While the most public battles in the digital-music wars are being waged over copyright issues, the creators of a new downloadable music-file format hope to undermine licensing fees imposed on the use of the MP3 format itself.
The new, open-source file format, Ogg Vorbis, will be in the public domain and therefore owned by everyone according to Jack Moffitt, vice president of technology for iCAST, which is funding the development of the new format, or codec (for coder/decoder).
Current MP3 technology is based on patents owned by Thomson Multimedia and the German research facility Fraunhofer Gesellschaft, which charges any business that uses MP3 technology.
"If you're making an encoder, something that makes MP3 files, you pay Fraunhofer $15,000 a year and then $2.50 for every download of that software," Moffitt said. Fraunhofer, he added, is "changing the licensing, so that if you have a Web site up, and people are downloading, you have to pay Fraunhofer a minimum of $15,000 per year, plus 1 percent of revenues, plus 1 cent per song downloaded."
Henri Linde, Thomson Multimedia's VP of New Business and Marketing, said approximately 75 "major players" are currently licensed to use the MP3 technology including Microsoft, Apple, RealNetworks and Emusic. Linde confirmed the royalty rates quoted by Moffitt and posted at www.mp3licensing.com, but he said, laughing, that the notion that most companies using MP3 are already paying royalties is "optimistic."
Linde said most MP3 downloads are not sold, so the amount of royalties the company collects based on users paying to download MP3s is minimal.
"I think that it is not a secret that the numbers are not very high at the moment," Linde said. "[Paid download royalties is] not a program that's making Thomson rich. ... I think the whole question is whether the paradigm of downloading for pay is a paradigm that works in the end. And Napster and Gnutella have an influence on that."
Napster and Gnutella are download programs that allow users to trade MP3 files freely over the Internet.
Even if Fraunhofer and Thomson Multimedia are not yet reaping the bulk of their rewards from per-song MP3 download royalties, Vorbis' creators hope to put an end to those royalty payments, Moffitt said. While Vorbis 1.0 won't be available for another month or so, a beta version, released Tuesday, is available at www.vorbis.com.
Moffitt said Vorbis data which will be given the file extension ".ogg" will be compatible with any current audio player and able to handle numerous channels of information, while MP3 files carry only two channels. That means DVD and other data-intensive uses will be possible.
The new codec, Moffitt said, also sounds better than MP3 files do.
"I guess that [Vorbis' makers] will say, 'Our codec is much better.' But that remains to be seen," Linde said. "It's hard to say how much impact it will have."
While the major record labels under the umbrella of the Recording Industry Association of America continue to fight Napster, and some are still in court against MP3.com, Vorbis will provide artists with a cost-effective means to distribute music without having to answer financially to anyone, Moffitt said.
An RIAA spokesperson did not return a call by press time.
(An earlier version of this story was posted Thursday, June 22, 2000 at 9:43 PM EDT.)