e.Digital Corporation (fka EDIG)

[Tinroad]

Farewell Free Downloads
By Brad King
2:00 a.m. June 11, 2001 PDT
http://www.wired.com/news/mp3/0,1285,44412,00.html

An audible sigh of relief can be heard from the folks at Napster.

With major label deals that will keep its trademark access to popular music intact and new technologies that limit the number of songs available on the service, Napster is slowly but decidedly morphing into a commercially viable enterprise.

Of course, the consumer experience is going to be radically different than it was a year ago, as filtering technologies and tracking software prevent users from getting to all the music they want.

In the old days -- according to the company's own count -- somewhere in the neighborhood of 70 million users downloaded the Napster application because the network allowed users on-demand access to any music they wanted -- for free.

But the company's new subscription service set to launch this summer is founded on a different principle: keeping free music away from consumers. And, of course, making them pay for it. While the changing consumer experience has hurt Napster traffic and use, the shift in the business model is no longer up to the Napster team. As part of its ongoing litigation with the recording industry, the company has been legally forced to develop a filtering system that controls what music is being traded on its network.

On Thursday, Napster teamed up with Loudeye, an encoding and digital infrastructure company, to help bolster its filtering technology designed to keep copyrighted music off the company's file-trading network.

The Loudeye deal gives the Napster technology team access to over two million encoded music files from the major labels, according to a Napster spokeswoman. With the help of software-maker Relatable, Napster has now created a filtering technology that can digitally fingerprint music.

The fingerprints allow the company to keep copyrighted music off its file-trading network by comparing music on its system against a list of copyrighted music that can't be legally traded.

The company also has access to a song database from Gracenote that allows the company to filter out misspelled song titles.

The results of the filtering process have been quite dramatic.

The service had 840,000 simultaneous users in May, down from its high of 1.5 million just three months before, according to Internet research firm Webnoize. Those users were sharing 21 songs on average, off 90 percent from the 220 songs users were making available in February. In other words, getting an unauthorized song onto the Napster system is now much harder.

Despite the reduced traffic and withering consumer experience, this is all good news for Napster. See, the company can't begin to launch its subscription service until it proves to the recording industry that the file-trading network can be controlled.

"The Napster brand name is still on users’ PCs and laptops, and those users are continuing to use the service," said senior Webnoize analyst Matt Bailey. "The drop in usage will continue, though, and if they can't launch their service soon, the brand might diminish in the eyes of the consumer.

"Of course, this filtering technology is giving the company some credibility. If there were obvious leaks in the filtering, they would have a hard time selling the service to MusicNet or any other music service."

MusicNet -- a joint subscription service owned by digital media company RealNetworks along with three major labels: EMI, Warner Music and BMG –- agreed to license content to Napster on the condition its filtering and tracking technologies get upgraded.

Once consumers have downloaded music using Napster -– or any of the myriad other file-trading applications -– they have the ability to burn that music onto a CD, something the recording industry fears could eat into its CD sales market.

Recently, technology companies have also been working overtime to ensure that once music gets to consumers' PCs, there will be some control as well.

Major music label EMI recently signed a deal with software company Roxio to develop a secure, CD-burning technology that would only allow certain music files to be transferred to a CD.

Without that protection, users could download music files from their subscription services, then indiscriminately burn the music onto any blank CD for free.

"There has to be a core technology that accomplishes what the labels need and it needs to be deployed where consumers are," said Brad Duea, Roxio's vice president of business development.

"One way that we look at being deployed is putting this within a subscription service, a premium subscription service that would allow users to download specific files that come with burning capabilities."