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In late June 1999, representatives from the Secure Digital Music Initiative (SDMI) - comprising more than 100 companies from the music, consumer electronics and information technology industries - announced that they had reached a consensus on specifications for new portable music players. that they hope will limit digital music consumers to two options in the not too distant future:
The proposed Version 1.0 Specification provides for a two-phase system - Phase I and Phase II. Phase I commences with the adoption of the SDMI Specification and ends when Phase II begins. Phase II begins when a screening technology is available to identify pirated songs from "new music releases" and refuse playback.
During Phase I, SDMI compliant portable devices may accept music in all current formats, whether protected or unprotected. In late 1999 or early 2000, record companies are expected to start imprinting CD content with a so-called digital "watermark" that will secure music against illegal copying. Thus, in Phase II, consumers wishing to download new music releases that include new SDMI technology will be prompted to upgrade their Phase I device to Phase II in order to play or copy that music. As an incentive to upgrade - with music now secured against casual pirating - music companies may finally be ready to put their music libraries on-line.
The new proposals' impact on MP3 is far less than it might have been. The so-called Big 5 - Sony Music Entertainment, EMI Recorded Music, Universal Music Group, BMG Entertainment and Warner Music Group - had initially advocated making SDMI-compliant players incompatible with MP3 files. However, in the event they have agreed to a security scheme that is backwards-compatible with the "free" MP3 format and in both Phase I and Phase II, consumers will be able to rip songs from their CDs and download unprotected music, just as they do now.