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An improved digital-audio compression standard has been adopted by the Bertelsmann Music Group (BMG) and the Universal Music Group for commercial music downloads. "Advanced Audio Coding" (AAC) is said to offer higher audio quality while occupying 30% less bandwidth and storage space than the popular MP3 format, according to an announcement from San Francisco–based Dolby Laboratories.

Developed and standardized by four major technology companies—AT&T, Dolby, Fraunhofer IIS, and Sony Corporation—AAC is said to provide up to 48 channels of audio (at unspecified levels of resolution), sample rates of up to 96kHz, and can support an "ITU-R broadcast-quality" datastream at 320kb/s for 5.1-channel audio programs. A Dolby Labs press release states that AAC offers higher-quality audio at lower bit rates than MP3, while being completely compliant with the requirements of Digital Rights Management and the Secure Digital Music Initiative (SDMI). AAC is the latest audio codec standardized by the International Organization for Standardization (ISO) as part of the MPEG specification.

BMG and UMG are two of the "Big Five" music conglomerates that control 85% of the world market in recorded music. The growth of the Internet in the past five years has forced management at all of them to consider inevitable changes in distribution. To date, their experiments with downloadable music have been confined to low-resolution promotional "teasers" intended to generate interest among music fans in buying CDs, but all have plans to eventually offer downloads and/or real-time streaming of individual songs. Concerns over copyright issues have prevented the fulfillment of such plans, and the poor quality of MP3 has caused many audiophiles to dismiss the digital delivery of music.

AAC could be the turning point. "We have chosen to distribute our artists' music in AAC format because of its ability to deliver a superior audio experience to the consumer," said BMG's vice president of new media, Karl Slatoff. "Our announcement is intended to provide the software and consumer-electronics industries with the information they need to deliver SDMI-compliant products into the market that will support legitimate music from BMG artists." BMG encompasses more than 200 record labels in 54 countries.

Slatoff's counterpart at Universal's Internet unit made similar comments. "AAC is an attractive format for us because it offers consumers high audio quality but requires a limited amount of bandwidth for downloading," said Laura Goldberg, Global e's VP of PC-based digital music. Using AAC, BMG and UMG hope to offer high-quality, copyright-secure audio to Internet-connected music fans everywhere.

AAC-compatible audio gear will show up later this year, with the emphasis on portability, according to the announcement. "AAC-compatible devices from major consumer-electronics manufacturers will begin to appear on shelves this fall, and we expect to see many devices from major manufacturers in time for the holiday season," stated Ramzi Haidamus, Dolby Laboratories' technical/business strategist. "Now that two of the largest music companies in the world are beginning distribution of AAC-encoded content, and as portable players become SDMI-compliant and DRM-compatible, a fully portable high-quality music experience will become a reality."