Sony BMG to Settle Class-Action Lawsuit
Sony BMG Music Entertainment has agreed to a settlement that would end a nationwide class-action lawsuit brought against the company over security flaws in anti-piracy software that it shipped on millions of music CDs.
Context & Ripple Effects
The settlement closes out a two-month spiral that began when Sony BMG agreed to patch its copy-protected CD in early November after researchers showed its content-protection code could hide malware from detection. Reporting since then has made the company's handling, not just the code, part of the story: Business Week found Sony BMG was warned about the software's security risks before the scandal broke and failed to alert consumers — the basis for its costly silence — while hackers demonstrated the rootkit could conceal cheating tools.
By mid-December the company had released an uninstaller for the controversial DRM code, but lawsuits were already consolidating into a nationwide class action. The preliminary settlement filed this week converts that legal exposure into compensation for buyers of the affected CDs.
First-order effects
- Consumers who bought the affected Sony BMG CDs become class members entitled to settlement relief, ending their individual claims against the company.
- Sony BMG caps the open-ended liability from the anti-piracy software — a saga it had already called an ongoing public-relations nightmare with no signs of abating.
Second-order effects
- Record labels weighing copy-protection on discs now face a pricing problem: the legal and remediation costs of embedding DRM in consumer software are visible, while its piracy-deterrence value is not.
- Vendors supplying such anti-piracy technology inherit the reputational damage, as the scandal attaches to the toolmakers as much as to Sony BMG.
Third-order effects
- If the pattern holds, DRM migrates away from stealth client-side installs on consumer PCs toward schemes whose security review happens before shipment — because the class-action mechanism now prices post-hoc disclosure failures into any label's decision.
The trend: Content protection is moving from hidden software installed on listeners' machines toward approaches judged first by security risk and legal liability, with DRM vendors and labels sharing the exposure.