Category: Technology

Digital Singles Close to Eclipsing Hard Copies
NEW YORK/LOS ANGELES (Billboard) – Digital tracks are outselling physical singles by a growing margin, a sign that consumers increasingly are embracing the brave new world of Internet downloading.
Digital download sales outpaced physical singles 857,000 to 170,000, according to Nielsen SoundScan figures for the week ending Oct. 26. That’s slightly more than a 5-to-1 ratio.
Sean Ryan, VP of music services at RealNetworks, says that the rise of digital track sales carries a “symbolic significance,” illustrating the music industry’s shift to online delivery options.
He also says it indicates a real opportunity for the music business: “Selling individual songs as an offline strategy wasn’t working all that well, but online it can be a huge hit.”
Nielsen SoundScan data indicates that the trend has been evident since mid-August.
In fact, from the last week of June — when Nielsen SoundScan began tracking digital downloads — through the current week, digital tracks have outsold physical singles 7.7 million units to 4 million.
(The former figure could have been higher, but the digital track figures do not include the first two weeks of sales from iTunes for Mac. Apple reported sales of 1.5 million tracks in its first two weeks on the Mac platform.)
Still, the biggest-selling physical single continues to outsell the top digital track. This week’s top commercial single, “I Can Only Imagine” by MercyMe (INO/Curb), sold 6,900 units. Online leader “Hey Ya!” by OutKast (Arista) rang up sales of 4,700.
What all this means for the music business — and whether it signals the start of a comeback for single sales — is open to debate.
EMI Music Marketing executive VP Phil Quartararo says he isn’t reading the tea leaves just yet — echoing a sentiment expressed by many label executives, who say they are not ready to rush to judgment. Quartararo says he is just happy that consumers are seeing a value in music.
“Any way we can drive a consumer to purchase music as opposed to taking music is a win for the industry,” he notes.
But many sales and distribution executives at the majors contend that contrasting digital track sales and physical singles sales isn’t a straight comparison.
SHIFTING MARKET?
The singles market, much to the dismay of physical retailers, has been in a state of pronounced decline for many years. Because major labels have concerns regarding singles’ potential to cannibalize album sales, only a limited number of those titles are available for sale.
Meanwhile, online consumers have access to a universe of more than 500,000 tracks at 99 cents each.
At the very least, some analysts see digital consumption trends as an indicator of growing market acceptance of the nascent online music services.
But a broader view suggests that the trend marks the start of a commercial shift to a market where individual song purchases and digital distribution will play a much bigger role in the industry’s profitability equation.
†
Regardless of the perspective, label and technology executives say the growth of track sales online shows that the industry is starting to fulfill a consumer demand that previously was being met only by unlicensed, free peer-to-peer networks.
Recent growth in the digital tracks market can be attributed to the rise of PC download sales — particularly from Apple Computer’s iTunes Music Store.
After the debut of iTunes on the PC, which came in the middle of the Nielsen SoundScan reporting period that ended Oct. 19, digital track sales jumped 70% to 685,000 from 406,000 in the previous week.
The gap between physical and digital on individual songs has been narrowing as weekly sales for the most popular digital tracks continue to grow.
On the Billboard Hot Digital Tracks chart this week, each of the 25 tracks ranked were purchased more than 1,000 times — a first. (In all, 32 songs were sold more than 1,000 times last week.)
In another first, two songs on the Hot Digital Tracks chart this week posted sales of more than 4,000 — the aforementioned “Hey Ya!” and “Stacy’s Mom” by Fountains of Wayne, which sold just shy of 4,100 copies.

Apple Launches iTunes For Windows
As expected, Apple Computer Inc. launched the long-awaited Windows-compatible version of its iTunes online music service on Thursday, promising a wider library of songs and new features to maintain its lead in an increasingly competitive market.
“This isn’t some baby version of iTunes. It’s the whole thing,” Apple chief executive Steve Jobs said in a presentation in which he demonstrated the new software and service.
Apple’s online music service will feature over 400,000 tracks by the end of the month. The Macintosh version of the download service has sold more than 13 million songs since launch about six months ago, Jobs said. Citing data from Nielsen SoundScan, Jobs said as of last week iTunes had accounted for about 70 percent of all legal downloads. “This has been the birth of legal downloading,” he said.
The new version of iTunes will offer a library of some 5,000 audio books and allow parents to set a monthly allowance of up to $200 for children to download songs, an attempt to cut back on the illicit file-swapping that the record industry has challenged in court.
With the Windows version, Apple is looking to bring iTunes to a far wider audience: the 90%-plus of personal computers that use Microsoft Corp.’s Windows operating system. Today’s launch also means that Apple will be ready for the crucial holiday shopping season.
Apple Chief Financial Officer Fred Anderson has said that the Windows launch of iTunes would be a Trojan horse for the company, spurring more sales of its popular iPod digital music players, which have also been popular with Windows users.
Apple said yesterday that it had shipped 336,000 iPod units in the September-ended quarter, a rise of 140% from the year earlier.

Simple Flaw in CD-Copy Protection System?
LOS ANGELES (Reuters) – A Princeton graduate student said on Monday that he has figured out a way to defeat new software intended to keep music CDs from being copied on a computer — simply by pressing the Shift-key.
In a paper posted on his Web site late Monday, John Halderman said the MediaMax CD3 software developed by SunnComm Technologies Inc. could be defeated on computers running the Windows operating system by holding down the Shift key, disabling a Windows feature that automatically launches the encryption software on the disc.
Halderman said the protection could also be disabled by stopping the driver the CD installs when it is first inserted into a computer’s drive.
Computers running Linux and older versions of the Mac operating system are unable to run the software and are able to copy the disc freely, he said.
The CD in question, Anthony Hamilton’s “Comin’ From Where I’m From,” was released by BMG’s Arista label in late September. Music retailers praised the release, which BMG touted as a breakthrough in the industry’s efforts to prevent music piracy.
“SunnComm’s claims of robust protection collapse, when subjected to scrutiny, and their system’s weaknesses are not only academic,” Halderman said in the report.
A spokesman for SunnComm was not immediately available to comment on the report. A spokesman for BMG, a unit of Bertelsmann AG, said the company viewed the software as a “speed bump” to prevent mass piracy of the disc.
“We were fully aware that if someone held down the Shift key the first and every subsequent time (they played the disc) that the technology could be circumvented,” BMG spokesman Nathaniel Brown told Reuters, adding the company “erred on the side of playability and flexibility.”
Halderman, who has previously done research on CD copy-protection techniques and their effects on consumer sentiment, called the latest protection attempts into question.
“CD copy-prevention schemes that (depend) solely on software, as SunnComm’s does, will be trivial to disable, and alternative strategies that modify the CD data format will invariably cause public outcry over incompatibility with legitimate playback devices,” Halderman said.
The music industry has blamed piracy and online file sharing services for a prolonged slump in CD sales. Software like that from SunnComm has been seen as a way to slow down the tide of CDs being ripped into digital format and uploaded to the file sharing platforms.

Disney to Test Self-Destructing DVDs This Week
LOS ANGELES (Reuters) – If Walt Disney Co. gets its wish, an experimental type of DVD will begin flying off store shelves on Tuesday — and self-destructing 48 hours later.
Disney movies on disposable DVDs are set to arrive in convenience stores, pharmacies and other outlets in a four-city test of whether Americans will pick up a limited-life DVD rather than dropping by a video rental store.
The red DVDs turn an unreadable black 48 hours after their packages are opened, exposing them to oxygen which reacts with the disc in a process similar to how Polaroid film develops.
The DVDs, which are being distributed by Buena Vista Home Entertainment, Disney’s home video unit, will carry a suggested price of $6.99.
Some retailers are expected to sell them for as little as about $5 said Alan Blaustein, Chief Executive of Flexplay, which owns the self-destruct technology.
The advantage to the disposable DVD format — known as EZ-D — is that such discs can be sold anywhere and never need to be returned, potentially making any retailer a competitor with Blockbuster Inc.
“It should be ‘aisle two, bread, aisle 4, EZ-D,”‘ said Flexplay’s Blaustein, who predicted families would continue to rent videos and start buying the disposable DVDs as well.
The plan has stirred some criticism from environmentalists such as the Alliance for Safe Alternatives, which is asking callers to phone Disney and tell them to scrap the plan which they say will add needless waste to America’s landfills.
The plan offers some recycling — though not in-store — and consumers will eventually be able to get a new disc in return for six used ones, the companies said.
Although the disposable DVD format does not make it harder for digital pirates to make illegal copies, Blaustein said by making DVDs cheaper the effort would also undercut the incentive to make such bootleg copies.

California Court Rules for DVD Industry
SAN FRANCISCO – The California Supreme Court ruled Monday that courts may block Internet users from posting codes that could be used to illegally copy DVD movies, in a case that pitted trade secret rights against free speech.
The justices did not resolve whether the code was in fact a trade secret, leaving that for a lower court to determine. They did rule, however, that they would not tolerate the posting of legitimate trade secrets online and reversed a lower court that said disseminating trade secrets was protected free speech.
The case centered on San Francisco computer programmer Andrew Bunner, who in 1999 posted the code to crack the encryption technology and, according to the movie industry, helped users replicate thousands of copyright movies per day.
The DVD Copy Control Association, an arm of Hollywood studios, said it controls the encryption system, which scrambles data to prevent unauthorized copying of a movie sold in the DVD format. The association sued Bunner and others under California’s Uniform Trade Secrets Act.
A San Jose judge ordered Bunner to remove the encryption-cracking code from the Internet. But the 6th District Court of Appeal in San Jose lifted that injunction, a move the DVD Copy Control Association said was akin to giving crooks the technology to reproduce protected material such as movies on a large scale.
The court of appeal ruled that protecting trade secrets is not as important as “the First Amendment right to freedom of speech.”
A unanimous Supreme Court, however, ruled otherwise Monday.
Justice Janice Rogers Brown, in reversing the appeals court on a 7-0 vote, said an order to remove the code “does not violate the free speech clauses of the United States and California constitutions.”
The case is not fully resolved, however, because the Supreme Court also ordered the San Jose appeals court to analyze whether the code is still a protected trade secret given its widespread exposure.
The DVD association hailed Monday’s decision.
“This opinion has wide applications to trade secret law,” said association attorney Robert G. Sugerman. “Owners of trade secrets can now protect those trade secrets through injunctive relief, which is clearly now available.”
During oral arguments three months ago, California Attorney General Bill Lockyer joined the group in arguing that industry secrets would be plundered if computer users could post them without court intervention. Companies including Boeing Co., Ford Motor Co. and AOL Time Warner Inc. urged the justices to side with the DVD association, arguing that trade secret protections trump First Amendment speech protections.
Bunner did not devise the decryption code, but instead posted it on one of his Web sites. The Norwegian teen who cracked the code, Jon Johansen, was acquitted in Norway in January of charges he stole trade secrets.
Bunner, 26, said he has removed any reference to it from the Internet and is fighting the case to stand up for free speech rights. He is one of dozens of people throughout the United States that the association is suing for posting the code.
He said Monday he believed his actions were lawful, and said he posted the code to let others play DVDs on their computers.
“The idea was to get it out there for an open-source DVD player,” Bunner said.
His attorney, David A. Greene, said the appeals court could still ultimately support Bunner’s actions because the code’s global dissemination may not grant it status as a trade secret anymore.

Poll: 99 Cents Too Expensive For Downloads
A single song download is too pricey at 99 cents, according to a Billboard.com poll. Of 9,034 voters, 61% said that the base price at such online outlets as Apple’s iTunes is too expensive for them.
The largest group, 32%, said 99 cents was simply too much for just one song. Another 29% preferred a less legal approach, agreeing with the statement “Why pay for it when I can download it elsewhere online for free?”
On the other hand, of the 39% who are in favor of the sub-$1 price structure, 22% felt 99 cents was OK if the quality and selection of the service offering the tracks is good. An additional 17% considered the cost a fair amount, “based on what you have to pay for an album.”

Web Worm Attacks Windows, Spreads Fast, Experts Say
SAN FRANCISCO (Reuters) – An Internet worm that takes advantage of a recently discovered, widespread security hole in Microsoft Corp.’s Windows software emerged around the United States on Monday, crashing systems and spreading to vulnerable computers, security experts said.
The worm, dubbed LoveSan, Blaster, or MSBlaster, exploits a vulnerability in the Distributed Component Object service that is hosted by a Remote Procedure Call feature in Windows 2000 and Windows XP that lets computers share files, among other activities.
Once it gets onto a vulnerable computer, the program downloads code from a previously infected machine that enables it to propagate itself. Then, it scans the Internet for other vulnerable machines and attacks them, said Johannes Ullrich, chief technology officer at the Internet Storm Center at the SANS Institute.
In some cases, the worm crashes the victim machine, but does not infect it, he said.
It is spreading rapidly and has infected several thousand machines, Ullrich said.
The worm also appears to instruct the computer to launch a distributed denial of service (DDOS) attack on Aug. 16 against a Microsoft Web site, he added. In a DDOS attack, a Web site is temporarily paralyzed after receiving requests from numerous multiple computers.
“It’s dangerous from the perspective that it can consume a lot of bandwidth,” said Russ Cooper of TruSecure Corp. “Every compromised machine is constantly attacking.”
The worm contains code that includes a phrase: “Billy Gates why do you make this possible? Stop making money and fix your software!!,” according to SANS.
Anti-virus provider Network Associates rated it a medium risk for consumers and corporate computer users, while rival Symantec Corp. rated it a high risk for distribution and a low risk for damage.
Last month, Microsoft warned of the vulnerability, which experts said was one of the worst to hit a software program in a few years because of the number of Windows systems affected.
The U.S. government issued a warning about the security flaw, and then released another advisory warning after thousands of machines began scanning the Internet looking for vulnerable computers. After that, experts said it was only a matter of time before a worm would appear.
In January, a worm dubbed “Slammer” that exploited a hole in Microsoft SQL database software brought automatic teller machines in the United States to a standstill, paralyzed corporate networks worldwide and nearly shut down Web access to South Korea.

Disney Inks Deal on Downloading Movies
LOS ANGELES – Scores of Disney films like “Chicago” and “Monsters Inc.” will soon be available for downloading off the Internet through a licensing deal reached between the entertainment giant and online movie service Movielink, the companies said Wednesday.
The agreement between The Walt Disney Co. subsidiary Buena Vista Pay Television and Movielink was finalized last week. Financial terms were not disclosed.
The deal gives Movielink access to film titles from all the major studios except one ó Twentieth Century Fox Studios ó and boosts its library of digitized films to around 400 from the 175 the company had when it launched eight months ago.
Movies from Walt Disney Pictures, Touchstone, Miramax and Dimension New Releases will be available through the service. Among the first releases will be “Gangs of New York,” “The Recruit” and “The Jungle Book 2.”
The first batch of Disney titles won’t be available until August because they have to be transferred to a format for downloading, Movielink CEO Jim Ramo said.
Plans by Disney to develop a video-on-demand service called MovieBeam this fall are still on, a Disney spokeswoman said. Unlike Movielink, MovieBeam would deliver films directly to consumers’ TVs through a set-top box.
Disney will set the retail price for the movie downloads, which typically range between $2.95 and $4.99, Movielink said.
The movie files can be viewed on a PC or on a television connected to a computer, but customers have a maximum of 30 days to begin watching their downloaded movie. Once they begin to do so, the movie can be viewed only over the next 24 hours.
A computer with a broadband Internet connection is necessary to use the service.

You may be on record industry’s hit list
Online swappers are wondering whether their names are on the record industry’s hit list can check online to see if they’re among 871 whose identities were subpoenaed in the first step of unprecedented mass legal action to stem Net piracy.
The Recording Industry Association of America says it plans to sue the song traders next month.
The U.S. District Court’s Web site (ecf.dcd.uscourts.gov) is searchable, though users must first apply for an account; confirmation comes a week later in the mail, and there are fees for documents. The Electronic Frontier Foundation may offer quicker action: The activist group hopes to soon let the public check the same information through www.eff.org.
The subpoenas, sent to Internet providers, list the screen names of Kazaa users (Bency-987 and Sk8BoyBen, to name two) along with songs the RIAA says were traded. The provider must reveal personal data and inform the subscriber. “We’ve received 150 subpoenas in two weeks,” Verizon’s Sarah Deutsch says. “This type of activity is unprecedented.”
Verizon, which has put several employees in charge of doing nothing but processing the requests, has been battling the RIAA over the question of naming names. Two recent court rulings opened the door for the wave of subpoenas; Verizon is appealing.
“The privacy questions are huge,” the EFF’s Fred von Lohmann says. “They treat everyone as a copyright infringer, and you’re assumed guilty until proven innocent.”
The RIAA doesn’t always get it right. This year, it accused a Penn State professor of sharing a song by the musician Usher. In reality, it was a homegrown tune about astronomy by a professor named Usher. The RIAA later apologized.
RIAA president Cary Sherman initially said he was targeting the “most egregious” swappers, but the subpoenas list only handfuls from artists such as Avril Lavigne, Kenny Chesney and Snoop Dogg.
“A subpoena need not list every song a user is making available,” the RIAA’s Amy Weiss says. “It may only include a representative sampling.”
Verizon directs users to www.subpoenadefense.org for tips on getting a lawyer and fighting charges.
“I’ve been getting thousands of e-mails,” says Bill Evans, who runs www.boycott-riaa.com. “The RIAA is alienating a lot of people, not just file sharers.”

Apple Unveils G5 Computer, Doubles Power
SAN FRANCISCO (Reuters) – Apple Computer Inc. on Monday introduced new Macintosh computers that use its “G5” microprocessor, a design by International Business MachinesCorp. that can handle twice as much data at once as traditional PC microchips.
The Cupertino, California-based computer maker also said at a developer conference in San Francisco that its new online music store had sold 5 million song downloads since its inception eight weeks ago, or an average of 625,000 songs a week or more than 89,000 songs a day.
“It looks like it’s slowing a little bit, but that was expected,” said Rob Enderle, an analyst with market research firm Forrester, of the rate at which online songs are selling.
Apple plans in August to begin selling three models of desktop computers based on the G5 chip, which can manage 64 bits of data at once, compared to 32 bits for traditional home computers.
Chief Executive Steve Jobs told the developers that with the new Macintoshes Apple has topped its main competition, Microsoft Corp. Windows-based PCs, which use chipsfrom Intel Corp. and AMD that run at faster rates — measured in gigahertz — than those in current Macintoshes.
“We can clearly say we’ve caught up with the PC and passed them,” said Jobs, dressed in his trademark outfit of jeans and a black shirt, to applause from an audience of 3,800.
With an August launch, Apple will become the first to introduce a personal computer with a 64-bit chip, just beating to the punch Advanced Micro Devices Inc., which plans in September to launch a 64-bit chip for desktop PCs running Windows.
There has been speculation that Apple would eventually use Intel chips and the announcement on Monday does not chance that, Enderle said, adding that he still expected Apple to announce next year it will use Intel chips.
“I think chances are like 8 out of 10 they will go with Intel,” Enderle said. “I know that he’s (Jobs) been over at Intel an awful lot and Intel has been over with him quite a bit.”
A spokesman for Apple declined to comment.
Whether consumers will embrace the new technology quickly is an open question, however, since to date only business machines meant to manage networks have used similar chips.
Most advances in home PC chips so far have simply made them run faster, but a 64-bit chip is fundamentally different. To take full advantage of the new chip design, software must be rewritten, although the Apple/IBM and AMD chips are built to be compatible with older software, as well.
Designing a microprocessor is a long, complex process and manufacturing them is expensive. Additionally, Jobs said that G5 chips running at 3.0 gigahertz are due out within the next 12 months.
Chip companies publish road maps, typically measured in years, detailing how long a certain chip will be produced and when successive iterations of a chip will be available.
Phil Schiller, head of worldwide marketing for Apple, declined to comment on the specific length of the road map between Apple and IBM, except to say: “There’s a long road map here. This is the beginning of many things to come.”
The Power Mac G5 starts at $1,999, with a 1.6 gigahertz PowerPC G5. The Power Mac G5 with a 1.8 gigahertz processor starts at $2,399, while the top of the line Power Mac G5, with dual 2.0 gigahertz processors, starts at $2,999, Apple said.