Sony BMG Recalls Discs With Flawed Protection System
Sony BMG Music Entertainment, the world's second-largest record company, recalled compact discs with hidden copyright-protection software because of concerns about security risks the CDs may create on personal computers.
Customers can exchange any disc with the copyright protection software, called XCP, for a replacement copy without it, New York-based Sony BMG said on its Web site. Once installed on a computer, XCP software can enable the monitoring of a user's activity and make the machine vulnerable to viruses.
The recall came after Sony BMG Chief Executive Officer Andrew Lack had championed copyright protections. Sony BMG, a joint venture created last year by Sony Corp. and Bertelsmann AG, produced about 4.7 million discs of artists including Celine Dion and sold 2.1 million of them. The recall comes as record companies are entering their strongest sales period ahead of the Christmas holiday.
``It's a big mistake. They shouldn't have done it,'' said Leigh, an analyst at Inside Digital Media Inc. in Tampa, Florida. ``They were so concerned about piracy that they were not careful about how they would control it. They shot themselves in the foot.''
Installed on about 50 recordings distributed by Sony BMG, XCP was designed to prevent illegal CD duplication by limiting the number of copies that could be made once a title has been installed on a personal computer. However, the technology could also be used to monitor the users' online activity and made PCs vulnerable to computer viruses.
`White Whale'
Of the 50 titles, 24 were new releases and the rest was from the company's catalogue, spokesman John McKay said. ``We deeply regret any inconvenience this may cause our customers,'' he said in a statement.
The recall may cost about $10 million, said analyst Leigh. McKay declined to comment on the cost.
Music fans install CDs on computers in order to transfer them to their iPods or other digital music players. Leigh said he believes that it's wrong to make technology that prevents them from doing that freely.
``The continued chasing of copyright protection technology is like chasing the white whale,'' Leigh said. ``It's an obsession that destroys the people obsessed by it.''
Sony and Guetersloh, Germany-based Bertelsmann created Sony BMG last year by combining their music units. Sony CEO Howard Stringer on Oct. 13 expressed his support for Lack, the unit's CEO, after the New York Times reported that Bertelsmann management wanted to fire him.
German magazine Der Spiegel reported on Oct. 16 that Bertelsmann CEO Gunter Thielen had met Stringer twice in the previous six weeks to demand Lack's dismissal.
No Harm Intended
Adding XCP software to the discs wasn't intended to harm to customer's computers or to enable monitoring of customer activities, Sony BMG said today.
The company, home of artists including Alicia Keys and Carlos Santana, had sought a way to combat unauthorized copying that helped cause a five-year drop in CD sales worldwide and hurt earnings.
Sony BMG last week suspended the manufacture of discs with XCP software and provided anti-virus companies with a way to help their customers remove the program from their computers. First4Internet Ltd., a U.K. technology business, provided the XCP software to Sony BMG.
London-based EMI Group Plc, the No. 3 in the industry, is the only other music company to sell discs with copyright protection. EMI has so far sold more than 175 million content- protected discs, based on technology from Santa Clara, California-based Microvision Corp.
Universal Music Group, the No. 1 in the industry and a unit of Vivendi Universal SA, doesn't sell discs with content protection; neither does Warner Music Group Corp., the No. 4 record company.
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