called universal licensing of content for use on the Internet.

"If I were a record executive I would make my entire catalog available through all the digital distribution systems as soon as possible," said Hertz, speaking at a CES panel of online music subscription services.

Larry Linietsky, a business development manager for PressPlay, another Web music subscription service, said that change is beginning to happen. "We have all five major and many independent studios working with us. 2003 is the year this really happens," he said.

PressPlay, like Listen.com, offers a $9.95 per month subscription service that gives users access to a library of digital music from major record labels. MusicMatch Inc., a Web-based music-on-demand service, claims to have about 115,000 active subscribers.

"The major labels have been insulated from the consumer by their distribution networks, but they are gradually gaining experience with these new Internet business models," said Dennis Mudd, chief executive of MusicMatch. "The music industry is moving faster into digital distribution than any other media industry."

"The traditional business of the labels has been getting clobbered for a variety of reasons and digital is the way to grow it," said Ryan.

However, another panelist, Dave Goldberg, general manager of music at Yahoo Inc., complained that music studios still exercise too much control over both the terms of digital distribution and the cost of downloads, rather than letting the market experiment with setting prices. "The labels still make more money off a 99 cent download than a CD. The big challenge for all of us is that the free stuff is not going away, and we have to figure out how to add value," Goldberg said, referring to free file-sharing services such as Kazaa that provide music and video.

Executives of some of the Web services admitted they still spend an excessive amount of time trying to convince studios to provide more content for digital distribution.

In this environment, Ryan of Listen.com said he sees hope in an expanding world of Internet-capable devices emerging. "This is the CES of the home network," he said.
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ot-40 Markets to Broadcast HD Radio in Early 2003

January 14, 2003 -- Las Vegas, Nev. - iBiquity Digital Corporation, the sole developer and licensor of HD Radio(tm) digital AM/FM broadcast technology, announced that broadcast groups and stations in 40 large, midsize and small markets, spanning 26 states and 20 formats will begin broadcasting using iBiquity's HD Radio technology on AM and FM stations in early 2003.
Markets include (by market rank): New York, Los Angeles, Chicago, San Francisco, Dallas, Philadelphia, Houston, Boston, Detroit, Atlanta, Miami, Seattle, Baltimore, Tampa-St. Petersburg, Cleveland, Cincinnati, San Jose, Milwaukee, Middlesex-Somerset-Union NJ, New Orleans, Raleigh, West Palm Beach-Boca Raton, Monmouth-Ocean NJ, Louisville, Richmond, Birmingham, Greenville-Spartanburg SC, Syracuse, Ft. Wayne IN, Roanoke-Lynchburg, Morristown NJ, Jackson MS, Charleston WV, Morgantown WV, Cedar Rapids and Lafayette IN. Four unranked markets will also rollout HD Radio services: Forest VA, Price UT, Raymond VA and White Oak GA.

Formats include rock, urban, ethnic, country, classical, news/talk and more.

Broadcaster groups and stations include: iBiquity Digital's founder Infinity Broadcasting, as well as Clear Channel Radio, Cox Radio, Inc., Entercom Communications Corp., Radio One Inc., Hispanic Broadcasting Corp., Susquehanna Radio Corp., Bonneville International Corp., Greater Media, Spanish Broadcasting System, Beasley Broadcast Group, Journal Broadcast Group, Buckley Broadcasting, Capitol Broadcasting Company, Inc., Chicago Public Radio, Cleveland Classical Radio, WCGA-AM, Cram Communications, Inc., Crawford Broadcasting Company, Crystal Boynton Beach, Inc., Eastern Utah Broadcasting, Elyria-Lorain Broadcasting Company, Federated Media, Fenix Broadcasting Corp., Gee Communications, Inc., Hunter Broadcast Group, Kaspar Broadcasting, KZIA, Inc., Multicultural Radio Broadcasting Group, New World Broadcasting, OneCom, Inc., Perception Media Group, Inc., Renaissance Radio, Inc., Richardson Broadcasting Company, Sellers Broadcasting-KMRY, South Sound Broadcasting, Spanish Media Broadcasting, WWNO-FM - University of New Orleans, University of South Florida, W&B Broadcasting, Inc., West Virginia Radio Corp., WRHC Management Corp., WOLF Radio, Inc., Wood Broadcasting Company, Inc. and WWOZ, Inc..

"Entercom has long been a supporter of the development of HD Radio. We are pleased to be among the first to adopt this new technology that will enhance the clarity, delivery and listening experience of our local programming" said David Field, president and CEO of Entercom. "With this initial conversion of stations in leading markets like Boston and Seattle and the others which will follow, Entercom expects to continue to contribute to the growth of local AM/FM radio by offering this improved and innovative delivery choice for our local listeners."

Richard Marschner, executive vice president and general manager, Cleveland Classical Radio stated, "Classical music delivered digitally leveraging HD Radio technology will create a complete listening experience for our faithful local listeners. In addition to the enhanced sound quality and compositions and artist information displayed on new HD Radio receivers, the ability to offer continued enhancements such as on-demand audio and advanced data services at the push of a button offers endless opportunities for what radio broadcasters can offer listeners as the technology evolves."

iBiquity Digital's HD Radio(tm) technology transforms today's radio experience by allowing AM/FM broadcasters to transmit, seamlessly, digital quality audio as well as integrated wireless data alongside today's analog-based broadcasts.

HD Radio digital receivers, such as those being developed by Kenwood USA, Visteon, Alpine, Delphi, Harman Kardon, JVC, Sanyo and others, will enable consumers to receive these signals with improved audio fidelity that matches existing CD quality. HD Radio technology will also allow for the development of additional on-demand interactive audio and wireless data services, including traffic reports, weather alerts, breaking news, sports highlights, market updates, radio program information and much more.

McHenry Tichenor, president and CEO, Hispanic Broadcasting Corporation stated, "As the largest Spanish language radio broadcasting company in the U.S., Hispanic Broadcasting is dedicated to offering premier services to millions of our listeners. The conversion to digital broadcasting using HD Radio technology will revolutionize the way Latino communities from the beaches of Miami to the neighborhoods of LA will experience the rhythms and beats of their local radio. We at Hispanic Broadcasting have eagerly awaited HD Radio and look forward to bringing our listeners a host of new services that go beyond the traditional audio experience that radio offers today." "Broadcasters across the U.S. have embraced HD Radio technology as the next generation of radio. HD Radio technology will change the way consumers experience local AM/FM and will enable new offerings to transform radio into the world of digital entertainment and all it has to offer," said Robert J. Struble, president and CEO, iBiquity Digital Corporation. "We couldn't be more pleased with the initial rollout of HD Radio throughout all of our partners' industries including broadcasting and consumer electronics, and this is only the beginning."

http://www.me-mag.com/t_news_pick_print.cfm?doList=1&sid=2267
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ot-Video to go


Player fits into the palm of the hand
Digital music players are evolving into all-round multimedia jukeboxes that fit into the palm of your hand.

The AV340 from French company Archos can hold thousands of music or video files on its 40 gigabyte hard drive.

But what sets it apart is the 3.8 inch screen that lets you watch movies on the go.

You can also plug in a digital camera or a camcorder into the side and see the results on the LCD display.

The jukebox will go on sale within the next three months worldwide and is expected to cost $700.
http://news.bbc.co.uk/1/hi/technology/2652079.stm

http://www.gpx.com/pages/products_ind.php?id=187&flag=cat#
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By: austonia
13 Jan 2003, 12:21 PM EST Msg. 1100416 of 1100421

GPX TEC900 20gb MP3/WMA Digital Audio Jukebox with FM Radio, Voice Recorder and MP3 Encoder

20 GB of built-in memory
Supports MP3, WMA and future formats
Real time line-in MP3 encoding
FM radio
20-station presets
Digital voice recorder
5-preset equalizer settings
USB 2.0 compatible
Built-in rechargeable Lithum-Ion battery
AC adaptor included http://ragingbull.lycos.com/mboard/boards.cgi?board=EDIG&read=1100416