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Special Report: Copy-Protected CDs

How the labels are trying to stop you

Ever since computers became de facto stereo systems, the record
business has taken more and more unpopular stances against
consumers in an effort to combat music piracy. The cat-and-mouse
battle is ramping up with the industry’s latest scheme:
copy-protected CDs.

Each of the five major labels is now experimenting with
anti-piracy technology that prevents computer CD-ROM drives from
playing or ripping music in the popular MP3 format. The labels hope
to thwart consumers from swapping tunes over the Internet or
burning recordable CDs.

So far, only four protected CDs have been officially released in
the U.S.: The More Fast and Furious soundtrack and the
debut record from hip-hop artist Pretty Willie, both on Universal,
and country releases from Charley Pride and Len Doolin on two
Nashville indie labels. While the technology has spread rapidly in
Europe and Asia, American labels are moving more slowly because
early reports about the plan have pissed off an array of home
tapers, electronics and computer companies, and even some members
of Congress. But protection for major releases may be just around
the corner: There was much discussion between Eminem and Interscope
Records about whether to copy-protect his upcoming disc, The
Eminem Show
, though the rapper, his label and his manager
decided in the end not to take that step.

The labels say CD burning has contributed to $4.2 billion in
lost revenues, more than ten percent of the $33.7 billion market.
Internet swapping may cost the labels billions more. Record
companies say new CDs may allow for a single copy to be made, but
will be in a locked format to prevent repeat copying and burning.
“We need a minimal degree of copy protection to slow down
frictionless trading of music,” says Ted Cohen, EMI’s vice
president of new media.

Safeguarded CDs may prevent piracy in theory, but they also
trample consumers’ rights to make personal copies of their own
music, whether to hard drives or portable MP3 players, which are
growing more popular. The new CDs also may not work in audio
devices such as DVDs and car stereos, which usually contain CD-ROM
drives, since they are less apt to skip. “The music industry is
potentially angering millions of its best customers, who will no
longer be able to engage in the fair-use application of placing
content on different devices,” says Rep. Rick Boucher (D-Virginia),
who plans to introduce legislation to combat copy protection later
this spring.

Reports about the initiative have convinced some consumers that
the labels have secretly released a large number of dysfunctional
test CDs into record shops to see how music buyers react. On the
Web site Fatchucks.com, consumers have posted reports about 122
suspect CDs in the U.S., including the latest releases from
best-selling artists such as Aerosmith, Alanis Morissette and
Britney Spears. John Eisenschmidt, an Arlington, Virginia, systems
analyst, says that when he tried to rip a copy of the new Tori Amos
album, Strange Little Girls, for his portable MP3 players,
he got only static, hissing and popping. Eisenschmidt believes he
got stuck with a copy-protected version and posted the news to
Fatchucks.com. Nine others reported similar problems with the Amos
CD. “The disc is worthless to me,” Eisenschmidt says.

There’s only one problem with the hysteria: Each of the five
major labels — which account for about eighty percent of all U.S.
music sales — denies that it has secretly released copyproof CDs
to the public. Retailers haven’t noticed them, either. “We do a
fair amount of returns, but nothing that draws us to the attention
that this is being done without our knowledge,” says Vince
Szydlowski, senior director of product at Virgin Entertainment.

In the case of the Tori Amos CD, Will Tanous, a Warner Music
Group spokesman, says there’s no way it could be copy-protected,
because the company’s U.S. plants aren’t yet equipped with the
technology. And Eisenschmidt’s reports about the popping and
hissing aren’t typical of the copy-protection schemes that Warner
Music Group is testing. “It’s simply untrue,” says Tanous. “We have
not released any CDs in the U.S. with copy protection.”

Press reports have suggested that titles have been leaked into
worldwide markets for testing. But officials at three CD
manufacturers — Israel’s Midbar, Phoenix’s SunnComm and Santa
Clara, California’s Macrovision — deny releasing any unmarked
titles into the U.S. They do say it’s possible that some protected
CDs destined for Europe and Asia might have ended up in the U.S.
“We don’t know where they’re shipped, and we don’t put any limit on
where they’re shipped,” says Brian McPhail, vice president of
Macrovision’s consumer-software division. “If it’s been unannounced
by some parties, that’s the label’s decision.”

Consumers aren’t the only ones troubled by the new technology.
Philips, the Dutch electronics giant that invented the compact
disc, advised that all record labels remove its CD logo from any
copyproofed discs because of worries that they won’t work in all CD
players, which would harm the company’s trademark. “We are
concerned about technology that limits the playability of the CD,
because multiple uses of the CD in devices has been the foundation
of its success,” says Jeannet Harpe, a Philips spokeswoman.

Rolling Stone asked to test Eisenschmidt’s Amos CD, but he says
he’s already sent it to lawyers. At least three firms are actively
investigating the rumors with an eye toward filing a class-action
suit against the labels. A suit against Music City Records for the
Charley Pride release, which carried no warning label telling
consumers that it might not play in computers, was settled in
February. If there are stealth copyproof CDs in the U.S. and the
labels haven’t disclosed it, they could be targets of civil suits.
“The lack of labeling may violate state statutes about deceptive
business practices,” says Donald Hall, an attorney at Kaplan, Fox
and Kilsheimer, who says his firm has collected a number of CDs
from consumers that “appear to be copy-protected.” No wonder the
warning labels on the two official Universal releases are as long
as the side-effects sticker on Claritin.

But the legal hassles of copy protection may not compare to its
business foibles. In Britain, BMG had to recall copies of the
copy-protected version of Natalie Imbruglia’s White Lilies
Island
because it wouldn’t work in regular CD players.
Ensuring copyproof CDs are compatible with the world’s 2.2 billion
CD players is no easy feat. As one label rep confides, “We’re not
convinced the technology is all that good.”

And artists, even though they’re smarting from piracy, aren’t
sure copy protection is the answer. “I don’t think the technology
is perfected to a point where it can prevent [copying],” says
Eminem’s manager, Paul Rosenberg. “The only thing it’s going to do
is get the fans angry. People who spend money won’t be able to play
the disc everywhere they want to, and that isn’t fair.”

Ultimately, protected CDs may not even staunch Internet
swapping. After all, it only takes one hacker to crack the code,
and he can then replicate a single copy over the Net ad infinitum.
And the CD may not be long for the market anyhow. New formats such
as DVD Audio or Super Audio CDs offer longer playing time, better
sound quality and copy protections built in from the start. Labels
might also move away from CDs and toward online distribution, to
save shipping and manufacturing costs. Of course, there would have
to be a workable copy-protection scheme online as well, which means
the Fatchucks.com crowd won’t soon disappear.

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