Battle Over Korean MP3 Phones Rages On
By John Alderman, Fri May 07 05:30:00 GMT 2004

Koreaís ability to innovate a union of digital music and wireless is being harmed by a short-sighted music industry. Sound familiar?

Korea builds a good share of the worldís portable MP3 players and has been a player in that industry since the late 1990s. It also has one of the highest rates of mobile use in any country, and as a handset maker has risen dramatically. So as the digital music world makes a few timid intersections with wireless, itís interesting to see how the adoption is shaping up there. Is it free from the legal wrangling that held the digital music market back in America? Hardly. But it does shed some light on how to proceed, or how not to.

As mentioned last month, LG Telecom -- set to release a new MP3-playing phone -- seemed on the brink of negotiating a compromise that restricted the play of user-supplied MP3 files that were free of digital rights management restrictions. While other manufacturers and carriers came to an agreement that open MP3s could only be played for 72 hours after their download, LG refused to accept that compromise and is now vocally supporting ďconsumer rights.Ē

"We consider it a violation of consumer rights to limit the usage of individually obtained music files downloaded on personal computers. There are currently no such limitations on personal MP3 players here or abroad," LG Telecom's Kim Seung-bum was quoted saying.

Which is true, even though some digital music players, like Sonyís, only use their own, locked down formats, and shut out MP3 files all together. But those devices donít sell so well, and thatís the point. Launching a new device, what manufacturer would hope for market share while ignoring the most popular format? The big reason Sony does it is to placate its own music division.

File sharing is very popular in Korea. So it's fair to say that many users' collections are filled with songs for which they didnít pay. But thatís also true in America, and services like Appleís iTunes have shown that if players accommodate the songs a user already has -- even if it's unclear where he got them -- but make it very easy and rewarding to buy, a market will develop. Apple sold over 70 million songs in the first year of its music store. Those new songs contain rights management, but the Apple iPod will also play unrestricted MP3 files.

The new LG-LP3000 handset, free from MP3 restrictions but also offering music commerce, has sold over 80,000 units in its first month. Thatís a promising start. Wireless and mobile seem like a perfect combination, especially as on-demand streaming services like Rhapsody gain strength. It would behoove the industry to see what it can develop.

But the Korean music trade associations have threatened to stop delivering legitimate music files to LG's commercial service, and even went so far as to stage a rally in front on LG headquarters, saying LG's MP3 phones are a threat "not only to the music industry but to the mobile content industry as a whole".

Across the world, the music industry first reacted to file sharing like a deer caught in headlights, then like a bully motivated by fear. Either way, it offered no good alternative to file sharing. So, if it wants to join the 21st century, itís going to have to give a little. Letting people play what they already have is a compromise that will move the whole business forward. Hopefully Korean consumers will get more choices, not ineffective rallies.