ILLUSTRATION: GORDON STUDER

Free Napster-style music sharing is on its way out. The future of digital music distribution will be determined by consumers voting with their purses for a single, or at most two, systems, just as they did with videotape formats and PC operating systems.

Napster offered immediate gratification; regaining it will cost us some privacy as well as money. As companies like Microsoft come to know all about us—not just our choices in music and films, but about our finances and even personal location—we may long for a pre-digital day.

Meanwhile, you may think you are buying the right to play a song at will. In truth, as digital music payment systems emerge, you will only be buying the right to play it on devices that recognize that right and have the software to play it.

A war on three levels

The coming battle to sell digital entertainment media over the Internet will be fought on at least three business levels. At the top are content providers fighting for the attention of the consumer. These are the movie and game makers, record producers, and book publishers.

One step down is the software that plays the content, sitting on desktops and, increasingly, inside devices such as MP3 music players. Microsoft Corp., based in Redmond, Wash., and its crosstown Seattle rival, RealNetworks Inc., are the major combatants here. The goal is to get their players on as many desktops and systems as possible, and to convince content providers to tailor their offerings to them. Other players exist as well, like Winamp, which is built into AOL Time Warner's Internet software. Most of the payoff for Microsoft, RealNetworks, and the others is control of the platform for digital media, because when consumers vote, these players will be the candidates on the ballot.

The third, and least visible, level concerns digital rights management (DRM), [see figure] the software that will oversee your media purchases and your right to move content from device to device. Three standards have been proposed, but the winner, if there is to be one at all, will be selected in a marketplace that as yet does not exist—the first music containing DRM software, though promised for this summer, may not appear until 2002. According to at least one industry analyst, it will be 2004 at the earliest before a clear leader emerges.

Napster—and the un-copy-protected MP3 format that made it possible—has spoiled those of us who have been buying (or taking) songs and transferring them from one PC to another and to other devices at will.

But the unprotected MP3 format will soon be a thing of the past. Until the digital rights issue is settled, every device maker, and every content or service provider, will have to make its own DRM choices.