e.Digital Corporation (fka EDIG)

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Reuters
Song-swappers taking bite of Apple's service
Wednesday May 14, 7:15 pm ET
By Sue Zeidler


LOS ANGELES, May 14 (Reuters) - Apple Computer Inc.'s (NasdaqNM:AAPL - News) new online music store has proven to be both a runaway commercial success and a backdoor route to unauthorized song-swapping by some Macintosh users, analysts and music executives said on Wednesday.
Apple on Wednesday announced that more than 2 million songs have been bought and downloaded from its iTunes Music Store since it launched 16 days ago.

That figure, according to analysts, easily surpasses the traffic of various other label-sanctioned services launched over the past year and a half to combat online piracy.

Apple's strong sales record is welcome news to music labels searching for a commercially viable alternative to free unauthorized peer-to-peer services they say have lured millions of would-be consumers from buying music.

But the industry's enthusiasm may be tempered by the emergence of Web sites and software applications that enable Mac users to search other Web-connected Mac computers' hard drives to listen to songs online, without the necessary licenses and permission.

Carey Ramos, an attorney for the National Music Publishers Association, said he was impressed with Apple's service and hoped the company will take steps to eliminate the file-sharing.

Although Apple, which sells songs for 99 cents, has said its service only allows users to copy songs to two other Macintosh computers, programmers found a way to use the iTunes software to play and copy music through the Internet, developers said.

The Recording Industry Association of America, a trade group for the major labels, AOL Time Warner Inc. (NYSE:AOL - News), EMI Group Plc (London:EMI.L - News), Bertelsmann AG (BERT.UL), Vivendi Universal's (NYSE:V - News; Paris:EAUG.PA - News) Universal Music and Sony Corp. (Tokyo:6758.T - News), as well as the labels themselves declined comment. Apple had no immediate comment.

ISOLATED PROBLEM?

But several music industry executives said privately that the service's success outweighed the problem, which they saw at this point as fairly isolated.

"Apple is trying to launch a legitimate service but no solution is bulletproof. We also have a problem with several million unprotected masters sitting in the market right now and they are called CDs," said one music executive.

Prior to launching the service with licenses from all five major labels, Mac users could not use industry-backed services like Pressplay or MusicNet.

Los Gatos, California-based software engineer Rob Lockstone said he shut down his iTunes-based Web site (http://www.itunesdb.com) after just one week after stumbling across an application which allows users to download music from iTunes servers onto their local machines.

Lockstone said he was not contacted by Apple or any record companies, but felt compelled to act because his site was being used in a way he had not anticipated.

"I cannot, in good conscience, continue to provide a service which will facilitate the theft of copyrighted material," he said in a message on his Web site.

Lockstone told Reuters his site does not allow a user to directly download music and that he implemented a mechanism to prevent individual IP addresses or host names from being gathered from his site, but that users hacked his site to get access to the addresses.

"They would come to my site or another site and basically harvest the addresses and then tap into this other program to talk to the other iTunes server and hook up and copy MP3 files," he said.