Hi, everybody. Thanks for coming. on the QuickTime team. We're really happy to have this session, especially with the two industry luminaries that we were lucky enough to get from Los Angeles. Before I introduce John, enhanced CDs are a particular passion of mine, and certainly at Apple, we've been working with developers for years to deliver enhanced CDs that have any range of sort of interesting content on them, from the simplest read-me-in-a-quicktime-movie-in-the-data session to really, really exciting, follow the lyrics, bouncing ball, kind of really, really cool stuff.

And John's going to talk about the sort of record industry outlook on enhanced CDs, what they're doing, what's good, what's bad, what's worked well, what hasn't. And the sort of interesting thing that sort of always pissed me off is that record labels had this opportunity to build a bridge with consumers. and really the only thing that they ever did was sort of have this 20-second transactional relationship at Tower. And here was all this opportunity sitting in the data session of an enhanced CD to say, hey, here's a video of the band, and here's some biography, and oh, here's a link to the website, and here's all the sorts of ways that we can continue the relationship because you think you might like this band. So I'm really pleased to report that that is changing now, and so the labels are looking at enhanced CDs as a way of adding value to the compact disc and a way of sort of beginning the communication, and that's really grown in exponential ways. So our second speaker, Naveen Jain from SparkArt, is going to walk us through a lot of that technology that's being implemented now at the labels. So John Massiana has done an incredible job at many labels doing enhanced CDs and is a consultant to the music industry. We're really happy to have him. I give him a warm welcome. We'll save Q&A for the end, and when we do Q&A, please, if you would use the microphone so that we can hear the question clearly and it can be translated immediately into Japanese, that would be great. So I'll hand you over to John. Thanks. Thanks.

My name is John. Together with my colleague Naveen, we're going to cover our backgrounds on working with Enhanced CDs. Mostly the discussion is going to cover the production, the authoring, and the process of creating Enhanced CDs for record labels, media companies, and marketing companies. I produced Enhanced CDs for the past several years, three years or so, but recently within the past year, I've begun changing my production efforts due to a trend in the industry. Let's go to the first slide. Do it a trend in the industry to collect marketing and demographic information from CD-ROM media. The results have been pretty successful, and I'll go over some of the specific examples a little later. First, I want to talk briefly about the role Enhanced CDs have in the music industry, and it's been evolving over the past couple of years. It shouldn't be any surprise that some record labels are using Enhanced CDs as one way to combat music piracy on the Internet. By offering additional content on the media itself, It entices consumers to buy the disc rather than download it. And I think that's a really important part of Enhanced CDs now. In the past year, I've tried to advance the quality of media that can be offered on Enhanced CDs and to make the consumer experience more enjoyable and also to get information back from consumers for the label in the form of mailing lists, collecting demographic information. First, I want to go over the technical specifications of what an Enhanced CD is and then discuss the production tools and methods I've used for clients in the entertainment industry. And then Naveen will pick up the discussion and talk about the future of Enhanced CDs and key things he has been working on to expand the market and interest for Enhanced CDs from the label and consumer perspective.

A normal audio disc is referred to as a Redbook standard. This is the format of most standard audio CDs, and it contains up to about 99 tracks. The Bluebook standard defines the enhanced music CD. It's also referred to as CD Extra, and it's a specification for a multi-session press disc comprising audio and data sessions recorded separately. Essentially, the audio and data tracks are recorded in separate sessions so there's no overlap between the audio and data, And it also prevents the data tracks from being played on home hi-fi stereo equipment. In the old days, before multi-session disks were a standard for creating enhanced CDs, CD-ROM data was often recorded in the same session as the audio, meaning that audio CD players, your home CD player or your car CD player, could recognize a data track and be able to play it, which is a terrible user experience. I've seen several older enhanced CDs where the data track was actually track one. So you buy a CD, you pop it in your CD player, and you hear a horrible screeching noise. Of course, they usually tell you that on the sleeve, but it's not exactly an ideal user experience. On a Bluebook multi-session disk, the first session is audio. It can contain up to 98 tracks. And after the session, the audio has been recorded.

A second session, the data is burnt onto the disk. Typically, the second session is a hybrid session that contains both the Mac and PC data. And there's also an approximate 27 megabyte lead out and lead in gap between the audio and data sessions. The gap is necessary to prevent the data tracks from being recognized as audio tracks on standard CD players. It also adds a significant real estate space on the disk.

The enhancees I create are often for record labels and media-related companies, so I concentrate on packing as much media as I can on the second session after the audio has been finalized. I usually always need to know precisely how much audio is going to be included on the disk in order to gauge the real estate space I have left. And real estate space, I'm just literally talking about megabytes. We've got 700 megabytes at maximum to work with, so if there's 18 tracks at 72 minutes, that's not much space left. We always have to plan for the contingency that we're going to have to leave something off if we run out of space. Always, always, always, always use video in QuickTime format.

I'm back on this page. I haven't found any format that works better on enhanced CDs. QuickTime is definitely the best. I usually use Sorenson 3, compression 320 by 240 frame size, and a rate of 1500K per second. Sometimes we'll push it up to 512 by 384 frame size and a 2000 or 2500 kilobyte per second rate, but that increases the file size considerably, and some machines have harder times playing it. So I'll typically offer the user a choice to decide between the two and just leave it up to them. We've tried encoding at 640 by 480, but few machines can handle it seamlessly, so we usually stick to 512 by 384 and 320 by 240. 30.

Always include standard web links on Enhanced CDs, photo galleries, music, always in QuickTime format, and an option to sign up for the project or artist or label's mailing list. The mailing list information is interesting because it can be collected straight off the disk by sending the information directly from the Enhanced CD application to a script on the web. So no browser is necessary. It's a seamless experience. You're just watching a video. You can sign up for an artist's mailing list or do other interactive things while you're watching video content.

Depending on the market for the individual CD-ROM, I found that people overwhelmingly sign up and give demographic information on enhanced music CDs. Given that fact, I make it as easy as possible for them to sign up. Don't know why exactly. Maybe it's just because it's so easy. It's sitting right there. You're watching a video. You just type in some information and send it away. You're feeling closer to the artist or the project. It's kind of unclear why people do it so much, but they really do. And it's great for the music industry to get that data back. Due to the fast-paced nature of the industry, there sometimes isn't enough time to produce the content fast enough to make the production delivery date. As I mentioned before, disk space limitations often make it necessary to put bonus content on the web. Logically, labels and marketing companies want to restrict access to it so that only people who bought the CD can get access to it. There are a variety of different ways to do that. Sometimes we use flash variables, session variables, cookies, things like that to control the exclusivity of it. Thank you.

When I author enhanced CDs, I nearly always use Macromedia Director. It's a great tool, and I use it to create the main interfaces and the portal to the actual content. Director is really easy to use. I can hide hidden content with a standalone projector application and integrate a lot of different media components into the director framework. Just to establish terminology, I use the term projector to refer to the interface. It's basically just a standalone application that sits on the disk. If there's a type of media that someone wants to use on an Enhanced CD and Director doesn't support it, chances are there's a plug-in, there's an extra or some script written in lingo that'll get around it or somehow be able to import it in there and use it. The most advantageous reason I found to use Director for interactive enhanced CDs is its excellent ability to channel information in and out of the application. Database interaction allows us to handle email collection, push dynamic content directly into the interface, and manage users' experience through the use of sessions and preferences files. We can record and track pretty much anything we want to about the user's experience without disrupting their experience. It's all handled by scripts in the back end. So that's the main reason why I choose to use Director as a powerful tool to author enhanced CDs that require a lot of interactivity and tracking. There are some limitations, though, and if anyone out there is from Macromedia, I'd like to just spend a few minutes on how Director could be a little bit better. The biggest problem I have with... Oh, there we go. Thank you. The biggest problem I have with Director is you have to author multiple projectors per project. I'll typically author three projectors per project, one for the PC, one for OS 9, and then one for OS 10. Flash handles the authoring of multiple projectors rather seamlessly, but Director doesn't.

Director does handle many standard CD-ROM media formats, so that's a very good thing. And QuickTime is one of the formats that usually works flawlessly in Director. MP3 audio in Director is often problematic for me. There's often occasional distortion things that happen, especially in the QC process. MP3 audio sometimes gets cut off. And the biggest issue, I think, with Director is the size issue. When you author a projector interface with no graphics or content at all, it takes up a minimum of 2 megabytes of space. When I'm dealing with a 77-minute audio disk and I need to author a hybrid Mac and PC session on the same 80-minute capacity disk, that 2 megabyte space is way too much for that kind of project. So it really can mean the difference of fitting the data on the disk or not if I use Director. here.

At this point, I want to show you a few examples of interesting things that we've been able to do with Director. And the first example is the James Bond Die Another Day enhanced CD. The CD featured an extensive photo gallery of all Bond movies, a dynamic photo gallery of all the Bond women, in addition to two video clips, one from Madonna, and email collection, of course, and links to other video content on the web.

The next example is the Fleetwood Mac best of. This enhanced CD was definitely a disk space challenge project. Somehow we were able to cram a five minute video, lyrics to all 36 songs in the compilation, full discography, email collection, web links, and bonus content onto an audio disk that was already 70 minutes runtime.

The last example was an interesting example of requiring email registration to access exclusive content on the web. It was for the Lord of the Rings, Fellowship of the Ring enhanced CD. It came out about a year and a half ago. The disk actually featured practically no content at all.

There wasn't enough time to put content on the disk itself, but an exclusive link got you to bonus web content, and access to the content was given by required email registration. The site featured several video trailers, an Enya e-card, wallpaper, stationery, buddy icons, and more. Email sign-ups are actually still being collected off of that disk, even though the Two Towers has been out for six months. And I think to date, we've received about 400,000 unique registrations from that Enhanced CD. So that was a really good Enhanced CD. It worked out really well. The tremendous response from the first Enhanced CD was a great lead-in to the planning of the next release, the Two Towers, and a special internet version was actually prepared I believe, for the next release. And it was specifically offered to the consumers who bought the first one.

Some of the music projects I work on are distributed all over the world. And an interesting byproduct of that is that many disks often need to be re-authored depending on chart regulations in foreign countries. The UK, in particular, has specific chart regulations. Only one web link can be included on a disk, which is quite limiting. Video data is limited to 15 minutes, no more. And email collection can't physically appear on the disk itself without impeding the chances that the city will have to chart. Most other worldwide territories don't have those stringent restrictions, but there are some new laws now that require content to be approved a little bit more specifically now than it was before.

Lastly, I just want to spend a few minutes going over the QC process for Enhanced CDs from an operating system perspective and a user perspective. After all the content has been assembled and approved by the content owner, the fun is really just starting for me and all the wonderful engineers who have to sit down and test every possible user path through every single screen of the Enhanced CD. All the functionality has to be tested from a detailed standpoint for the user and operating systems of course. And typically they're tested on every platform imaginable. And there are always minor discrepancies between OS platforms and sometimes major discrepancies, sometimes with the media, a direct or playback error, an encoding flaw or a stupid mistake that I made and it's usually the latter.

Just as an example, it took several days to QC Lincoln Park's Meteora CD and get it out the door due to a Windows 98 and OS 9 issue with a plug-in that I was using to play the Redbook audio off the CD inside the director interface. It took us about four days to get through that, and production death threats were made in our directions, but we finally got a solution. And typically, it usually takes about one to four days to QC an enhanced CD entirely. depending on how much content there is and depending on how complex the back-end components are as well.

Ideally, from a user perspective, the enhanced CD experience should be as seamless as possible and not require any added effort on the user's part. Generally, I like to test and make sure the user has all the components needed to play all the content on an enhanced CD before the application launches. Several checks can be made in the background without the user being aware of anything that's going on. However, the most often scenario is that the user doesn't have quick time and they have to -- they're forced to download it.

I'd love to establish a method where the latest version of QuickTime could just be automatically installed without the user having to do anything. And currently, I don't place the QuickTime installer on the disk itself. Sometimes CDs are out in the market for three, four, or five years. So putting an installer on the disk creates a problem that it might be outdated during the time span that the CD's on the market.

Most of the components we can check for and automatically update in the background, and Director has a great way of handling some of those things with lingo scripts and things like that so that the user isn't bothered by having to download a Flash component or something that they need. This time I want to turn things over to Naveen who will probably describe more of the marketing, tracking, and the benefits that labels receive from Enhanced CDs and the future of Enhanced Hello there. Thank you very much, John. At first, I would like to start-- with the current state of ECDs on the marketplace. Now, John gave you a little bit of a description, but John is really talking about the premium ECD. The reality is that the vast majority of ECDs that are produced quite honestly don't even come close to the Fleetwood Mac ECD or the Lincoln Park ECD or some of the other ECDs that John has worked on. So typically, first of all, just to introduce the current state of ECDs, Basically, the ECD, as John said, is really the post-purchase new media connection with the consumer. This person has actually took their time to go out to a record store or luckily, hopefully, buy it online. This is the one time you really have to connect with that consumer post-purchase. It's the time for both the label and the artist to make the connection. You know that they're a real fan because they actually bought the disc.

It's also one of the few parts of a new media campaign that the label typically runs that has a quote unquote perceived value to the consumer. I mean, the consumer doesn't really value the website or value anything else that the new media department will typically do at a label. But the enhanced disk, by way of a sticker on the front of the disk or whatnot, supposedly is supposed to have some value to the consumer. And yet, even with these key aspects of enhanced CDs, nine times out of 10, they feel rushed. And they almost never take advantage of the technology that's currently available at the time of purchase.

So there are a couple different types of enhanced CDs. John primarily was talking about quote unquote standard enhanced CDs, which are director-built multimedia pieces that actually sit on the CD and sometimes connect with the web or whatnot. There's another type of enhanced CD that John also briefly mentioned, which is more of like a CD being used as a key to access exclusive content. For example, the Lord of the Rings enhanced disc that John produced. Now the beauty of the key type enhanced CD is that for label catalog sales where the label is not going to put an enhanced disc on a Lionel Richie CD, they can actually use like grace note technology like CDDB or whatnot to actually connect the user via a web interface to "exclusive content".

Now, the problem is that neither of these methods that are usually used in the enhanced CDs ever fulfill their potential. Typically a typical enhanced CD that's produced by a major label today will have one or two mediocre quality video clips. And there really are few exceptions. John mentioned some very exceptional enhanced CDs that were produced, and that rarely is the case.

The versatility of the medium is not really taken advantage of in any way, shape, or form. The video potentially on the disc can be much higher quality, and the beauty of it is there's no waiting for the consumer to access the rich content because there's no need for the Internet connection.

The other beauty of enhanced CDs is that they can obviously connect directly with communities and online related web content directly from the disk itself, as John was mentioning. Another really key aspect that labels fail to take advantage of is the ability to install artist branded components, such as screen savers and desktops and whatnot, which really are extremely powerful long-term mindshare branding opportunities they're really taking advantage of. So how do labels currently view enhanced CDs? Well, you know-- They currently view them as a pain in the ass to produce. And as John mentioned, they're a QA nightmare. And they're often rushed. I mean, when you're producing a typical enhanced CD for an artist, there's so many cooks in the kitchen.

You have to deal with the art director and the manager of the artist and the artist himself. And the media department is running around like chickens with their head cut off. It's just insane. It's absolutely insane. So there's often late art delivery. And, you know, there's never really time to really think about the next level or think about, you know, are consumers really going to use these different components? And as John said, he always has to make allowances to take media off, either due to space issues or, quite honestly, the asset may not be ready. And then the labels often ask, because very few ECDs are tracked currently, do people even use these things? And that's a question that I get asked personally all the time when, you know, we approach a label to produce an enhanced disk for a given artist or whatnot.

But the funny thing is that the potential benefits of the enhanced CD are huge. You know, John was mentioning some of the, you know, quote-unquote anti-piracy capabilities in enhanced discs because it has value and therefore the consumer is going to say, "Oh, I'm not going to go download the music on Napster or Kazaa or whatever. I'm just going to go buy the disc because it has a special video clip." The reality is that that's obviously not very true.

But there is significant opportunity to add things like music videos, live video, live audio, collectible extra content such as AIM icons, avatars, screen savers, desktop wallpaper, cool database-powered active desktops that are built in Flash. In fact, one thing that we've actually produced that was really cool is we produced the Lincoln Park Meteora enhanced disk with John. And we had this really, really cool screensaver. This is actually the screen that the consumer first sees from the enhanced disk when they go to access the screensaver. And the screensaver was actually built in Macromedia Flash. And it was database connected. And it allowed the user to actually download video content directly from the net. And it actually created almost like an artist-branded TV channel. So it's Linkin Park videos 24 hours a day. And then we also had a concept for the Linkin Park campaign called Newscaster, where it was basically Linkin Park news for the fans, by the fans. We actually sent a video crew out on the road with Linkin Park, and they shot video, and we'd pipe it in, you know, not real time, but we'd pipe it in on the Linkin Park official website and through the screensaver.

So, you know, Linkin Park is a content producer, So why not take advantage of the content? And that's exactly what we were able to do with the screensaver. And the screensaver was extremely successful. In the first six weeks of release of the album, over 100,000 users download and install the screensaver. The beauty is the screensaver's tracked.

Another key benefit, as John started to mention, is the data collection aspects of enhanced CDs. John mentioned the artist mailing list capability and the amazing success that Warner Brothers Records saw from the Lord of the Rings soundtrack. There's also the capability for labels to create genre segmented mailing lists. Most labels have a "rock list" or a "pop list" or whatnot, and they'll use those mailing lists to market new artists that don't already have established fan bases. So that's a huge benefit. it.

ECD usage statistics are not typically tracked currently, but they're very easy to get because the ECDs are built in Director and therefore you can connect directly to a database from the user's machine, assuming of course that the user's online. So you can actually track the usage of the ECD, how many people are actually using it, the content popularity, you know, what content users are actually using on the disk. And there's a host of other tracking capabilities available. We actually have a tracking system that's very, very powerful. We actually now have the ability to tell you what countries people are using the Enhanced CD from, and in some cases, even what DMAs people are using the Enhanced CD from. Additionally, we can track the viral aspects of a promotion and tell you the send to a friend ratio as far as what the response rates are, how many people are doing it week to week, time scale, et cetera, et cetera, et cetera, directly from the enhanced disk through our reporting technology. And of course, you can track much, much more.

Another really key benefit that labels really fail to take advantage of typically is the cross-sell capability. I mean, you have a disk that's in the consumer's hand. They're actually taking the time to open the enhanced portion of the disk. Why not take that time and offer them, you know, previous catalog from that artist? Or offer them opportunity to purchase an artist's DVD or whatever is coming out for that particular artist. And if the enhanced CD is database powered, then you can update the offers at any time you please. There's no reason not to take advantage of that.

Another key benefit that I was mentioning a little bit beforehand is the viral marketing capability of the enhanced CD. On the Meteora CD, for example, we actually had send Meteora to a friend right on the ECD itself. So all the user had to do was enter their email address and click send, and it would actually, you know, connect to our database system, obviously, if they were online, and we'd send that user an email address saying, hey, Johnny wanted you to check out Meteora. Go check it out. And obviously, word of mouth is, especially for the jaded consumer in that particular demographic, word of mouth is really the best way to market to them. And the response rates, as you saw by the graph, that's actually real data, is massive. 30% to 60% is typically the response rate that we see from typical viral marketing programs. And that includes email to a friend, IM to a friend, and SMS to a friend.

Another key quote-unquote word of mouth, well, not really, is the official website toolkit. This is something that we actually included on the Meteora Enhanced CD as well, and it was extremely successful. Well over 100,000 kids actually accessed the toolkit in the first two to three weeks of album release, And we're using it on their fan sites because we had exclusive art on there that we had not used previously on other Linkin Park creations. We also produced their website, et cetera, et cetera. And therefore, we were actually able to tell whether kids were actually using the content on the Enhanced CD or not. This is what the toolkit actually looks like. So the toolkit, typically, when we produce them, will contain the official PR photos of the band, official logos, the album artwork. And then we also include a host of webmaster resources, such as how to build a website, how to program HTML, where to host a website for free or for very low cost, go GeoCities, where to get a message board so that fans can build their own communities, because fans really like to do that.

So another core benefit of the Enhanced CD, and I've mentioned it previously, is obviously the database connectivity ability. And this has very, very rarely been put to use. In fact, I've not really seen an Enhanced disk that's really well database connected. But things like updating the artist's news and tour schedules, I mean, the reality is most labels that we've talked to about this say, well, who's going to update it? Well, someone's updating the artist's website. So why not pipe it into the same database that powers the website? and therefore you update one and kill two birds with one stone. So tour schedules, buy links directly to Ticketmaster when tour dates go on sale, tour journals directly from the band, and, of course, much, much more. Thank you. So why don't labels do these things? Well, the first item is cost.

Obviously record labels are not doing very well financially right now. So they don't like to spend a lot of money. And the new media gets a good chunk of change currently, but they're trying to cut costs every place they can. And an ECD is an easy thing to cut. It's an easy thing to skimp on.

It's, oh, who cares about the enhanced CD? No one ever uses it anyway. So that's really one of the first things to go, typically, when a label is trying to cut costs. Quite honestly, the high cost of production tools has an impact on the cost of these CDs as well. Macromedia Director, for example, you actually have to buy a PC license and a Macintosh license in order to produce hybrid enhanced CDs. So therefore, you're buying two copies of the same program to produce a typical enhanced disc. And Director isn't cheap.

Another, some of the concerns are obviously the production timelines and the QA procedure. And enhanced CDs, because they have to be mastered and obviously duplicated before they're sold at retail, there's very, very strict delivery times if the label's going to meet their on-sale date. So, you know, John is often stuck working, you know, all-nighters to meet crazy, ridiculous deadlines. And we are, too, from the design side and the development side, because we really don't have much time. And because the enhanced disc has to be produced so far in advance of the actual album on sale, as I said before, assets sometimes are really hard to come by. So we may not have the exclusive video clip that we've been talking about for three months when planning a given artist release with the label New Media Head. It just might not happen, whether it's not edited or it's not even shot yet or whatever. It just often does not occur.

Now I'm going to talk a little bit about how the typical artists view ECDs. Now the thing about my company is that we actually work directly with the artists as well. So oftentimes artists will ask us about the enhanced disk or what's going on with the new media promotion and whatnot. So this is kind of how the artists currently look at enhanced disks. First I'm going to start with what should be the artist's benefits of enhanced disk and obviously rarely occurs.

Key benefit is fan relationship management. And that's very similar to customer relationship management because the person who buys your disc is your customer. So things like an official artist fan club link and potentially giving them discounts to the official artist fan club, links to the public community so that fans can interact with other fans, direct communication links with the artist by way of up-to-date artist news, the tour schedule, and the ability to offer exclusive contests and updates through that supposed database connection. Additionally, you have a great opportunity if you're an artist to grow your street team or your E-team. Now, typically a street team and an E-team is like a three-month deal. It's totally front-loaded at the beginning of a campaign or it'll kind of go up and down with single cycles.

But I genuinely think that especially for an E-team, a street team is typically a fixed size because of costs, et cetera, et cetera. But E-teams, there's no reason not to give the fans the opportunity to join the E-team at any time and keep that E-team running for the course of an entire album cycle and potentially in between album cycles because those are the core fans, the user that actually takes the time to join the E-team and whether they promote or not is a whole other question. But you should at least keep that online because it really doesn't cost all that much. And of course the mailing list sign up for future artist releases or information or whatnot. And as John said, that can be very, very successful.

This is actually a screen of the Linkin Park Enhanced CD again. This is actually the page where we actually were marketing Linkin Park's official fan club, which is called the LP Underground. Now, the LP Underground has literally tens of thousands of members who are paying to join the club, and through the Enhanced Disc, we actually had thousands of sign-ups. And, you know, the Linkin Park Disc came out in March of this year. So it's actually been very, very successful as a kind of a cross-sell, you know, with the consumer through the Enhanced Disc. Thank you.

Other benefits, as I mentioned before, of course, are the viral marketing capabilities. You know, they're huge. There's no reason not to do it. It's kind of like free marketing. It's the consumer marketing on the artist's behalf and who else better to market for you? There's no reason not to do that.

As I said before, the cross-sell potential for artists is even bigger than the labels. Now, typically labels don't really get into the artist's merchandise and all that kind of stuff, or the fan clubs. But, of course, that's changing as the industry continues to evolve. So the labels are going to have more and more reason to cross-sell merchandise and fan club memberships through an ECD. The merchandise is huge for an artist to be able to sell their merchandise or offer their merchandise directly from the enhanced disk by way of web link, of course. In future, it would be really cool to actually be able to pipe updates as far as new merchandise that goes on sale or exclusive merchandise to fans who actually bought the disc or et cetera, et cetera, et cetera. I mean, there's a million things you can do. Unfortunately, it never gets done.

So what are some of the artists' concerns with enhanced disks? Well, artists are really concerned about the poor production by the label. There have been several instances where we've actually had to recreate enhanced CDs after the initial shipment because the label found later, or the artist found after the fact, that the enhanced CD, quite honestly, didn't even function.

And that's incredibly damaging because you damage your fan relations with a poorly produced enhanced CD. This is your opportunity to really communicate with your fans on a direct basis. And if you produce a damaged ECD that's not at the par of the music on the enhanced disc or the album packaging or everything else that goes, that everyone at the label and on the artist side and the management company works so hard to produce, then the consumers oftentimes feel screwed. What's on this enhanced disc? Why is there a sticker on this enhanced CD package that says I have exclusive content when I can't even access it. And that also reduces perceived value of the ECD compared to similar products in a very, very crowded marketplace. So if you're on label X and you're a rock band and label Y's rock band has a better enhanced disk and obviously things are similar as far as radio play and all the other bazillion variables that go into a typical artist campaign, then having a poor enhanced disk is kind of like having a poor package or, you know, whatever. It's not a real, it reduces the perceived value directly. And it's all subconscious, but it actually has an impact.

And, of course, potential inability to grow the mailing list and all that other stuff that can be caused by rushed or poor production on behalf of the label. Thank you. Now I'm going to discuss briefly how consumers view enhanced CDs, both currently and how they should. The current view of enhanced CDs by consumers is that they are very cheaply produced. The brand of ECD, you know, every CD that you buy that's enhanced has that little ECD logo. At least in my opinion, the value of that brand has been very sharply reduced because most of the ECDs that are produced are quite honestly terrible. And they meet very low standards. They lack any real content. And sometimes they don't even work. So they're, of course, of limited value to the consumer. And therefore, consumers at this point, sometimes they don't even bother putting them in because there's no point. It's either not going to work or it's going to be the music video that I've seen on MTV 5,000 times. So there's no point. Thank you. How consumers should view ECDs is obviously that they offer significant additional value without added cost. If you go to Best Buy and you buy an album for $9.99 and it has an enhanced disk portion, then there should be additional value on that enhanced disk.

Access to exclusive collectible content, such as AIM icons that are specific for the enhanced disk, desktop wallpaper, the screensaver technology kind of stuff that I showed you, active desktops, desk sites, all those sort of creative elements, you know, are very, very exciting to a consumer. And many record labels that have taken the time to produce high-quality enhanced disks have actually seen very positive results from those added value additions to the enhanced disk. The ability to communicate with other fans. That's what fans really want. They want to find like-minded souls online. And the ability to communicate via direct links to the artist community or whatnot are incredibly important for the consumer. And of course, the ability to stay up to date on what's new in the world of the artist. Latest news and tours and ticket sales and all that kind of cool stuff.

So now what is the future of enhanced disks? Well, the future is interesting. It really depends on how much effort labels really want to put into enhanced disks. If the current trend continues, then enhanced disks are going to fade away as a fad, part of the multimedia craze of producing CD-ROMs. And they're really, quite honestly, probably going to go away. But it's really a great opportunity, as I said, for enhanced disks to be of tremendous value to the artist and the label through all the things that I've discussed and all the things that John discussed.

Additionally, there are two new major audio formats on the horizon. There's SACD and there's DVD audio. And those two formats are going to obviously play in as well as far as physical shipment of audio is concerned. So labels should really take the time now to learn more about their consumers and involve them in ways that they really won't be able to when the digital music revolution is really fully complete. We have things like Apple's amazing new music store, which enable consumers to buy music, and there's no enhanced portion to buying a protected file. There's no... It's just the audio straight, and it's cheaper than buying a disc, so eventually you're going to run out of time where eventually, obviously, consumers will only buy music through digital channels. So the time is fast coming where enhanced discs will probably be obsolete as digital music continues to evolve.

So therefore, now is the time to really take advantage of the medium as consumers are still buying hundreds and hundreds of millions of CDs worldwide to really find out more about the consumer, learn more about their buying habits, and give them access to real exclusive content that they will not be able to access when buying a $0.99 downloadable audio track.

Additionally, through all the tracking capabilities that enhanced CDs can offer potentially, you can really turn the media promotion into a science. There's no reason not to do it. If you can track everything from the website traffic to the player traffic to the enhanced disk traffic and compare it to SoundScan and compare it to DBS and compare it to MediaBase and do all the correlative cool stuff that labels really should be able to do and aren't really doing, enhanced CDs are a really core facet. They're a really cool, really core variable as far as the new media campaign as a whole.

So, you know, it's really a shame that labels really aren't taking full advantage of them currently. Thank you. So now I would like to take questions from the floor. And I think Glenn is going to say something. Male #2: Something nice? Yeah. No, thanks. Naveen, that was awesome. Thank you. No problem.

In working with John and Naveen and the labels for quite a while, the QuickTime team is really familiar with enhanced CDs. And at first pass, some of the things up on the screen there looked kind of depressing. But I really feel like this is a huge opportunity for developers. Developers on just the delivery of media through the enhanced CD, and probably more importantly, the tools for creation, as well as all the tools for tracking. There's a lot of incredible success. you would know better about the correlation between, let's see, the largest selling CD last year was Linkin Park Meteora. So the intelligence behind the marketing plan and the delivery, hybrid theory. Sorry, it should be Meteora. Hopefully. It will be. It will be. That's the new record. So if you'd like to ask any questions, please use the microphones, introduce yourself, and thanks to our speakers again.