BUSINESSWEEK ONLINE : MAY 29, 2000 ISSUE
INTERNATIONAL -- INT'L COVER STORY The Digital Revolution Will Not Be Criminalized (int'l edition) You can't stop change. But with enough lawyers on retainer, you sure can try to slow it down. That, at least, seems to be the thinking in the music business these days. In an aggressive effort to defend themselves against the threat of the Internet, labels, distributors, broadcasters, and music Web sites have declared war on one another in the courts. In March, the National Association of Broadcasters brought a case against the Recording Industry Association of America (RIAA) to prevent music companies from levying extra fees on radio stations that play songs on the Web. In January, the National Association of Recording Merchandisers, a trade group representing Best Buy Co., Musicland Stores, and other retailers sued Sony Corp. for trying to sell music directly to consumers on its Web site. The list of similar intramural lawsuits goes on and on. ''JUST A TOOL.'' All this legal warfare is creating millions of dollars in fees for lawyers. But is any of the litigation going to protect the players in the industry from the Digital Revolution? Probably not. ''I don't fool myself or any of my colleagues in the industry that litigation is a strategy. Litigation is really just a tool,'' says Hilary B. Rosen, president of the RIAA, a Washington trade association representing the big labels. For industry executives, ''the business strategy [has to be] front and center.'' Rosen should know. The limitations of fighting technology in court are nowhere more evident than in the labels' long, and largely unsuccessful, battle against MP3--a new technology that allows digitized music to be transmitted easily over the Internet. In recent years, music companies and the RIAA have sued, among others, Web sites that serve up MP3 files, the individuals who used those sites, and a company that makes a popular Walkman-like device for listening to MP3s. The net impact: almost none. While the labels have had some scattered successes, including the recent victory in court against MP3.com, the industry's legal onslaught has done almost nothing to slow the proliferation of free music. Why? For starters, because the application of traditional intellectual property law to the Internet is still unclear. In 1998, for example, the RIAA tried to have the Diamond Rio, a Walkman-like device made by S3 Inc. that lets people listen to MP3 files, declared illegal. Last year, however, a federal appeals court judge tossed out the suit, holding that the Rio was legal under the Audio Home Recording Act, a 1992 law affirming the rights of consumers to use digital recording devices. Enforcement can also be a tricky problem. Consider the prospect of suing teenage music hounds who are the major consumers of downloading software. Under copyright law, they are almost certainly guilty of theft. But it wouldn't be worth the industry's time or energy to go after them. There are many thousands of them, most have negligible assets, and the wisdom of suing customers is highly questionable (witness the backlash that followed Metallica's recent effort to crack down on fans downloading the heavy-metal band's music by way of Napster). Likewise, the industry has a strong legal case against the many pirate Web sites that give away MP3 files for free, but the effort is ultimately futile. As soon as one is shut down, others take its place. ''Nobody is going to be able to bail themselves out through litigation,'' says William W. Fisher III, a professor of intellectual-property law at Harvard University Law School. But, to the relief of their lawyers, that probably won't keep them from trying. By Mike France, with Richard Siklos, in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Download This! (int'l edition) INT'L COVER IMAGE: Download This! TABLE: The Artists TABLE: The Labels CHART: Although Music Is a Slow-Growth Business... TABLE: Radio CHART: For Now, Web Rivals Shouldn't Slow Radio TABLE: The Retailers CHART: Retail: Still King but for How Long? TABLE: The Consumer TABLE: The Web The Digital Revolution Will Not Be Criminalized (int'l edition) These Wristbands Will Keep You Humming (int'l edition) Napster's Shawn Fanning: The Teen Who Woke Up Web Music Forget Napster. Net File-Swapping Now Goes Way Beyond Music INTERACT E-Mail to Business Week Online

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