The music world’s WTO?

A little-known industry cabal meets in Seattle this week—behind closed doors.

THIS WEEK, SEATTLE hosts another semi-secret international organization’s meetings, but don’t expect any riots in the streets—though maybe there should be. Rather than free trade, this group’s raison d’etre is to find a way to make the digital distribution of music profitable. That is, to make the songs you download off the Internet not free.

Just as the WTO arrived amid a swell of bubbling-hot trade issues, the Secure Digital Music Initiative, or SDMI, comes to Seattle for a three-day meeting, January 19-21, at a crucial juncture. Last week’s America Online-Time Warner merger confirms what this organization knew when it formed 10 months ago: that the old media companies will converge with the new and that a business model needs to be in place to keep the money rolling in.

Spearheaded by the five major labels, SDMI has grown to include 150 companies, including a who’s who from the technology industry (Microsoft, AOL, Sun) and multinational media companies (News Corp, Canal Plus). Charged with reversing consumers’ attitudes toward the wealth of content available online at no cost, delegates have met in major cities around the world, hammering out a technical solution that will, if SDMI succeeds, halt the spread of free music.

“[The record companies] have made it clear,” says Kevin Unangst, group product manager for Microsoft’s streaming media division, “that to bring their content online for digital distribution, they need copyright protection.”

A lack of security has thus far kept the major labels from embracing the Internet for distribution; it’s mainly used as a promotional tool aimed at reaching the MP3-gobbling masses. Meanwhile, many of the smaller companies that have sprouted up to meet the demand for downloadable music have benefited from this openness, which means they’re not all thrilled with SDMI’s mission.

“The whole thing is steeped in paranoia that’s been dredged up by the major labels,” says Dave Allen, general manager of the Los Angeles division of, a digital download site.

But the executive director of SDMI, Leonardo Chariglioni, counters that the organization springs from the very capitalist notion that the companies generating the content and the artists creating it deserve payment for their services—despite the free-for-all mentality that persists on the Web. “SDMI may have been kicked off by the record industry,” he says, “but it’s really the most extensive collection of different companies, and different industries, sharing the same goal.”

When Chariglioni and the 200 SDMI delegates descend on Seattle next week, the specific goal will be to move closer to making portable playback devices such as the Rio more secure. Originally meant to play MP3 files, which can’t be properly copyrighted, such Walkman-like players are now being made with SDMI-approved security measures in mind; the group’s next step is to tighten the belt further, with hardware companies vowing to only allow playback of protected content.

Local companies such as RealNetworks, Microsoft, and Loudeye stand to benefit, as they and others will likely profit from the software needs of companies looking to make content more secure through encoding and encryption. All three are involved in SDMI.

“We have a sincere desire to strike a balance between creating copyright protection for artists and moving digital distribution forward,” says Alex Alben, RealNetworks’ vice president of government affairs and an SDMI delegate.

Still, as they meet by day—and party by night—in the city that hosted the hyped WTO meetings, the members of this hush-hush group’s proudest accomplishment may be in achieving what the world trade negotiators did not: SDMI is now poised to meet its goal. Only a year ago pundits predicted that the music industry had been too slow to react to the MP3 revolution and would take a serious hit; but this conglomeration of music, technology, and media companies is about to give digital distribution some financial teeth. The group’s papa, Chariglioni, sounds thrilled.

“I am extremely satisfied by the speed of the process,” he says, “and what we have been able to achieve in such a short amount of time.”

In a way, it’s an act of mercy: Those who’ve enjoyed the wellspring of free music now won’t have to wait long to find out that the industry’s planning to pull the plug.