As these early adapters have graduated into the real world, MP3 technology has moved beyond the college-dorm circuit. At first (and isn't this ironic?), the record industry paid no mind to this subculture growing under its nose. Tech-savvy artists like the Beastie Boys even encouraged fans to sample live tracks and album cuts through free downloads.
The industry's wake-up call came last October when MP3 technology went portable. The RIAA unsuccessfully sued to block the introduction of the Diamond Rio, a device that looks like a Walkman and allows consumers to take the music they've snagged online anywhere they want.
The industry claimed Rio violated the Audio Home Recording Act, a law requiring, among other things, that makers of digital audio-recording devices pay royalties, which go to two trust funds. But because the law doesn't specifically cover PC peripherals, the Rio was allowed to launch. A court will hear the suit this fall.
If the MP3 phenomenon was nothing more than a small campfire before the legal action, the RIAA suit turned it into a raging inferno, complete with media coverage. Claims Michael Robertson, CEO of MP3.com, which dispenses MP3 news, software, and thousands of songs over the Internet: "Our site has been growing since our launch, but the RIAA lawsuit against Rio touched it off. It touched off this whole movement." Traffic on Robertson's MP3.com site has tripled since June.
Last month, the RIAA openly declared war, petitioning colleges to discipline student pirates and purging the Web of illegal sites; it claims it's now shutting down at least 50 a week by threatening legal action against the webmasters. "There used to be a big gap between the college kid taping in his dorm room and the manufacturer in China whose stuff winds up at flea markets all over the world," the RIAA's Rosen says. "All of a sudden, the concern is that one individual can affect thousands and thousands [through the Internet]. The commercial impact is significant."
Which is also why the RIAA has joined forces with the five major labels (Sony, BMG, EMI, Warner, and Universal) to create the Secure Digital Music Initiative. Their goal is to implement new industry standards for copyright protection and distribution of music in digital formats. Additionally, there are several proposals on the table to regulate distribution. Sony recently submitted a proposal for copyright-protection technologies for CDs and PCs. There's also the Madison Project, an RIAA-blessed IBM initiative, which would allow selected consumers to buy albums, singles, and artwork online (for an unspecified amount) and "burn" it onto a CD. (It will be tested in San Diego later this year.)
Among the benefits of a plan like the Madison Project: It will address concerns about artist payment. ("If they don't figure out how to get the artists paid," says admitted MP3 novice Bonnie Raitt, "there just aren't going to be that many people making music for a living.") But many believe this approach will be rejected by current MP3 users. "These encrypted solutions and secure systems don't satisfy the needs of the consumers," says Steven Grady, VP of corporate communications for GoodNoise.com, one of a new breed of Internet music companies that hopes to act as label, distributor, and retailer. "If the music industry is going to come to the Internet, it has to play by the rules of the Internet."
