Rick Karr is a journalist and Cultural Correspondent for National Public Radio (NPR) covering art and technology issues (he was also the host of the now sadly defunct NPR program Anthem).

Rick first caught our ear last month on Morning Edition where he reported about the MP3 hardware slowdown prior to Christmas 1999. His piece touched on some of the most interesting questions surrounding MP3, SDMI and Digital Download technology. In a happy coincidence he showed up later that week in a Musictech list discussion with even more insights into the topic.

Nice guy that he is, Rick jumped at the chance to chat about digital download technology with Jenny. That discussion follows.

Jenny Toomey: So Rick, what’s your real title at National Public Radio?

Rick Karr: Cultural correspondent.

J: What’s your history with music and technology?

R: Well, for my experience with music… I studied classical piano for about 12 years. About 8 years into that I started playing guitar and started my first band. I played in bands through high school, college and up until about two years ago. I did it always sort of indie style. The last band that I was in was on a very small Chicago indie label called Sweet Pea.

J: What band was that?

R: We were called Tart. We finally self released a CD and then we broke up.

My experience with technology was that I’ve always been an incredible geek. I was a keyboard player and I got into synthesizers and I wanted to be like Richard Tandy from ELO — I wanted to have banks and banks of synthesizers. Then when new wave hit and interesting bands like Pere Ubu started I got way into synthesis and computers. Actually for the first two years of college I was a computer science major. So I’ve always had the two things side by side. I wrote songs and I played my friend’s songs but my interest in music was primarily technical because I loved the studio. For instance, when DAT came out I was incredibly excited because it was like, “Wow, digitally accessible technology!” I’ve always tried to keep abreast of those technological changes.

At the same time, to me, a lot of what’s going on with musical technology now is not about music or technology at all; it’s about social organization.

J: How do you mean?

R: Well, one subject that interests me as a reporter is the fact that we are moving from an industrial economy to a digital economy. For some people that phrase is just so much empty BS coming from the media. But if you really look at it, music is the second product that is truly about to go completely digital, completely virtual, completely abandoning the industrial realm. (The first product, by the way, was pornography.) So music is the first product that everyone can admit to consuming that is going completely digital. So it’s really interesting to see how the digital economy will change our cultural structures. You see, all of the structures that we use to organize our economy and our civil society in the industrial age were formulated to meet the needs created when we went from an agrarian / agricultural economy to an industrial economy. For example, limited liability corporations, double entry book keeping systems, patents and copyrights, all of these things came up as ways of saying, “OK, now we are not growing things, we are making things.”

So here we are in a new era and we have to confront this huge change where we’re not making things anymore. We are making ones and zeros. In a lot of ways I think what happens in the next few years in music, for better or worse, will set the standard for a lot of other cultural structures to come.

J: I completely agree with you.

R: So in terms of freedom of access and freedom of information and freedom of bandwidth…

J:…and privacy…

R: …and privacy and what kinds of ideas can you own. All these questions are fascinating to me.

So back to your original question, in a way, these three threads of my life come together in covering music technology. My life as a musician, my life as a geek and my life as a social theory student.

J: You wrote an interesting piece about the lack of portable MP3 players available this Christmas [Real Audio archive of NPR piece] which concluded that the SDMI slowdown is at fault. Can you explain what SDMI is?

R: SDMI stands for the Secure Digital Music Initiative and it’s just that — an initiative, a working group of people from hardware companies, software companies and, from what the industry is now calling, “content providers”, i.e. the Major Record Companies. SDMI is an attempt to figure out how to securely deliver music in a virtual way. In other words, with digital downloads you don’t buy a round piece of plastic (a CD), you just download music information. In its ideal form, what they mean by “securely”, is that it will preserve artists’ rights and prevent unauthorized copies of the music from being made. What it means in practice — and this is all they’ve done so far — is that they have agreed on a way of determining what music is going to be covered by SDMI and what music isn’t.

The reason they need to do this is because in the early days of this technology the music industry realized their copyrights were very vulnerable to piracy. Nowadays you can take any CD in your record collection, throw it in your computer and (using very inexpensive technology) you can do what they call “rip” it. This takes the music off of the disc and converts it into an MP3 file. Then you can put it up on the internet for your friends to grab or you can e-mail it to your friends. What a lot of people in the Industry wanted to do once they learned about MP3 technology was basically to make sure that every CD player built from now on, and every piece of hardware that played music from now on, won’t let you listen to any content that isn’t covered by SDMI. In other words they were going to make your entire CD collection worthless.

J: (Laughs)

R: The industry wanted to make sure that you couldn’t rip things anymore. I mean, you could keep ripping things and playing them on your old CD player but ultimately there would be attrition and your CD player would break (in the same way that no one listens to 8 tracks anymore). So this was sort of the initial idea that some folks in the industry were pushing. Well, very quickly everybody in the industry began to realize that that was a ridiculous solution. Consumers weren’t going to go for that. So what SDMI decided to do was set up phases. Phase 1 requires them to come up with a way to determine which music is going to be covered by SDMI and which music isn’t. The way they plan to distinguish between the music that is covered and the music that is not is by watermarking all newly manufactured releases. Watermarking is a process by which a complicated stream of digital bits is embedded in the music. It’s done in such a way that your CD player doesn’t really notice the extra info in terms of audio, but it will notice the watermark if you intend to copy it. If the watermark is there, that means that the track is SDMI-compliant music. In the future, all music-playing devices are not supposed to let you rip this type of file. If the watermark isn’t there, (i.e. all your existing CDs) you can do anything you want with it. That’s as far as they’ve gotten right now.

J: You said in your piece that there were originally supposed to be 20 of these digital Walkman-style devices available for purchase at Christmas, but now there are only 3 because most companies do not want to risk creating hardware that might become obsolete after the SDMI requirements are fixed.

R: It’s a little more complex than that. A lot of those twenty prototypes that were announced were pretty obviously “vapor-ware” from the get-go, in other words, they were stuff that companies were pretending to release in order to spike their companies’ stock prices. It was pretty clear that some of these companies didn’t have their acts together. But yeah, people did think there were going to be a lot more of these things available.

In fairness to SDMI they said they wanted to have Phase 1 done in time for Christmas and technically speaking they made that deadline. However, they didn’t get it done fast enough for the devices coming out now to have any Phase 1 compliance in them. And what’s more, Phase 1 is really kind of irrelevant to the hardware people. Phase 1 is far more relevant to the “content” people. The content people i.e. record labels are taking their sweet time embedding the watermarks. Right now, most labels are saying that their product isn’t going to be watermarked until the first quarter of 2000. The reason for hold-up is that they literally have to remaster all the CDs to add the watermark. So for the most part, I think the slow implementation is mostly a result of the inertia of the record companies saying, “Eh you know, it’s not worth us doing it right now” that is slowing down the process.

J: What do you think about a darker read of what’s going on with SDMI? For example, you’ve got 5 competitive companies (meaning the Big 5 record labels) purporting to work together on SDMI when it’s pretty clear they can make a lot more money owning the software rights to the watermarking or encryption software than they can in record sales?

R: Well, SDMI doesn’t imply an encryption standard. If you talk to Leonardo Chiariglione who is in charge of SDMI (and who ironically was also in charge of the group that created MP3), he says that SDMI Phase 2 will ideally be “technology agnostic”. In other words, it’s going to let the record companies choose their own encryption and compression systems. SDMI is just going to be a set of rules of how devices are supposed to be programmed if you try to do things with that content. This is why Phase 2 of SDMI is going to be so difficult. They will have to come up with a set of rules that has very fixed outcomes, in other words, rules that say “No you cannot rip this CD into an MP3 and e-mail it. You might be able to rip it and load it into your own player but you can’t e-mail it.” These are very specific rules, but at the same time the application has to be technology agnostic. That way if one record company decides to deliver product in Windows Audio and one delivers product in Real Audio, Phase 2 has to be able to deal with both of those. If one company decides to encrypt and one doesn’t it has to be able to deal with that as well.

But I’m not sure I understand the upshot of your question. That they would make more money if…?

J: In the same way that the Philips who created the CD technology gets a 7 cent royalty every time a CD is manufactured. My assumption was that they would all have to agree with a certain digital standard and then everything would have to be encrypted in relation to that technology. So my fear is this: the labels are saying that they are worried about making their back catalog vulnerable (i.e. agreeing to an unproven encryption standard that could be cracked) but they are actually just waiting and bullying back and forth to make sure that it will be their corporation who will get paid in software royalties once the software standards are adopted.

R: I have two reactions to that. One, I think it’s too late for that. I think what happened in CD is that Philips was way ahead of the curve with digital technology. Philips launched it and everybody in the industry said, “It will cost us billions or at least tens of millions to come up with something that competes with this, so let’s just go with them.” Whereas in the software world things move so quickly and standards for things like encryption are so evanescent that there really is no way for any one company to get out ahead of everybody and say, “this is the standard that we’ll use.”

Now, by the same token, there are elements of what’s going on right now that smack of what you’re talking about. There is a company called InterTrust Technologies Corp and it owns the most of the patents on Digital Rights Management.

Digital Rights Management is a strategy to ensure that everyone who has a stake in the content you are downloading gets a little bit of the money that is paid for it. It’s the digital equivalent of what ASCAP, BMI and SESAC do in the real world. These organizations make sure that songwriters get paid. That, for example, Northern Songs Limited gets paid every time somebody plays a cover of “Hey Jude”. Intertrust owns the patent on this Digital Rights Management technology, so in the future we will be paying micro-payments of royalties to them on all downloads because they jumped out and got a patent on the *notion* of micro-payments. So yeah, there are aspects of what you’re talking about, but I don’t think the major labels care about stuff like that.

J: Really? You see, I don’t think of the majors as just majors anymore. I see them as small parts of huge media corporations. The recent merger between AOL and Time-Warner is a perfect example. Before all the mergers you may have just been a record label without any interest in dabbling in software. Nowadays these labels are often partners with huge corporations that may also own a huge software company. Or maybe the label’s operating budget is influenced by a partnership with a software company, for example, the $20 million deal between Musicmaker.com and AOL.

R: Yeah, I think that’s a fair assessment.

J: So it’s not just the head of, say, WEA who is deciding what standards of encryption and SDMI that they are going to agree to. It’s WEA’s media-corporation partners (and I’d have to look at one of those scary charts that names all of the scary corporate partnerships to WEA in order to tell you which one). I have the feeling that it all crosses over so much now that everyone is holding up the technology because they are attempting to get paid several different ways.

R: I agree, that’s probably part of what’s making it take so long. When you look at the format war between 33s and 45s it was pretty easy for any given record company to figure out what format they were going to go with, because the format was issued as an answer to the 33. In fact most companies said, “We’ll just go with both.” We all know how that shook out, because it was all just music guys making the decisions. It was easy. Now you have such huge corporate entities. For example, Sony makes movies. Everybody in the movie industry understands that movies are eventually going to be delivered the same way that music is now. So the people in Sony Pictures are saying, “Whoa, let’s go slow here, let’s not set any precedents now that we can’t live with for the next 30 years. These choices could have a negative influence on our revenue stream 30 years down the line.”

J: When do you see them agreeing on a SDMI standard? Do you ever see them agreeing?

R: You know, it’s really hard to guess because part of me wants to say I don’t know that they are ever going to, I think there are too many interests at loggerheads in this. I think that it’s pretty clear that some of the majors are playing a wait-and-see game or are trying to come up with their own ways of doing things. For instance, Sony is playing around with the new Memory Stick Walkman. They want to be able to start selling on the new format so they are saying; “Maybe we will preclude complete digital delivery. ”

A lot of this also has to do with the evolution of bandwidth. Once everybody has a T1 pipe into his or her home, (which may be a year from now or 10 years from now) it’s going to radically change things. Plus there is some technology floating around now that may evolve very quickly and take the whole thing wireless. Look at the high bandwidth local network that Apple has rolled out with the “Airport” on the iBook. There are a lot of people who say, “Look how quickly we built a digital cellular network, there is no reason why we couldn’t build a digital data delivery network just as quickly.”

Once the bandwidth evolves I think you’ll see a lot of people in the industry going to a “pay per play” standard. “Pay per play” is a download strategy where the consumer does not own the permanent license to listen the music at all. They have to pay for it every time they listen to it. So with “pay per play” the entire idea of owning a license, (which is really what you own when you buy a CD) is changed. Right now when you buy a CD you’re really buying the license, that’s the contract you are making. The law says, “you buy it you get the rights in perpetuity, you licensed it for your own use.” I think a lot of people at the major labels are now saying, “Listen, if we can make people pay for music every time they listen to it, doesn’t that maximize our revenue stream?”

J: I think it will be very difficult to convince the music consumer to spend money on something that they don’t get the right to own essentially giving up a right they’ve always had in the past. I’ve read about the “pay for play” model and the “subscription” model and other hypotheses of how artists will be compensated in the future but I have a hard time conceiving the change.

When you talk to the performance rights associations they say that publishing is here to stay and it’s only a matter of figuring out a new way to quantify and collect these digital royalties. Yet all you have to do is about 10 minutes of research to see that they are doing a pretty rotten job collecting these royalties. Insound actually had to chase BMI down to get a license to pay them. So, not only are they not chasing down the pirates, they aren’t calling back the honest sites that have left messages asking to pay.

R: Yeah, well as far as they are concerned for right now there is very little money in it.

J: So that’s the performance rights organizations, and whenever you talk to the technology heads they say that the age of publishing royalties is over and artists are going to have to figure out how to get paid in other ways because there is no way to permanently encrypt music. If the performance rights organizations are not going to chase down internet royalties who do you think will do it?

R: I think the artists themselves have to and they have to educate their fans about it. The artists need to educate their fans to stay away from piracy and pirate sites. In a lot of ways the Chuck D world of half a million labels and a million artists is a great thing, but it does mean that the artists have to take on a lot more responsibilities. There are some things that major labels do well. If you are a commercially viable artist on a major you can have a pleasant experience. They can be very good at distribution and publicity…

Chuck D and Prince and Robert Fripp to a large extent are saying now that the standard practice of the label owning the copyright is onerous. “I should own the fruit of my labor.” Some would ask, “what would a label become if it wasn’t the owner of the copyright?” Well, the answer to that is that they become what they always have been — distributors and promoters. Since the distribution aspect of manufacturing records disappears in the digital download format they basically become ad agencies or marketing agencies. They create the ads, buy the time, help with brand identity, they do cross-media campaigns and they do promotion and marketing and all these different things. It’s an across-the-board marketing thing. I think that the ideal world for the artist is this smorgasbord of different companies that are marketing agencies and there are big ones that are the descendants of EMI who you license yourself to for a while because they are a good at promoting artists and making them big and there will be small ones like Simple Machines or Matador who are better at doing different kinds of genre artists and that’s what they do.

There are other ideas, too. There’s a professor at MIT named Richard Stallman who has the notion that we should just do away with copyright. I asked him the question, “Wll, as a musician, how do I get paid?” He answered, “You play live, of course.” But we all know that tours don’t make any money.

J: Well, a lot of tours don’t make any money, some of the biggest and the smallest ones. My response to that is that that type of public performance is not how most major businesses make money. For example designers lose money on their shows and collections but make money on their brand. They take a loss on the $5,000 dress in order to get the publicity that sells thousands of bottles of $50 perfume. Most successful businesses are the result of a large volume of inexpensive sales.

R: Precisely — loss leaders drive revenue. But what you end up having under the Richard Stallman model, if you want to call it that, is a world where music becomes free and going to a concert becomes incredibly expensive. Fugazi’s ticket price cap goes out the window because it will be the only way for the band to make any money. Either that, or you get only trust-fund kids making music, which is already enough of a problem as it is.

J: I was going to ask you about the three other models of how artists would get paid if downloaded music becomes the standard. We’ve already talked about two of these: “pay-per-play” and subscription models. The third is the advertising model that would work like radio where bands get paid out of money that sponsors pay to the websites. My first question about that is, “do we know if internet advertising even works?”

R: No, we aren’t sure and if you press anybody on that point they just reference the example of radio. There is a site which used to be called Imagine Radio; it was sucked up by Sonicnet, which was sucked up by Viacom. It uses a piece of artificial intelligence software called expert system to figure out what you are likely to like and not like. You would answer a bunch of questions up front about bands you like or don’t like and then they just start playing songs at you. Every time a song starts playing a box shows up on your desktop that has 0-5. Zero means, “get this off I never want to hear it again.” Five means, “this kicks ass, I really like this.” So it slowly builds a profile of what you like and don’t like and then it compares the profile with other profiles and tries to make predictions about what you haven’t heard but are likely to like. So it’s conceivable that a model like that where you drop in ads every fourth song might be an interesting kind of virtual station. It would expose you to new music. It would act as an intelligent gatekeeper for you — in a way it serves the role that, say, rock critics or friends with good taste or radio stations with interesting playlists play in the music world right now.

J: Well we’re going to see. Thanks Rick!