Sony BMG turns lock on digital pirates

The multi-billion-dollar music industry is best recognised for its strutting pop stars, VIP parties and stylish videos.

But as music goes digital, the record labels controlling the industry have grown ever geekier to tackle piracy and adapt to the online business model.

That's where people like Thomas Hesse come in.

Sony BMG's president of global digital business knows a thing or two about digital rights management.

It's one of several technologies Hesse's division has been tinkering with since the merger last year of Japan's Sony Music and Germany's Bertelsmann.

First there was a revamp of the CD. DualDisc albums are double-sided with regular CD on one side and DVD audio on the other. The greater capacity allows the DVD side to be mixed for 5.1 surround-sound stereo systems and to contain music videos, extra tracks and interviews.

Hesse said DualDisc, which sell at a slight premium to regular CDs, were selling well in the United States. The albums are sold here as US imports.

"When we launched, one-third of all units we were selling were DualDisc. It speaks to the fact that two thirds of consumers now have DVD players and one third have surround-sound systems," said Hesse, a German who runs the Sony BMG digital empire from New York.

The Universal Media Disc format designed to work on Sony's portable Playstation will also be used to release music, he said.

But overshadowing everything on Sony BMG's agenda is the move to add copyright protection software to all new releases by the end of the year.

It is the most comprehensive protection measure introduced so far by a music label.

The Sony BMG move is aimed squarely at so-called casual pirates rather than peer-to-peer file-sharing fans.

Users can burn three additional CD copies for their own use and store the music files on their computer in a protected format from Microsoft.

"People need to understand that if you make 10 or 20 copies of a CD and hand them over to your children's friends at their birthday party, that's something they should not do," Hesse said. "If you absolutely want to get over it you can, and that's the price [we pay] for being consumer friendly."

Hesse describes the copy protection as a "speed bump" designed to make serial CD burners think about their actions.

"The technology will help curb that. It's a hurdle you have to get over if you want to copy a CD in significant quantities."

But already the technology has fallen victim to that constant bugbear of the industry - disagreement on technical standards.

"There's a slight wrinkle to it in that currently the Apple Fairplay digital rights management isn't connected to this system," Hesse said.

That cuts users of the iPod music player, out of the Sony BMG picture.

And in a move that seems to work against the concept of digital rights management, Sony BMG has been giving iPod users a back-door method of circumventing the problem.

It's a situation Hesse is obviously uncomfortable with.

"We've been entreating Apple to come onboard. It's not a commercial issue but a strategic one - whether Apple wants to keep its technology in the corner," said Hesse, who last week struck a licensing deal with legitimate peer-to-peer downloading operator Mashboxx. Sony BMG songs cost US99c each at Mashboxx.

"Overall digital sales are 5 per cent of total sales - in the US it was 10 per cent in the first quarter," Hesse said.

Ringtone and song downloads to cellphones accounted for at least half of digital sales, he added.

But while sales of digital music are growing, Hesse is not expecting a huge displacement of CD sales anytime soon.

"In the next two or three years we don't expect any incremental growth. In my heart of hearts I really hope there is, but it's too early to say whether it will be the case," he said.

That means the humble CD, and high-quality audio systems such as Blu Ray and HD-DVD, will be of primary importance to the music industry for some time.

But Sony BMG is investing heavily in getting the music download model right, with the fight against piracy a motivation.

"Build legitimate platforms that are highly attractive to the consumer and fight the pirates and stealing," Hesse said. "You've got a much more credible case of fighting the pirates if you offer a legal alternative."

But doesn't the lack of a comprehensive music download service in New Zealand undermine the campaign against illegal downloading? Hesse agrees, but said things were about to change.

He blamed online retailers and their desire to fund the roll-out of online stores in bigger countries first for delaying a local launch of music download services.

"It's connected to the size of the market. The big retailers grab the big markets first. For us it's easy to do, we've the licences and rights. It's not Sony BMG that's holding up the market," he said.

Speculation that Apple was on the verge of launching iTunes in Australia reached a frenzy in May. But Apple refuses to name a date for the Australasian launch of the largest music downloading service.

Current Sony BMG negotiations indicate that New Zealanders could expect a comprehensive music service similar to iTunes to be available by the end of the year, Hesse said.

"It's coming. We're in the process of licensing to a number of people who are setting up shop here. We're very confident that this year we'll see the emergence of download platforms."

With one 3G mobile network in New Zealand already and Vodafone set to launch its own high-speed network in the next two months, Hesse expected music downloads to phones to take off.

"The next big thing in my mind is the convergence of online and mobile. Making downloads available to the phone and simultaneously to the PC so people can build libraries on the PC - that's what's going to keep us busy in 2006."

There are thousands of analogies Hesse could use to illustrate his company's stance on copyright protection, but he chose one to which every victim of a home burglary can relate.

"You sell cars with locks," he said. "You sell homes with security."

Curbing the copiers

* Sony plans to add copyright protection software to all new releases by the end of the year.

* The copy protection is a "speed bump" designed to make serial CD burners think about their actions.

* Ringtone and song downloads to mobile phones account for at least half of the company's digital sales.