e.Digital Corporation (fka EDIG)

[Tinroad]

OT: EMI to Develop Encrypted CD-Burning System with Roxio
June 05, 2001 by Jay Kumar


EMI Recorded Music and CD-burning software developer Roxio plan to develop a commercial system that lets consumers burn digital music onto CDs. The partners have released few details of the venture, which likely won't debut this year.

The proposed system would let users of Roxio's CD burning products, which include Easy CD Creator and Toast, burn encrypted digital tracks from EMI onto CDs. Such a system would allow EMI to capitalize on consumer activities that the recording industry claims steals an ever-increasing amount of profits.

Sales of CD burners were up 65% in November compared to the previous year, according to PC Data. Global music sales dropped 1.2% in units in 2000, due in part to online piracy and CD burning, especially in France, Germany and Italy, according to the International Federation of the Phonographic Industry [see 04.19.01 IFPI Blames Global Sales Dip on Free Online Music].

The system Roxio is developing will provide security to EMI. Roxio President and CEO Chris Gorog said he hopes that within a year, Roxio users will be able to burn EMI's Windows Media-encoded tracks to a recordable CD if they have paid for that right. "Our software will be encoded so it can understand when a consumer has agreed to pay to burn a track," he said. "We will enable the burn to happen."

As part of the deal, EMI made an undisclosed equity investment in Roxio.

A subsidiary of computer storage technology company Adaptec, Milipitas, Calif.-based Roxio is in discussions to form similar pacts with two other major label groups. Gorog would not disclose the identities of the label groups, but he said Roxio hopes to eventually have deals in place with all five major labels.

EMI and Roxio have yet to work out a pricing model for their initiative. Roxio's preference is to establish a tiered system that lets the consumer pay for a download first and then decide later if he or she wants to burn the track.

"It's a little theoretical," said Gorog. "What we're talking about is a massive sea change...We're in effect positioning this to replace bricks-and-mortar distribution. Ten years from now, I believe this will be the dominant way to distribute audio and video."

Additionally, Roxio hopes to have a role in MusicNet, the online subscription platform that EMI is backing along with AOL Time Warner, Bertelsmann and RealNetworks. "We'd hope to be the burning engine for MusicNet," said Gorog, who added that Roxio would like to serve a similar role with Duet, the subscription service being developed by Sony Music and Universal Music Group.

Gorog said Roxio's software eventually would bundle the various encryption technologies used by the labels with which it has deals. While Roxio's role in downloadable music sales may take years to sort out, it could prove profitable for the company. "Financially, it should mean a lot to us to be the company that has figured out how to do this," he said.

Roxio was recently sued by music recognition technology developer Gracenote for opting to use a similar open-source music database instead of Gracenote's commercial service

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