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IRMA Speakers Review New, Existing Formats

Outlining in broad strokes the future of the recording media industry, the International Recording Media Association’s Annual Marketing Summit, held here, explored the merits of the various competing formats for audio and video.

The summit was haunted by the specter of Napster and other Internet file sharing services, which despite coming to a mostly inglorious end at the hand of the music industry’s tenacious legal team, forced the issue of copy protection to the fore.

Sami Valkonen, senior VP, New Media, BMG Entertainment, conceded that though the industry was winning the legal battle, it was losing the battle for the hearts and minds of its customers.

“All everyone talks about is the big, bad music companies,” Valkonen said.

In a talk titled “CD Copy Management: Keeping it All Safe,” Valkonen noted that any new audio format had to walk a fine line between protecting copyrighted material while still allowing the customer to make “some” personal copies and ensure a good experience.

“Bad copy protection is when a customer can’t listen to a CD on his computer without a lengthy registration process,” Valkonen said.

“Good copy protection allows people to drag and drop secure files quickly into hardware devices without having to rip but also prevents users from sharing files with thousands of their closest friends,” Valkonen said.

“We have to make the concept of owning the original CD more valuable to the consumer. One way to that is to make it their ‘key’ to accessing secure online content from that particular artist,” he added.

He also put the onus on the CE industry to recognize that its fate was intertwined with the music industry’s. “We can’t operate this way and if we continue to do so, it will ultimately hurt their business as much as ours,” Valkonen said.

The talk turned to the emerging digital formats in both audio and video when Pat Wyatt, VP marketing Twentieth Century Fox, took to the podium and noted that despite the impressive numbers racked up by DVD-Video, VHS remains a retail stalwart.

“Despite all this talk about DVD, VHS is not going anywhere,” Wyatt said. “There are too many households with VCRs and the margins are still very enticing to retailers. Even though they’re trying to devote more shelf space to DVD we keep reminding them of the vast market for VHS. In fact, that market is still growing, according to our numbers, and we are totally committed to the format.”

In a talk titled: “Where’s the Beat? Status Report on DVD-Audio” Bill Allen, new technology VP, BMG Entertainment and a member of the DVD Entertainment Group, said that the fledgling format will ride DVD-Video’s impressive coattails for success.

“There have been about 25 million DVD-Video players shipped since the format’s inception and there will be about 52 million in homes in 2005,” Allen said. “It is penetrating the market at a much faster clip than the VCR, and while sales in audio equipment has been down this year, sales in home theatre audio is up because of DVD players.”

The format will catch on in the audio market, said Allen, because of the popularity of the format in video and the wide base of installed players (DVD-Audio can play on many DVD-Video players).

DVD-Audio is superior to the conventional CD for two major reasons, said Allen. Sound quality on a CD is 16 bit versus 24 bit for DVD-Audio. Because of its large capacity vis-à-vis Compact Disc, DVD-Audio can offer more value-added features, from lyrics viewed on TV screens to music videos included on the disc.

Secondly, and perhaps more important in terms of the music industry, said Allen, is the format’s superior “4C” copy protection.

“Trying to copy protect the CD is just a short-term band aid, ultimately we have to move beyond the CD if we want to keep content safe” Allen said. “Our best feature is the 4C copy protection that does just that.”

Allen noted that the DVD Entertainment Group has formed a Retail Advisory Panel to facilitate education for both the retailers and customers they serve.

The virtues of Super Audio CD (SACD) were touted by Sony’s SACD director, David Kawakami, in his talk “Breaking the Silence on SACD.”

Kawakami outlined Sony’s SACD roll out strategy and said that 2002 would see the company take SACD from the audiophile market to the masses.

“We have a total of 13 players, over 300 titles and secured distribution at over 1,500 outlets,” Kawatami said. As with any new format, he noted, education is crucial. To that end, Sony has created a demo kiosk that it has placed in 50 Best Buy locations, 643 Circuit Cities and other CE retail locations.

The challenge, said Kawatami, was to attempt to recreate the subtle nuances of multi-channel sound for a consumer in a retail environment. To that end the kiosks feature 5 speakers, three of which hang over the back of the consumer’s head to create the immersive effect.

Finally, relative newcomer DataPlay made a pitch for its dominance among the new formats. “Kids view technology as entertainment so we have merged technology and music,” said Pat Quigley, VP of marketing at DataPlay. “We are going to make it cool to own the original again.”

In addition to its diminutive size and low cost the format offers the consumer the opportunity to continue to transact with a retailer or provider, Quigley said.

“Bonus tracks or even whole albums can be stored on a prerecorded disc and unlocked by users on their computer for a price,” said Quigley, who noted that 2002 will see an aggressive push by the company at retail to get products out and to educate consumers.