How It Works
     The dragon has been prodded by sharp prongs of competition and the potential for piracy. That same hot Christmas device also makes stealing music incredibly easy. Just as with a software program, a person using MP3 music is essentially downloading a file into a disc—a file that can then can be easily uploaded into another computer to be sent via e-mail or posted on an Internet site.
     And it is almost impossible to stem the flow of copying, because MP3, the audio software that enables the downloading, storing and uploading process, doesn't belong to any one company. It is so-called open source software, widely available on the Internet and free.
     MP3, which works by compressing large audio files so they can be quickly transmitted on the Internet, also has one other feature that has the recording industry ready to fight for its life. MP3 enables musicians to record their own music, post it on the Internet for worldwide distribution, and thus bypass record companies and distributors. For struggling artists, MP3 represents freedom from the difficult process of trying to get a recording company interested in their music. For record companies, it represents the dreaded Internet phenomenon known as "disintermediation:" in short, cutting out the middleman.

Industry Lobby
     The industry is launching an attack on MP3, concentrating its fire on the piracy aspects. The industry's lobbying arm, the Recording Industry Association of America, estimates before the advent of the Internet, there was $4.5 billion a year worldwide in pirated music sales. The RIAA hasn't been able to calculate how much in sales it is losing because of the Internet, but a recent Web-crawling program used by one of it's anti-piracy advocates found on one afternoon, 200 Web sites that had thousands of illegal music files.
     "This will be a more and more critical issue as broadband networks are built out…and it is already a huge issue because downloading music on the computer is part of the culture on college campuses," said one Senate staff member who has worked on Internet issues.

Government Role
     For now though, neither the recording industry nor the Internet music companies want Congress to do anything more except get itself educated on music, copyright law and the Internet.
     "The law is very clear about what copyright infringement is," Hoffman told JEC Chairman Connie Mack, R-FL, when asked if current laws work in the Internet music business. "I think our copyright legislation as it exists today is very strong. It has clearly been very effective in the software business and as other businesses are coming into the crosswinds of the software business…. I think a lot of the rules and lessons learned in the software business will apply."
     Congress is hearing some of the calls for self-education. The House Judiciary Courts and Intellectual Property subcommittee has considered holding a hearing on Internet music this summer, though a firm date is up in the air. The hearing, if held, is to be more focused on educating members and asking questions about what makes a legitimate Web site and how rampant is piracy at college campuses, rather than on drafting new legislation.
     "This hearing would be the Judiciary Committee's own initiative based on a lot of industry and general public interest" in the topic, said a staff member.

Copyright Laws
     There are a number of copyright laws that govern the recording industry. In general, copyright regulations forbid commercial reproduction or distribution of intellectual property without the owner's consent. In 1992, the Audio Home Recording Act (AHRA), which governs digital recording devices, was passed. Last year, Congress passed the Digital Millenium Copyright Act, which criminalizes anyone hacking copyright-protected material.
     The onus on enforcing the law lies largely with the music industry. The RIAA has worked to slow down the proliferation of illegal copying of music on the Internet in several ways. The association sued Diamond Multimedia and its subsidiary, RioPort, one of the first makers of the portable digital listening devices for MP3 music, charging the company's Rio player violated the AHRA. However, an appeals court ruled against them, saying that music files passing through computer devices, like the Rio, were not recording devices and therefore exempt from the law. The RIAA is still deciding whether to appeal to the Supreme Court.

Industry Efforts
     In addition, the industry is trying to set its own standard for digital copyright protection called the Secure Digital Music Initiative, that would provide an open and voluntary specification for managing copyrighted material. Parameters of the standard are scheduled to be released by June 30 and are eagerly anticipated by all in the industry. Right now the major recording houses are not releasing their vast catalogues of music over the web because they say there is no way to control the material. If the technology standard is adopted, consumers could be able to find popular artists over the Web, and not just in CD format.
     "We are all waiting to see whether SDMI takes care of legislative needs or not," a House Democrat staff member said.
     One of the ideas for "copyright management," as the term is called, is to attach a numbering system to an encrypted music file, so when a consumer buys the music and is given the decryption code, the company can track the file. Another option is to "stream" the music to a customer, so if a consumer wanted to hear it, they would have to log into the company's server to listen to the music. A third option is to encode a music file and allow it to be copied, say once or twice, and then after that, the quality of the sound would degrade.
     "I am confident that technology exists…that will result in a level of security that recording companies can live with," Zittrain said.
     The question is whether the marketplace will embrace the SDMI standard, or whether MP3 has gotten so far ahead that artists and consumers will want to stick to using the open standard, industry skeptics say.
     In the meantime, the RIAA and Internet music sites have been effective in reducing the amount of piracy by alerting Internet Service Providers and universities that their servers are being used for Web sites that are illegally distributing copyrighted materials and making sure that consumers know copyright laws.
     Sites like MP3.com, which enable unknown musicians from around the world to distribute their work online, recently signed a licensing agreement with the American Society of Composers Artists and Performers, so that artists who join ASCAP can receive royalty payments based on the number of times their songs are downloaded. MP3.com also has a spot on its Web site that tells people how to report pirating of music.
     "Six months ago, there was more exchange of pirated music files on the Internet, but since then with the work done by MP3.com and EMusic, legitimate downloading of files exceeds piracy," said Philip Corwin, a partner at Federal Legislative Associates who represents MP3.com in Washington, DC.
—by Bara Vaida