Burn, Baby, Burn

ALLEN CLARK FOR TIME
StreamCast CEO Steve Griffin, the man behind Morpheus

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CD burners have the enthusiastic backing of a couple of top tech companies. Apple started things rolling last year with its "Rip, Mix, Burn" ad campaign, and CEO Steve Jobs has been telling anyone who will listen that "piracy is a behavioral issue, not a technological one." Gateway took the idea a step further last month with its ad campaign featuring CEO Ted Waitt and the company's signature Holstein cow singing along to a burned CD backed up by CD-burning advice on gateway.com . When the R.I.A.A. seethed that the ad was a cynical attempt to cash in on piracy, Gateway happily conceded that CD burning was a cash, uh, cow. "It's a killer app for us," says vice president Brad Shaw.

Not all tech companies think copy protection is futile. StreamCast Networks, the company that owns Morpheus, sees value in the idea. That might seem ironic, given the lawsuit filed by the R.I.A.A. against StreamCast, which is heading for a likely trial in October. But the kind of copy protection on show in Morpheus 2.0, a new version of the file-swapping software to be released in the next few weeks (and distributed free at musiccity.com ) will probably give music executives ulcers because it allows artists to cut out the music-label middleman.

The technology is called CintoA, shorthand for Content into Application, and it acts as a kind of secure digital wrapper for anything an artist might want to seed among Morpheus' 60 million users. The artist pays $500 up front, then sets the price users will have to pay say, $1 a song and the rules they will have to obey to unwrap a song or album, including whether they can copy it to a CD. Morpheus takes 30% of the revenue; the remaining 70% goes to the artist. Not bad when you consider that the average songwriter barely makes a dollar from the sale of her CD in a store. Of course, if you happen to download free music and want to compensate the artist anyway, you can always go to fairtunes.com (see box).

Rap singer Chuck D has turned his website Rapstation.com into what may be a model of the future. It serves as a Napster-style source for MP3 files (the kind of music files most often burned onto CDs) of some 4,000 rap artists, 15% of whom are signed to labels. Users may download a raw MP3 with no copy protection and burn it onto a CD if they want. The site features a store that sells Rapstation.com merchandise, and artists may link to the site to sell their CDs. "Technology giveth, and it taketh away," says Chuck D. "You have to be realistic. The public's choice is MP3, and all these systems the major labels are coming up with fail to realize that." A spokeswoman for Chuck D says the site is on track to turn profitable by the third quarter of next year.

The major labels' systems include the online services Pressplay (owned by Vivendi Universal and Sony) and MusicNet (EMI, AOL Time Warner, Bertelsmann and the software firm RealNetworks). Initially hyped as the legitimate alternatives to the original outlaw Napster, these services have flopped with consumers especially where CD burning is concerned. Pressplay charges $9.95 to let you burn 10 tracks a month barely enough for one CD. MusicNet offers no burning capabilities, but EMI seems to have belatedly recognized the need, at least for fans of Sharon Riley and Faith Chorale. You can now burn up to 20 tracks from EMI's Christian-music catalog for $9.95 a month. Then there's the new version of Napster, which, with the aid of BMG, plans to sell a subscription service as soon as it can strike licensing deals with the other labels.

The industry is greeting these first forays into online services with caution. Doug Morris, chairman of the Universal Music Group, calls Pressplay "an exercise in trying to understand what's going on." There may be plenty of money to be made from selling raw MP3s and unlimited CD-burning privileges. But with major media companies so wedded to the old ways of selling music nearly 40% of Vivendi's operating income flows from its media business allowing users to burn from their catalog seems akin to dragging a large wooden horse into their boardroom.

Yet in the long run, turning Trojan might be Big Music's best strategy for a return to growth. Given that the established music industry of the day has alternately resisted and then succumbed to every new technology since the player piano in 1896, users would seem to have the weight of history on their side. "A business strategy that alienates your customer base isn't a good strategy," says Andreessen. "The most productive way to solve the problem is to satisfy demand." CDs saved music in 1985; perhaps some modest fencing around the cash cow of CD burning can save the industry again in 2003.