e.Digital Corporation (fka EDIG)

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Odyssey 1000 feature-WMA Digital Rights Management (DRM) support

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Microsoft is preparing an upgrade to its anti-piracy technology aimed at bridging the gap that continues to separate online music subscription services and portable devices such as MP3 players. Code-named Mercury, the upgrade will add features to the company's Windows Media digital rights management software that sits on handhelds, MP3 players and similar gadgets. The company has had a version of the software available for portable devices since 1999, but that version has had fewer features than technology Microsoft produces for PCs.

The move is an attempt to ease the fears of record companies and other content providers who worry that anti-piracy locks used to protect online content will break down on portable devices, which don't have the processing power or software support of a computer.

"This will be significant for them," said Michael Aldridge, lead product manager for Microsoft's Windows Digital Media Division. "It is going to have a direct impact on what subscription services will be able to offer."

The problem of portable devices has been a tricky one for record companies and other content producers trying to sell their work online or create subscription services.

Most devices lack critical features found on a computer, such as a system clock. The absence of those features makes it difficult to instruct a song to expire after a given date, or set a number of times that a song can be played once it has been transferred to the device.

As a result, most of the big subscription services, such as MusicNet, Pressplay or Listen.com's Rhapsody, prevent their subscribers from moving music onto portable devices. Rioport, which already has technology for protecting content on devices, has won a few licenses from record companies to offer music for MP3 players. Analysts say the portability problem must be solved before the subscription services can become mainstream.

To begin with, the devices must be released with advanced functions, such as system clocks, built into their hardware. Many of the big device manufacturers are beginning to give their products these new capabilities.
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Online Music Has Come Of Age Says New Consumer Technology Purchasing Study By Venture Strategy Partners

SAN FRANCISCO, CA, May 16, 2002 - Online music is rapidly becoming mainstream with a large segment of the adult population listening in, but music providers still face an uphill battle to devise an acceptable method of charging for the service, according to a consumer technology purchasing study conducted by Venture Strategy Partners.

According to Venture Strategy Partners' bi-annual Consumer Technology Behavior Index, nearly one out of every three adults have either downloaded music or have listened to streaming music from the Internet at least once. Furthermore, nearly one-third of these consumers say they download music files or listen to streaming music online often. While younger adults remain the most prevalent listeners, the study shows that Baby Boomers (35-54) make-up about 35 percent of the listening audience and this number is expected to grow.

The study also provides constructive insight for content providers and distributors looking to cash in on the trend. One in four adults say they would subscribe to an online music service. Some have already paid for downloaded or streaming media usage.
While there are divergent views by existing and prospective online music users on how much they would pay for a subscription service, among those willing to pay, a monthly fee of approximately $15 for 50 songs per month, or $12 a month for an unlimited streaming service, is considered 'reasonable'.

Among other constructive issues raised in the study for content and distribution providers:

* Portability of music files is key for any subscription service to take root;
* The ability to store and copy downloaded music files is considered important by users; Lack of high speed Internet access for quick downloading of music files remains an obstacle for adoption;
* Online music users largely have no service provider preference although there seems to be a leaning towards downloading music from a cable channel or high-speed service provider rather than from an Internet Service Provider.

Says Tony Conrad, General Partner of Venture Strategy Partners, an early stage venture capital firm, and Board Member of FullAudio, "The findings clearly point to a growing market of online music consumers who are increasingly willing to pay for a service. The real challenge is for content and distribution providers to develop both a dominant brand and an acceptable business model to access and serve this market." FullAudio, along with MusicNet and Pressplay, remain among the few major players in the online music field, according to analyst Phil Leigh, of Raymond James.

The findings of increased adoption of online music technology is one of the bright spots in an otherwise tepid embrace of consumers to new technologies, particularly wireless services and voice recognition services.

Appeal of many features of wireless services, particularly for location-based interactive guides, news and stock quotes, is significantly lower in the current findings of the bi-annual study. Similarly, significantly fewer people are in agreement that wireless services are for people like themselves or worth it to learn and set up.

In the area of voice recognition services, 52 percent of respondents are aware of voice recognition services and slightly less than half of those aware have ever used it. One third would use a voice recognition service to retrieve or send e-mail, making it the activity people are most likely to use voice recognition to conduct.

Consumers are more dissatisfied with the automated services that use numbers keys to answer questions than those that use voice recognition. However, dissatisfaction with both technologies is quite high, 42 percent and 34 percent, respectively. The Consumer Behavior Index, polls consumer attitudes about their personal benefits of various high tech products twice a year. Venture Strategy Partners will leverage the findings to provide tactical marketing and strategic advice for its portfolio companies as well as to assist in evaluating future investments in emerging companies.

"Understanding and tracking trends in consumer technology decision-making and adoption is essential in making profitable investment decisions, and helps our existing portfolio companies target customers and stay ahead of their competitors," said Joanna Gallanter, Founder and Managing Partner of Venture Strategy Partners.

Venture Strategy Partners has also launched a companion Corporate Technology Purchasing Study that tracks the adoption, attitudes and usage of new and existing technologies by corporate purchasing decision makers.
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