As appeared in U.S.News and World Report, March 29, 1999

Internet Music

The song doesn't remain the same

BY WARREN COHEN

Don't look for the newest release by the quirky New York duo They Might Be Giants in Tower Records or Best Buy. The band, which has sold about 2 million records since the late 1980s, will sell its forthcoming album exclusively over the Internet. "I take a certain amount of glee in how much the Internet is terrible news for all the major labels," says John Flansburgh, the group's guitarist. The emergence of the Internet as a way to bypass the big record labels comes at a rough time for the music industry. Universal has hinted that it will let go of more than 3,000 employees and cut $ 300 million from its budget. Sony's music division will suffer as a result of the company's plan to cut 17,000 jobs and close 15 factories by the year 2003. And EMI chose a food-industry veteran as its new CEO instead of an entertainment executive, a sure sign that cost control will be as important as chart topping.

A handful of superstars, like Public Enemy and The Artist (formerly known as Prince), have already terminated their contracts with major labels, vowing to go it alone on the Net. Other acts, like Tom Petty and Beastie Boys, have dipped a toe in the digital waters by releasing promotional singles on the Internet.

Still, even advocates admit that it will be years before Internet music goes mainstream. Most consumers don't have the right equipment. Over today's standard 28.8 modems, it could take between five and 10 hours to download a 12-song CD.

Record companies also have refused to release popular hits on the Net before safeguards against illegal copying are established. "In the past, people copied cassettes, but in the generations of copies, the resulting music would become bad," says Leonardo Chiariglione, one of the inventors of MP3, the Internet's most popular format for distributing music. "In the virtual world, you make 1 million copies and it's the same as the original." Chiariglione has recently been hired by the recording industry to help set standards for encoding digital music to prevent piracy. IBM, Microsoft, and other big companies are working to develop antipiracy technologies as well.

Record rentals. David Geffen, a principal at DreamWorks SKG, pooh-poohs the notion that the Internet will bring the big record companies to their knees by advancing piracy and allowing artists to go directly to the public. "Piracy has always been a problem," says Geffen. With digital copyright protection, the Internet could even provide record companies with new opportunities. "Imagine if you could buy a listen, three listens, or rent to own," says Cary Sherman, general counsel for the Recording Industry Association of America.

Until technology improves and major labels release recordings in digital format, however, Internet music will remain limited. Even They Might Be Giants plans to sign with a major label for a subsequent release. "Our next deal is an old-fashioned one because I'm just trying to get people our music," says Flansburgh. "It's an inevitable fact of life that you have to make certain commercial compromises."


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