The first casualty of this decade's digital music revolution has been music sales, as consumer switched from CDs to 99 cent singles or free downloads. But some industry executives see a chance to reverse the trend and sell music in significantly larger bundles -- more songs, in fact, than the average consumer buys in a year. That's the home-run swing promised by initiatives such as Nokia's Comes with Music, which signed up its third major record company today, Warner Music Group. Universal Music Group, an early advocate of this kind of thing, and Sony BMG were already on board, with EMI still in licensing talks.

The Comes with Music proposition is simple: buy a specially designated Nokia phone, get an unlimited number of seemingly free song downloads for one year. That's seemingly free, not actually free, because the price of the phone will include a hidden sum that Nokia will split with the labels and music publishers.

Knowledge Ecology International, a group that seeks to reduce the control wielded by patent and copyright holders, recently posted a list of suggestions that the RIAA purportedly sent to the U.S. Trade Representative for what to include in the proposed Anti-Counterfeiting Trade Agreement. Ars Technica's Nate Anderson took up the issue today, accusing the record companies of trying to disembowel the safe harbor provisions of the DMCA. I checked the legitimacy of the Knowledge Ecology post with Neil Turkewitz, the RIAA's point man on such things, and he said it looked accurate. Not surprisingly, however, he offered a somewhat different take than Ars. Yet he acknowledged that some aspects of the RIAA's proposal for ACTA go beyond U.S. law on the enforcement of copyrights online.

The major record companies made their written case today (download the .pdf here) against a new trial for Jammie Thomas, the single mom ordered by a Minnesota jury to pay $222,000 for infringing the copyrights on 24 songs through Kazaa. The main legal arguments include:

• Thomas downloaded many of the songs in her shared folder from other Kazaa users despite being away that such copying was illegal. Thus, she willfully she violated copyrights even before she made the songs available for others to copy;
• The RIAA's contractor, MediaSentry, downloaded "numerous" songs in Thomas' shared folder, providing evidence of actual distributions. Bill Patry's arguments to the contrary, the fact that the downloads were by the labels' contractor doesn't make them authorized.
• Federal law equates "distributing" with "making copies available for others to take," regardless of whether there is an actual distribution.
• The cases cited by those seeking a new trial aren't relevant or misinterpret the law.
• The U.S. is obligated under international treaties for the protection of intellectual property to equate "making available" with "distributing."

These are contentions, mind you, and Thomas' lawyers have their own brief.

Today, Rhapsody (a joint venture between RealNetworks and Viacom's MTV Networks) launches another initiative aimed at selling its subscription music service. My colleague Michelle Quinn has the details here , such as Rhapsody's answer to the new Napster MP3 store, but I wanted to drill down on a couple of elements from the announcement.

To me, the MP3 store is the least interesting feature. Yes, it has more DRM-free tracks than the iTunes store, but so does Napster's. More intriguing are the partnerships aimed at introducing more people to Rhapsody's vast celestial jukebox, the core feature of its subscription service. These deals, especially the one with iLike, may mark the first time Rhapsody or any other subscription-music service has been effectively marketed. (When it comes to selling digital music products and services, Apple has been in a league of its own.) Sometime in July, iLike's 28 million users will be able to play for free just about any song mentioned on its network of sites, not just 30-second samples or the handful of full-length tracks posted by selected artists. The same capability will be rolled out gradually through Yahoo and MTV Networks' online properties, such as CMT.com and VH1.com.

There is, however, a non-trivial caveat.

I was reminded today of why I couldn't be a lawyer. My brain's still hurting from the series of briefs I read in Capitol v. Thomas case. Nevertheless, I commend them to you (check out Ray Beckerman's website for a list) for two reasons. First,  the issue in question -- whether the mere act of putting a song file into a folder that others can download from constitutes infringement -- is hugely important. Under the interpretation advanced by the RIAA and the MPAA, making a file available for copying online network is enough to violate its copyright, even if there's no evidence that anyone actually copied it. Although the Jammie Thomas case involved a file-sharing network, the argument could just as easily apply to any folder made accessible to the public via the Web -- for example, the one associated with a certain 9th Circuit Court of Appeals judge.

Second, there's a fascinating line of reasoning in the MPAA's brief about the need to interpret U.S. statutes in a way that's consistent with international treaty obligations. That sort of argument is unsettling, given how aggressively U.S. negotiators have been pushing intellectual property protections on our trading partners. It raises the possibility that copyright owners could win protections through treaties and the courts that they could not get directly from Congress. But Bill Patry offers a counterpoint in this post.

UPDATE -- in a new post last night, Patry also responded to the argument, advanced by Thomas Sydnor of the Progress and Freedom Foundation, that the 8th Circuit's National Car Rental decision doesn't apply here. According to Sydnor, that decision is superceded by the Supreme Court's ruling in the Tasini case, which Sydnor argues established the precedent that "making available" was infringement.

Thomas was the first person sued by the RIAA to face a jury. She lost (to the tune of $222,000) but the judge in her case is weighing whether to grant her a new trial based on his instruction to the jury that making songs available constituted infringement in and of itself. Most of the cases filed by the RIAA include similar allegations of "making available" infringements, but that's not the only evidence the labels bring. Typically, their anti-piracy contractor, MediaSentry, also downloads copies of songs from the targeted file-sharer. Of course, if the RIAA loses the legal battle over making available, that invites a battle over whether MediaSentry's downloads can be considered infringements, given that the company works for the copyright owners.

A little more than a year ago, the creators of Azureus -- a file-sharing program based on the BitTorrent protocol -- launched Vuze, a version that ignored bootlegs in favor of authorized copies of TV shows, movies, games and other programming. The idea was to create a file-sharing environment that content owners would want to participate in, and that would present less risky revenue streams. By focusing the software only on authorized files, Vuze could charge fees for files or sell advertising around them without fear of being sued for profiting from piracy. It soon attracted content from dozens of producers around the globe, including the BBC, PBS and TOKYOPOP, although the major Hollywood studios largely kept their distance.

This month, Vuze did an about-face. Unleashing the software's search engine, it enabled users to find and retrieve content indexed by some of the world's most popular BitTorrent search engines. These include Mininova, an index site in the Netherlands now under legal assault from Dutch anti-piracy authorities. As a result, users don't have to fire up a second file-sharing program to find free, pirated versions of the titles Vuze offers on a pay-per-view basis. They can do it through Vuze's search engine.

CEO Gilles BianRosa acknowledged that the move didn't meet with universal acclaim from the companies providing content on Vuze. Yet he said that the change merely acknowledges the reality of the marketplace, and argued that it would help content owners compete better with online bootleggers.

Show of hands: how many of you have bought a used CD or DVD stamped "Not for Sale/Promotional Use Only"? Tuesday, a federal judge issued what appears to be the first ringing defense of the promo market, rejecting Universal Music Group's lawsuit against someone who sold promo CDs on eBay. UMG claimed that, as the CD cases clearly stated, the promotional discs were merely "licensed" to their recipients. The license agreement barred the discs from being sold, so when defendant Troy Augusto peddled the CDs, he violated UMG's copyrights (specifically, the company's exclusive right to distribute the works). But U.S. District Judge S. James Otero in Los Angeles held that UMG gave up ownership of the CDs when it mailed them to reviewers, publicists and other industry insiders with no expectation that they would be returned. As a consequence, Otero ruled, Augusto was the rightful owner of the discs, and under the "first sale" doctrine, he was entitled to sell them (provided that he didn't keep a copy). And no, Otero ruled, the fact that the CDs were sent out as gifts doesn't affect the recipients' right to sell them.

It's an important ruling, and not just for used CD buyers. It adds weight to the growing body of case law holding that companies can't stop buyers of copyrighted products from reselling them. Just last month, for example, a federal judge in Washington state rejected a lawsuit by Autodesk against someone selling used copies of AutoCAD software on eBay. And for Augusto, who was represented by lawyers from the EFF and Keker & Van Nest, it should mean a respite from record company litigation. Universal , in fact, was the second of the four major record companies to sue. He had agreed to a consent judgment with EMI in 2004, but when Universal sued last year, he figured it was time to put up a fight in court. Looks like he was right.

Promusicae, the Spanish trade association for the major record companies (e.g., the Madrid version of the RIAA), filed suit in Spain this week against p2p developer Pablo Soto, creator of the Blubster, Piolet and Manolito music file-sharing networks. Soto's networks represented the second generation of p2p, which eliminated the central controls that got the original Napster into legal trouble. He later added a layer of anonymity to sharing, making it harder to identify those who were swapping songs illegally. I can't read Spanish, so I can't even pretend to analyze the legal claims made by the labels. But their press release accuses Soto of developing software with the intent of profiting parasitically from other people's works. It also argues the the networks were created specifically to share songs online:

All the promotional slogans on Soto’s websites urge users to swap music recordings. Their wording, always in English, encouraged the user to “enter into the world of free music downloads, to download music while you chat with your friends” or said that “million users in the whole world can share their music files and help the online community to grow.”

In addition, it notes that Soto's networks "all lack any kind of filter to avoid the exchange of files protected by authors, producers and performers’ intellectual property rights." Those allegations wouldn't take the case very far in the U.S.  For starters, it's legal to share songs online if the copyright owners grant permission to do so -- not something the major labels have done, admittedly, but some independent labels and artists have. And it's not necessarily illegal to facilitate unauthorized sharing, particularly if the technology has a legitimate use and its creator can't monitor or control what people do with it. Nor is there any obligation to use filters to block infringements, at least not yet.

In an interview, Soto said, "What they claim is that we are competing with them and we are breaching their IP [intellectual property]." But he insisted that unlike Napster, his programs give him no way to watch what users do. He also noted that numerous independent musicians use Blubster to distribute their songs. "Many of those musicians need to use p2p software because they can't get distribution deals" from the major labels, he said.

The case raises the same set of issues that the RIAA and MPAA litigated here against Grokster and StreamCast (distributor of the Morpheus software), and both here and in Australia against the companies behind the Kazaa software. The labels won those cases with the help of internal company records and testimony showing that the companies planned to encourage and capitalize on piracy. The Supreme Court's ruling in the Grokster case doesn't apply to Spain, though, so the courts there will be following a different legal roadmap.

The lawsuit seemed a little odd, given that Soto's networks are small potatoes compared to BitTorrent and other third-generation p2p applications. Soto suggested that the labels were running out of options for deterring piracy in Spain. The record companies' efforts to identify individual infringers on p2p networks have been blocked by the courts, as have their claims against sites to bootlegged songs.   

UPDATE: I got a bit more insight into the complaint from Beatriz Sanchez-Eguibar, director of legal services for Promusicae. Although there's no concept of "contributory infringement" in Spanish law, she said, the complaint against Soto accuses him of infringing copyrights by making software available to people who used it to make unauthorized copies of songs. It also accuses him of unfair competition because his profits came at the expense of the labels' works. Soto has about three weeks to reply to the complaint, and hearings on the case could be wrapped up within a year. As for the links sites, Sanchez-Eguibar said that some had been temporarily sidelined, but the cases had yet to be decided. And in regard to lawsuits against individual infringers, she said Spanish law recently was changed to make it easier for Promusicae to force ISPs to disclose the identities of customers whose accounts may have been used for piracy. "A new door has opened," Sanchez-Eguibar said, although the labels have yet to walk through it.

In response to John Mitchell's request (see his comment below), I asked Sanchez-Eguibar to send me a copy of the complaint, but she said it was confidential. So all I can offer on that front is jpegs of five pages supplied by Soto's publicist. I have no reason to doubt their authenticity, but I can't vouch for how complete they are. Here you go (click on the images to get a full-size view):

SpiralFrog, the ad-supported music-downloading service, announced Tuesday morning that it has signed a distribution deal with EMI, the country's fourth largest major record company (out of four). The news comes nearly two years after the company signed its first (and only other) major label deal, with market leader Universal Music Group. Ahh, remember when EMI used to be the first in line to support new business models online? At any rate, the deal brings an odd assortment of notable acts to SpiralFrog's roster of free downloads, including Coldplay, Norah Jones, Keith Urban, Frank Sinatra and David Bowie. Company chairman Joe Mohen has said he expects SpiralFrog to line up the remaining majors by the end of the year. Until it does, its service remains intriguing but incomplete, with a growing user base despite some handicaps that will be hard to overcome (e.g., it doesn't work with iPods).

The Center for Democracy and Technology weighed in today on the delicate subject of privacy and digital watermarks, recommending a series of best practices for protecting consumers against the unauthorized use of personal information. It's a tricky issue because watermarks -- unique digital identifiers that can't be detected with the naked eye -- are emerging as an anti-piracy tool, in which case the whole point is to identify the source of an infringing file. Nevertheless, as the 17-page report (download here) notes, even watermarks used for such purposes are subject to abuses that could invade innocent consumers' privacy or, worse, expose them to lawsuits for infringements they did not commit. And as the use of watermarks in online and digital media spreads, the threats proliferate. As the report puts it:

Perhaps the most frequently raised privacy concern is the idea that watermarks could enable increased monitoring, recording, or disclosure of an individual’s media purchases or usage. The fear, in other words, is that watermarking could compromise an individual’s ability to use and enjoy lawfully acquired media on a private, anonymous basis. Particular media usage choices could be sensitive if exposed, or could contribute to the creation of profiles of individuals’ overall media purchase and consumption habits, which might be used in ways that the individuals do not expect or understand. Other possible privacy concerns include the risk that watermarks could contain personal information that could be exposed to third parties, and the risk that errors in or manipulation of watermark data could paint a false picture of an individual’s behavior and perhaps lead to adverse consequences, including potential legal liability.

The Justice Department put out a press release late last night touting the conspiracy conviction of 25-year-old Barry Gitarts of Brooklyn, a member of an online music and software bootlegging group known as aPC (aka the aPOCALYPSE pRODUCTION cREW or the Apocalypse Crew). The jury verdict was notable to the RIAA because it was the first federal criminal trial of a defendant accused primarily of online music piracy. That's not what got my attention, however.

Gitarts was actually the 15th member of the group to be convicted. The other 14 pleaded guilty to crimes related to the activities of the aPC, which once was one of the release groups that sat atop the online piracy pyramid. More interesting, all but one of these defendants were identified and charged months after the former leader of the aPC, then 21-year-old Mark Shumaker,  pleaded guilty to federal charges of criminal copyright infringement stemming from a series of raids in December 2001.

Although some online commenters say Shumaker wasn't part of aPC at the time of the raid, the feds focused on his activities in that group when they announced his conviction. In other words, anyone with a clue at aPC should have found something else to do with his or her free time. Instead, the group remained active until the following April, when FBI agents swept in and seized servers, logs and other incriminating evidence of the group's activities. The fact that more than a dozen aPC members have joined Shumaker among the ranks of felons is a sign of the insularity of the warez scene and its participants' sense of invulnerability, founded in part on their anonymity (scene members often know nothing about one another except the names they use online). Most members of the scene don't get caught, it's true, just as most file-sharers don't wind up on the receiving end of an RIAA lawsuit. Still, given the heads-up provided by Shumaker's arrest and conviction, you'd think the aPC would at least have changed its name.

The APC logo above was created by an artist who goes by the initials rnz.

The original Napster didn't invent the MP3 format, but it did more than any other software company to popularize it. That, of course, was its undoing. Now, almost seven years after Napster went under, the company that bought the its name in a bankruptcy auction is making its first foray into selling MP3s. It's late to the party, but at least it's making a big entrance -- the new Napster has more than 6 million MP3s for sale, the largest collection of any online retailer (excluding those with dubious licenses). Like Amazon.com, it has MP3s from all the major record companies. But Napster Chief Operating Officer Christopher Allen says his company's selection is about three times the size of Amazon's because of the extensive offerings from indie labels and artists.

The entertainment industry has been pressuring colleges directly and indirectly to teach students the do's and don'ts of copyrights, hoping such lessons will help abate online piracy. But at USC's Entertainment Technology Center, students often are the ones giving lessons to Hollywood and the high-tech world about the right way to deliver movies and TV shows to consumers who are increasingly mobile and digital.

The ETC, a 15-year-old branch of the university's School of Cinematic Arts, was established as a forum for tech companies and studios to collaborate -- a good example being the center's work on digital cinema. A more recent project is the Anytime/Anywhere Content Lab, a place for ETC staff to put a variety of cutting edge (or even bleeding edge) entertainment equipment and services together to see how they work. Or don't, as the case may be.

David Wertheimer, the ETC's executive director and a former digital guru at Paramount, said that while studios focus on their product, the lab concentrates on the user. The hope, he said, is that its work will show studios and tech companies how to "meet in the middle and provide new kinds of products" that appeal to the next generation of consumers. In addition to interviewing USC students on campus every week about their media consumption habits and attitudes, the ETC brings about 20 students into the lab to talk to its board and try out some of the gear it has assembled. It's not a scientific sampling, but the ETC does try to draw specimens participants from a range of backgrounds and fields of study.

The lab takes up a portion of the ETC's office, which is planted in an industrial strip between the USC campus and the 110. The current configuration includes a home theater, a conference area and a room for testing and experimentation (i.e., a place to answer questions like "Can I make it do this?"). The centerpiece, though, is an 18' x 20' demo room with eight flat-panel screens hung on the walls at eye level. Below the screens sit black metal boxes of various shapes and sizes -- amplifiers, disc players, computers, hard drives, iPods, cell phones, networking gear and the like. It's a bit like an electronics retailer's showroom, designed to make it easy for the staff to add, subtract and connect things. "It could end up looking like NORAD and be totally stressful to people," Wertheimer cracked. The intended vibe, though, is more like the living room you wish you had at home. If you were me, that is.

It's not unusual for chief executives to have rich severance packages, or to have some extra compensation promised if they lose their post in a corporate takeover. Nevertheless, you have to admire Napster Chairman and CEO Chris Gorog's new deal with the company. Under the severance clause in his previous employment contract, Gorog had been entitled to a cash payment of 165% of his base salary of $625,000 (a little more than $1 million, for those of you unable to use the calculator in your cell phone), plus immediate vesting of his stock options and free health insurance for 18 months. The payout was the same if he were fired without cause or he left in the wake of a buyout. The latter's relevant because Napster put itself on the block in September 2006, hiring an investment bank to evaluate suitors. The new deal keeps Gorog's base pay at $625,000, but ups the cash portion of the severance package to 240% of his base salary ($1.5 million) if there's no takeover in the works. If a takeover should happen and Gorog should leave within 12 months thereafter, the cash portion jumps to 299% (about $1.9 million), plus a cash bonus "equal to the average of the three prior cash bonuses" he received. Not bad for a company that has never reported a quarterly profit from its online music business, and whose stock price has been stuck in the single digits for more than four years. The stock peaked near $25 in April 2002; today's close was $1.53.

The judge in Capitol v. Thomas -- the first of the RIAA's lawsuits against individual file-sharers to go to trial, it resulted  in a $222,000 judgment against a single mother in Minnesota -- threw the verdict into doubt today. Defendant Jammie Thomas had moved for a new trial on the grounds that the award was excessive and unconstitutional. In response, U.S. District Judge Michael J. Davis issued an order calling for a hearing on a different issue: whether he erred in instructing the jury that simply making a song available for others to download violated copyrights. He gave that instruction at the request of the labels' attorney, Richard Gabriel, who has since left the case to take a seat on the Colorado Court of Appeals.

The Independent Online Distribution Alliance, better known as IODA, launched itself in 2003 to help independent labels, artists and others in the music industry make the leap from physical to digital. One of its functions has been to act as a conduit to online retailers, such as Apple's iTunes Store, eMusic, Napster and Rhapsody. Now it's giving its members the option of being retailers, too.

Three interesting developments today on the issue of music pricing and price elasticity, a subject close to my heart. While one label starts flirting with the idea of lower prices to stimulate demand, another backs away from it. And meanwhile, Trent Reznor gives away more songs.

Like David going 15 rounds with Goliath, StreamCast Networks Inc. battled the biggest companies in the entertainment industry for nearly six and a half years before finally dropping the slingshot and hitting the dirt. The file-sharing company filed a Chapter 7 bankruptcy petition last week, sending it down the road to liquidation.

But the company's demise wasn't triggered by Hollywood studios or the major record labels, as much as they would have liked to have done so. Instead, StreamCast was felled by one of its own rocks: a lawsuit it filed in January 2006 against file-sharing rival Kazaa and a host of related companies. It proved to be a tactical blunder of the first order. Two of the defendants in that case counter-sued, won and locked StreamCast in a financial death-grip. And here's the delicious irony. StreamCast executives had long grumbled that Kazaa had sabotaged their business just as it was taking off in 2002, enabling Kazaa to dominate the second generation of file-sharing networks (i.e., the one that succeeded the original Napster). That may or may not be true, but there's no doubt that StreamCast's attempt to take revenge against the extended Kazaa family proved its undoing.

StreamCast Networks, the company behind the Morpheus file-sharing software, filed for protection Wednesday under Chapter 7 of federal bankruptcy law. Now, perhaps, the when-will-it-ever-end legal battle known as MGM v Grokster will finally come to an end, more than six years after the major record companies and movie studios sought the federal courts' help against StreamCast, Kazaa and Grokster. At the time, those companies were the three heirs apparent to the original Napster. In fact, StreamCast -- backed by Timberline Venture Partners, a venture capital firm tied to legendary VC Tim Draper -- had begun life (under the name MusicCity Networks) piggybacking onto Napster's protocol and client software. It eventually switched to the FastTrack network it shared with Kazaa and Grokster, only to be booted unceremoniously from that network and forced onto Gnutella. Its bankruptcy doesn't come as a shock (except, perhaps, to the employees who were laid off as of April 22), yet it leaves a few intriguing legal questions unanswered.

Copyright-law guru Bill Patry makes an intriguing point in his post today on the recent ruling in Atlantic v. Howell, which held that making songs available on a file-sharing network did not, in and of itself, constitute infringement. Although Patry welcomed that portion of the ruling, he took issue with a second key finding by Judge Neil V. Wake. If the courts ultimately side with Patry, it could be much harder for the RIAA to prove its claims.

Talk about a case going full circle: U.S. District Judge Neil V. Wake has rejected the RIAA's motion for summary judgment in its claims against Pamela and Jeffrey Howell, completely reversing the ruling he'd made last August. The new ruling, dated Monday but released today, sets a high bar for proving infringement claims against file-sharers, potentially spelling trouble for Hollywood as well as the record companies. The decision won't control other courts, but it adds to the growing stack of rulings that make cases against file-sharers more difficult to win.

EFF Executive Director Shari Steele fired off a nastygram today to Microsoft CEO Steve Ballmer, blasting the company for abandoning customers who bought 99-cent downloads wrapped in a soon-to-be-defunct DRM. Although I think the letter is unrealistic on some points, Steele hints at a step Microsoft could take that would be truly helpful to buyers stuck with song files that just won't play.

SpiralFrog's Joe Mohen was back in town Friday, and he reported a few new milestones. The advertiser-supported music-download service has more than doubled its registered users from 500,000 in mid-February to 1.1 million, and has increased its monthly unique visitors from 1 million in late January to more than 3 million this month. The numbers suggest that its growth is accelerating, which is a good thing, although the company is still well short of the 10-million-plus level that attracts the interest of major advertisers. The intriguing thing is that SpiralFrog is making this progress despite a number of non-trivial shortcomings, most notably the paucity of major-label content (only Universal Music Group has made its tracks available) and incompatibility with iPods.

There's been a lot of discussion in the blogs lately about court rulings that could complicate the RIAA's lawsuit campaign against illegal file-sharers. The three limit, to varying degrees, the record companies' ability to argue that p2p users violate copyrights merely by putting songs into folders from which other users could copy. The best post is (not surprisingly) from William Patry's copyrights blog, which summarized and analyzed the decisions out of New Haven, New York and Boston. It's also worth reading this post by EFF's Fred von Lohmann (make sure to follow the links to this earlier, related post), and this one by Eric Bangeman of Ars Technica.

Those entries cover the legal issues far better than I could. However, they don't discuss how little relief the rulings may give to those sued by the RIAA. As the Jammie Thomas trial demonstrated, the RIAA's case doesn't rely on the allegation that a defendant merely put songs in his or her shared folder. Its anti-piracy contractor, MediaSentry, actually downloads songs from the target's shared folder. That enables the RIAA to allege that the songs were reproduced and transmitted without the labels' permission.

Gracenote announced a couple years ago that it was entering a new line of business, to go along with CD and music recognition services: it would supply lyrics, fully licensed by the copyright owners, to websites and device makers. It has landed a few notable deals since then, including Yahoo and MTV, but today it's unveiling its most interesting new customer: MetroLyrics, a British Columbia-based site that specializes in song lyrics. The deal is a sign that at least some sites operating in a legal and ethical gray zone online are ready to join forces with copyright holders, if the terms make sense.

I have a column running today on latimes.com that explores the emerging differences in strategy between RIAA members and MPAA dues-payers over how to respond to Internet users' demand for large quantities of content on the cheap. I wouldn't argue that the labels and studios are fighting over how to respond. Both of them support the idea of using content-identification technology to ID and block unauthorized transfers of copyrighted works. But label executives are expressing increasing support for all-you-can-download plans, the most extreme of which being the file-sharing-friendly stance taken by Warner Music Group's Jim Griffin.

You could, of course, argue that the labels' comments will amount to little more than lip service until they actually license an all-you-can-download offering such as PlayLouder MSP, a broadband service in the UK that allows subscribers to share music to their hearts' content. But at least they're saying interesting things.

If Warner Music Group hired Jim Griffin just to provoke discussion about new business models, it's already gotten its money's worth. Portfolio.com started things off with a piece about Warner signing Griffin, a vocal critic of the major record labels' approach to file-sharing, to a three-year contract. He'll be the guy drawing up and selling Warner's plan to create the ultimate subscription-music service: for about $5 a month per subscriber, ISPs could enable their customers to download and share an unlimited number of MP3s. It's an idea Griffin has been floating for several years, and it meshes nicely with former Warner new-media guru Paul Vidich's unsuccessful campaign to include some form of free music in the price of Internet service. Among other observers, Ars Technica's Jacqui Cheng liked the idea; TechCrunch's Michael Arrington did not. No, really. TechDirt's Mike Masnick gave it a thumbs down as well.

So much for the easy part. The Justice Department announced today that it would not seek to block the merger between satellite radio providers XM and Sirius. That leaves the deal's fate in the hands of the FCC, which has a decade-old rule prohibiting one company from owning both satellite-radio licenses. Opponents of media mergers will probably point to today's news as another instance of a Republican Justice Department giving short shrift to antitrust enforcement. To me, though, the decision was inescapable. I just can't see an antitrust problem here, no matter how many times the National Association of Broadcasters invites me to do the math. 

I have a column on latimes.com today about Jango and its effort to monetize what people do while listening to music (as opposed to selling the music itself). The company interested me because its approach strikes me as one of the foundations of the new music-industry business model. I skipped over one aspect of Jango's strategy, though, and that's its widget, which can be posted on blogs or MySpace pages (and, before too long, Facebook profiles). You can inspect the one I created after the jump. Although I recognize that it's a customer-acquisition tool, I have to confess that I don't understand why companies do stuff like this. In essence, Jango is paying to provide entertainment to other sites, rather than using entertainment to draw people to its own pages (where they can generate revenue). And the widget, which is just a jukebox, doesn't really sell the highly social Jango experience. Maybe it's just about getting some name recognition....

It's poor form to criticize a competitor's scoop, but I won't let that stop me. The Financial Times ran an attention-grabbing piece today about a "radical new business model" Apple was floating with the record labels: letting buyers of premium-priced iPods and iPhones download an unlimited amount of music from the iTunes store. Radical for Apple, perhaps, but not for the music industry, which (as the story points out) is already talking to Nokia about the very same approach.

Mixwit lets you create and share playlists using music culled from the Web via Seeqpod. So I ask you, is this legal? Right? Fair? One thing's certain: it's really fun. And although there's no evident business model, if I were a label exec I'd be helping these guys to find one.... (If an image of an old-school BASF tape doesn't appear below, click here -- I haven't had much luck getting the embedded player to work with IE.)

Verizon, a leading provider of broadband services in the U.S., is the belle of the blogs today thanks to its work with a p2p trade group on a technology to speed p2p downloads. The technique, developed by researchers from Yale and the University of Washington, enables p2p software and broadband networks to work together to select the most efficient way to deliver a requested file.

For ISPs, this "P4P" approach offers a way to cut the amount of bandwidth hoovered by file-sharing applications -- in particular, the costly bandwidth between the ISP's local network and the rest of the Internet. That's because it would help downloaders obtain as much as possible from the shortest possible electronic paths.

Ezmo, a music locker service that let users share their collections with friends, bit the dust today. The service alerted users in an email and blog post, saying it couldn't raise the money it needed to keep going. I spoke briefly this afternoon with David Leibowitz, who was Ezmo's chairman, and he still thinks Ezmo had a workable business model: encouraging people to buy music by letting them play for free the songs that friends own. It's much like Lala.com's approach, at least conceptually. I'll confess to being more than a little skeptical about the latter, largely because of the royalty payments it had agreed to make. But at least Lala.com has deals with the labels; Ezmo never got that far.

Apple boasted today that it has surpassed Best Buy to become the second-largest music retailer in the U.S.. It trails only Wal-Mart, which, like Best Buy, does most of its sales in a very different market (packaged CDs). That's not a knock on Apple, which chose the part of the music market that actually has a future. Granted, Wal-Mart has an online music store, but it's not in Apple's league in terms of sales or mindshare.

The major record companies have a testy relationship with Apple, so its rise through the ranks of music retailers hardly comes as welcome news. But what should really disturb them is the other data included in the release. Sales at the iTunes Store passed the 4 billion milestone about seven months after they hit 3 billion. Similarly, it took the store about seven months to sell the previous billion tracks. It's safe to assume that the store has more customers now (over 50 million, according to the latest release) than it did seven months ago. That means customers are buying less on average than they used to. And the not-so-pleasant implication is that digital sales have been growing mainly because of new customers coming into the fold, not because the average customer is buying more songs year over year. At some point you run out of new customers, and then what?

Warner Music Group announced today that its head of digital strategy, Alejandro Zubillaga, is stepping down to (as he put it) "get back to my entrepreneurial roots." In other words, he's still mulling his next move. Warner took some grief four years ago when it named music-industry novice Zubillaga -- a former telecom exec in Venezuela and venture capitalist whose firm, Lexa Partners, was part of the group that took Warner private -- to lead the all-important work of developing new digital revenue streams. The appointment had a patina of nepotism, given that Zubillaga's brother-in-law, Edgar Bronfman Jr., led the Warner buyout and became the company's chairman. But his leadership led Warner to make what strikes me as the flagship deal for the entertainment industry going forward: a pioneering agreement with YouTube to share advertising revenue.

Intel has been racking up the press clips in recent weeks for new chip designs aimed at cheap laptops and handheld devices (e.g., the Wall Street Journal today, Business Week last week, Engadget last month). The downsized chips promise to bring desktop computing power (albeit from a couple of desktop generations ago) to a new type of mass-market mobile Internet device -- something like an iPhone at half the price or less. This is another sign of the pieces falling into place for ubiquitous connectivity, that is, people being connected to the Net wherever they go. And when that happens, the Internet will probably change everything again.

Jonathan Lamy, a spokesman for the RIAA, responded to my previous post with a chart showing a sharp decline in the number of infringement notices sent to college campuses that had been piracy hotbeds in 2006-07. Contrary to the highly unscientific sample I cited, these numbers suggest that the RIAA's enforcement efforts have made an impact on campus. Of course, students may have simply gotten better at concealing their file-sharing from The Man, found an alternative source of free music to replace Bit Torrent and Limewire, or put off their downloading until after Spring Break. But here's Jonathan's explanation of the data, followed by the chart (which you can download here) after the jump:

This is a ranking of schools receiving the most DMCA notices a year ago. We think the notices are a pretty good indicator of the extent of piracy on a campus: completely objective -- we are simply crawling the Internet and whatever we find, a notice is sent to the school.  Because of these notices, because of the pre-lawsuit letters, because of the focus of Congress on these issues, many schools taken rigorous steps to discourage students from visiting illegal sites.  Look at the notice reduction column during the past year.  That means that many fewer incidences of piracy found on those campus networks, which used to have the most prolific incidences of piracy. That, I think, is pretty compelling and a different way of looking at the impact of our collective efforts.

I was chatting with someone today about a column that explored whether unauthorized downloading was "theft" when he offered a tidbit of insight into the feeling on college campuses. My source (I'm being vague here to protect his students' anonymity) teaches a college class on new media business models, and he surveys each new group about their media consumption and attitudes. Bear in mind, this is a group of students interested in the media business. So you'd think there would be some degree of sensitivity toward copyrights. Nevertheless, this year's respondents said they download music regularly through file-sharing networks and other unauthorized sources, while buying music from iTunes intermittently (64% said they did so 1-4 times per month, with 5% saying more than 5 times). They were also asked to rate on a scale of 1 to 7 how nervous they were about being punished for illegal downloading, with 1 being "not concerned" and 7 being "extremely concerned." Two-thirds answered with a 1 (43%) or a 2 (24%). Only 4% put down a 5 or 6, and none went all the way to 7.

Given the frequency with which the students admitted to using file-sharing networks, these results can safely be interpreted as a nose-thumb to the RIAA. This isn't too surprising -- reporters have been writing anecdotal pieces for several years questioning the deterrent value of the major record companies' lawsuit campaign against file-sharers. The numbers, after all, aren't on the RIAA's side. Even though thousands have been sued since 2003, the targets represent a tiny fraction of the people downloading illegally. If these students are truly representative of those preparing to enter the media industry -- the ones who should be most aware of the labels' anti-piracy efforts -- you have to wonder what return the RIAA is getting on campus from its investment in attorney fees.

The RIAA logo is courtesy of the Recording Industry Assn. of America.

In 1967 the Who released The Who Sell Out, mocking the notion of artistic integrity by sprinkling fake commercials for household products amid its tracks. It's a fabulous collection of pop-rock gems (as is Petra Haden's a capella version from 2005) that, either through prescience or coincidence, anticipated how eager labels and bands would become to tie their songs to consumer goods. I'll leave to Bob Lefsetz the question of whether musicians hurt themselves by farming out their songs to commercial interests; I tend to be forgiving on that front because, with CD sales melting away, musicians really do need to find new revenue streams.

Which brings me to Donita Sparks, who's taking the licensing business in a whole new direction. As part of the CASH Music initiative she launched with singer-songwriter Kristin Hersh, Sparks is selling the rights to half the revenue she makes from licensing her song "He's Got the Honey" to commercials, TV shows and movies (and given the track's bluesy fuzz-rock feel, it's more likely to wind up in a beer commercial than "Toy Story 3"). Up to 100 investors can buy .5% shares of the sync licensing revenue for $100 each. If she sells all 100 shares, she'll raise $10,000.

"Invoking the metaphor is a shield against thinking," William Patry, the chief copyright counsel for Google, wrote on his blog a couple of years ago. The topic was "technical protection measures," but he's argued that bad metaphors are also behind the entertainment industry's rhetoric that unauthorized downloaders are thieves. I give my own take today on the question of whether infringement should be viewed as a form of theft in a latimes.com column, which you can read here. I'm not completely in sync with Patry on this issue, so you should take my views with more than the usual grain of salt.

The Times of London had a remarkable story Tuesday about a UK government proposal to require ISPs to monitor their users' downloads and cut off service to those who repeatedly access pirated movies and movies. This is the entertainment industry's Holy Grail, or at least this year's version of it -- a set-it-and-forget-it approach to combating online piracy.

Just how compelling is free music? SpiralFrog, which offers free downloads with the copyright owners' blessings, went from zero customers in September to more than 1 million unique visitors per month in late January. And in a visit here Friday, board chairman Joe Mohen touted a new milestone: SpiralFrog has signed up than 500,000 registered users. (Registration is required to download content from SpiralFrog.com; otherwise, visitors are limited to reading music news from Billboard, listening to song samples and streaming music videos -- the kind of thing that's available on lots of music sites.)

The rapid growth is important, given that SpiralFrog needs to attract millions of eyeballs to survive off of advertising revenue. But what Mohen couldn't yet say is how long SpiralFrog's registered users tend to stick around. The service is only a few months old, after all. SpiralFrog's main advantage over legal outlets such as iTunes and Rhapsody is that it costs nothing, which matches what tens of millions of consumers want to pay for music online. That's what makes SpiralFrog and other emerging ad-supported music-on-demand services -- such as iMeem and Last.fm -- so promising conceptually. But to hit that magic price point, it imposes trade-offs that the masses may not abide.

RealNetworks just reported that subscribers to its paid music services (Rhapsody and Real's premium Internet radio stations) dropped slighted in the final three months of 2007, from 1.925 million to 1.9 million in the previous quarter. Rival Napster on Wednesday reported a similar drop in the fourth quarter, from about 750,000 to 743,000.