"Since 1999, CD unit sales have plunged 26 percent -- a decline of $2 billion -- thanks in part to file-sharing services and other forms of digital piracy. The record labels' frustration is so acute that the Recording Industry Association of America has begun suing hundreds of consumers who have exchanged music on peer-to-peer networks like Kazaa, Morpheus, and Gnutella.
But what technology giveth, can it taketh away?
The industry hopes so: This month the first copy-protected CDs are expected to start showing up on music-store shelves in the United States. And that's great news for the one or more lucky companies whose music-locking tech will be adopted. Even by modest estimates, licensing fees will amount to more than $100 million annually.
The big winner could be Macrovision, a major provider of copy protection to Hollywood. With revenues of $102 million in 2002, the company, based in Santa Clara, California, commands a near monopoly on video and DVD copy protection, providing the system used in more than 2.1 billion DVDs and 85 million DVD players.
Macrovision's technology, called CDS-300, hides the original audio tracks but makes pre-compressed music files available for limited downloads to PCs. The company's main competitor is Phoenix-based SunnComm, a 25-person upstart that already has a contract to supply copy-protection technology to BMG, the fifth-largest record label. SunnComm's MediaMax CD-3 also restricts the original audio files, but does so on the user's PC, rather than the disc, by installing a kind of software lock."