WebNoize Brought Music Industry Suits and Internet Geeks Together

The WebNoize three-day conference took place last week in Los Angeles, mixing record-company executives with Internet geeks, all trying to find profitable ways to distribute music online. Tom Roli, publisher of the Webnoize website, set the tone for the event, stating that "the industry is facing great change and uncertainty due to emerging technologies, shifting global markets, and media revolutions."

Diamond Multimedia, a company we've been reporting on the last several weeks due to their tangle with the RIAA, announced several new deals to support their Rio MP3 player. Diamond and Liquid Audio revealed a partnership arrangement under which the two companies will work cooperatively to support what they described as "bringing secure downloadable music from the Internet to the masses." Both companies have entered into a nondisclosure agreement to investigate incorporating Liquid Audio's secure downloading system into Diamond's portable music players.

"Liquid Audio provides a secure environment for music from a number of well-known labels such as Geffen Records and Interscope, who have recently used Liquid Audio's technology to promote major artists, including Hole and Marilyn Manson, and this is a market in which Diamond intends to participate," commented Ken Wirt, vice president of corporate marketing at Diamond Multimedia.

Internet start-up Audio Explosion also made its debut at WebNoize, and promises to find ways of making MP3-formatted music acceptable to the music industry with anti-piracy software. The company also announced a "strategic alliance" with Diamond, in the hopes of getting in on the ground floor of Internet-distributed music that is saved to a PC and transferred to a portable playback device.

By incorporating MP3 audio, Audio Explosion says it is supporting secure distribution of music to an expanding new class of electronic playback devices. In addition to Diamond's Rio, other new devices include the MPman (manufactured by Saehan Information Systems) and the MPlayer (from Pontis GmBH), both aimed at defining a new type of consumer-electronics product akin to an Internet walkman. "Audio Explosion makes digital music secure and easy to buy," said Arnold Brown, President and CEO of Audio Explosion. "We're excited to be first out of the gate in terms of full compatibility with these new devices."

Under the terms of the agreement with Diamond, the company will bundle an Mjuice Music Card with its Rio player. The Mjuice Music Card allows Rio customers to purchase $5 worth of songs from Audio Explosion's Mjuice.com website, which will launch later this month. Mjuice.com will initally contain several hundred licensed songs, from various genres, priced at $1 per download, including hip-hop, alternative rock, and acid jazz. Ken Comstock of Diamond, emphasing that the company is pursuing legitimate material for their player, explained: "Our strategic agreement with Audio Explosion demonstrates our commitment to providing our customers with a wide variety of licensed MP3 content."

Online music-distribution pioneer Liquid Audio announced that version 4.0 of its Liquid Music System is now shipping. The new audio delivery system incorporates MPEG's AAC audio compression scheme as well as Dolby Digital AC-3, and will also be playable with RealNetworks' RealSystem G2 software as well as Liquid's own Liquid Music Player.

The new 4.0 version of the online audio distribution system also puts a rosy glow on the cheeks of the RIAA by including the recently developed Liquid Watermark. According to the company, Liquid Watermark allows content owners to embed "inaudible" security information within a recording to help prevent piracy. An integral part of a recording, it travels with the audio regardless of its medium or carrier, and can be decoded during playback to identify bootleg copies of a recording. Even if the recording is copied to CD, analog tape, or transmitted over the Internet, the Liquid Watermark remains with the music and is readily accessible whenever suspected pirate copies appear.

"Liquid Audio is the kind of solution the music industry embraces," said Hilary Rosen, president and CEO of the RIAA. "It makes the effort to provide for legally responsible music distribution, which can only help propel the sale of legitimate music on the Internet. Liquid Audio's approach not only benefits artists and labels who create the music, but consumers as well."

Liquid Audio claims that the Liquid Watermark system was designed from the ground up to work with linear audio as well as encoded audio formats like MPEG AAC and Dolby Digital, and to withstand multiple generations of D/A conversion, data compression, signal processing, voice-overs, and radio broadcasts---the information contained in a Liquid Watermark cannot be removed without destroying the recording. Extensive listening tests were conducted with "trained audio professionals." According to the company, "in every test, not a single engineer was able to reliably detect any coloration or artifacts as a result of the watermarking process. The Liquid Watermark was inaudible under all conditions, including silent passages in a music recording."

Liquid Audio also announced a marketing, distribution, and development agreement with Adaptec, Inc. in an effort to make it possible for purchasers of downloaded Internet music to more easily save those tunes to CDs using a CD-Recorder. "The Internet has revolutionized how consumers shop---for books, software, airline tickets, and now music," said Robert Flynn, vice president of business development for Liquid Audio. "Our relationship with Adaptec expands on our current offerings by making it easier and more accessible for online music consumers to record their own CDs."

Web-based music sales are projected to match the exponential growth of the CD-Recorder market. The International Federation of the Phonographic Industry expects that by the year 2002, Internet music delivery could account for 15%, or about $2.0 billion, of traditional music-store business. During the same period, IDC predicts that 25% of all CD/DVD devices, most likely in computers, will have the ability to record CDs. Some analysts are also predicting that streaming audio will eventually overshadow downloading technology due to its comparative ease and simplicity. "Clearly, we have to be concerned about how people use music on the web and how it conforms with the law, but audio streaming is the key to the future," exclaimed Jim Griffin, of Onehouse.