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Flattening, realigning and disintegrating describes what some say the Internet is doing to the recording industry.
By illegally downloading and distributing copyrighted music as free MP3 files, tens of thousands of consumers are cutting deeply into e-commerce profits, and simultaneously threatening the very existence of the major labels. This news is particularly ominous to the recording industry, since analysts predict the MP3 market has the potential to skyrocket from $12.6 billion in sales last year to $60 billion by 2003.
Even recording artists, who at first praised the new freedom of marketing themselves directly to their fans over the Internet, haven't escaped being ripped off by intellectual property thieves.
Does InterTrust Have A Solution?
At least one software developer claims to have found a fix. InterTrust Technologies Corp. of Sunnyvale, California says it has a solution. It's developed software that writes certain coding to an MP3 file that makes it impossible for the files to be passed on -- without paying first.
For instance, a record company could use the program to allow a potential customer 
to listen to a cut on a CD just three times. After the third listen, the file would self-destruct unless paid for. "The whole idea of limiting use is an important issue for record companies and music e-commerce sites," says Albert Pang, an analyst with Framington, Massachusetts-based International Data Corp.
It Goes Beyond the Music Industry
According to Pang, the same problem is also nixing profit margins of e-commerce software vendors that want to sell more business-to-business programs via the Internet, but can't.
"They're afraid to download the software, since there's no way they can stop a business from installing it on as many computers as it wants -- for the price of one," Pang says.
Meanwhile, InterTrust scored a major coup last week. Diamond Multimedia Systems, Inc. agreed to install InterTrust's technology in its popular Rio music player, in order to protect copyrighted songs. Plus, there are rumors in the music industry that Seagram Co.'s Universal Music Group, a giant music publisher, will also use the technology on its music-distribution system.
Even though the mighty Microsoft Corp. (Nasdaq: MSFT) has recently developed its own copyright protection program, it's reported to be willing to make its media software compatible with InterTrust.
Still, Pang says some musicians may balk at using such copyright software protection, especially if they're just starting out. "If you're an aggressive musician, you may want to get your work out there.''
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