Sony, IBM in Online Music Partnership
By Barry Willis April 18, 1999 — There's gold in them digital music hills. This obvious reality---supported by the music industry's near-panic in the face of the phenomenal growth of MP3 in the past year---was reinforced last week, when Sony Corporation and International Business Machines announced a digital music mutual-aid pact at a press conference in Los Angeles.

The two technology giants are teaming up to make Sony's copyright-protection technology compatible with IBM's electronic music-management system. The combined and finished product will be used for the distribution and downloading of music via the Internet. Sony has playback hardware in the works that will play song files encoded by IBM.

With their proprietary system, the two are leaping ahead of the RIAA-led music industry, which is developing its own set of standards for digital downloading. The industry's standard isn't expected to be complete until late this year. Sony has a history of influencing standards as a way of maintaining its market share and its stature as a premier research and development organization. The company is reputed to spend a larger portion of its annual budget on R&D than any comparable large company.

The IBM-Sony alliance was announced just a few days after IBM linked with RealNetworks to develop an application for downloading and storing high-quality audio and video transmissions. RealNetwork's stock surged in the past two months, rising steeply to a peak of $266 per share---more than 17 times its value last year. The stock dropped substantially last week.

Liquid Audio, AT&T's a2b Music, and Microsoft---through its Windows Media Technology 4.0---are all chasing the same market MP3 recently broke open. Although downloaded music is nowhere near audiophile quality, the only real obstacle to making it so is transmission bandwidth---familiar territory for both Sony and IBM.

Besides making some of the most widely recognized consumer electronics, Sony also builds a substantial amount of the world's professional broadcast and studio gear. The recorded music market is estimated at $13 billion annually in the US alone---a market in which Sony Music has a major presence.