Sony BMG is pulling millions of copy-protected CDs from U.S. store shelves in response to a mounting controversy over software contained on the discs that behaves like spyware.

NEW YORK -- Sony BMG is pulling millions of copy-protected CDs from U.S. store shelves in response to a mounting controversy over software contained on the discs that behaves like spyware.

The music giant announced Nov. 15 that it is recalling recent releases from Amerie, Neil Diamond, Trey Anastasio, Celine Dion, Natasha Bedingfield, Switchfoot, Ricky Martin, Van Zant and others because they feature XCP content-protection software from U.K. security specialist First 4 Internet.

Microsoft and a number of computer security firms -- including Computer Associates, F-Secure and Symantec -- have designated XCP as spyware and/or malicious software, charging that it monitors consumer behavior, is difficult to uninstall and creates vulnerability to viruses.

At least one virus that attacks computers installed with XCP software is already in circulation.

The recall, which comprises 52 titles in all and 24 front-line releases, will cost Sony BMG roughly $6.5 million in return fees and added manufacturing costs, industry sources estimate. Sony BMG sources say that more than 4.7 million units featuring XCP software shipped to retail, and roughly half of them (2.1 million) have been sold so far. A complete list of titles can be found at www.cp.sonybmg.com/xcp/english/titles.html.

In connection with the recall the label is offering an exchange on all XCP-protected CDs that consumers have purchased. They will have the chance to swap their existing CDs for ones that do not have the digital rights management software on them. The new versions of the CDs are expected to ship Nov. 25, retail sources say.

Sony BMG announced the recall less than a week after a Nov. 11 declaration that it was temporarily suspending its use of the XCP technology, citing the virus issue. The label also placed its entire content-protection program under review. It continues to distribute copy-protected titles from technology partner SunnComm.

A Sony BMG statement said the company "deeply regret[s] any possible inconvenience this may cause."

The major also is stepping up its efforts to distribute a patch that it claims helps remedy the vulnerabilities the XCP technology created, offering links to its content protection support site on all Sony BMG label and corporate sites.

But computer security experts charge that the patch, as well as a much maligned uninstall solution provided for XCP, create their own security holes and stability problems. Right now they are the only remedies available to consumers with XCP software.

As the major scrambles to address the situation, litigators are quickly lining up against the company. One class action has already been filed against Sony BMG, and others may be pending.

Despite the uproar over XCP, retailers say there have been almost no returns of the copy-protected titles so far. Many XCP discs have been on the market for months. And Sony BMG says it stands by its strategy to use content-protection technology to safeguard copying of its titles.

Sony BMG stresses that XCP-protected discs play in traditional CD and DVD players without any side effects.

"These are just safety measures to make sure the artist is getting compensated for their work, and I'm all for that," says Ross Schilling, manager for Van Zant. The Columbia Southern rock act, which has been at the center of much of the press coverage surrounding the XCP issue, has seen its sales rise during the last two weeks, Schilling says.

The Recording Industry Assn. of America also continues to advocate copy-protection solutions.

"The digital marketplace is one that by definition relies on DRM," RIAA chairman/CEO Mitch Bainwol says. "What we had in this case was an application of copy-control technology that didn't pan out very well."

According to NPD Group research, consumers acquired almost 30% of their music last year through ripping and burning of CDs.

However, not all retailers are convinced that copy protection is the answer to the industry's piracy woes.

"It's too late to put that one back in the bag," says Joe Nardone, VP of Wilkes-Barre, Pa.-based Gallery of Sound. "Copy protection is like putting a band-aid on a knife wound."

Other retailers are concerned that the issue could negatively impact sales.

Don Van Cleave, president of the Coalition of Independent Music Stores, says, "Right here before the 'make or break' time of the year the customer base is given a huge reason to be paranoid and choose another gift for their cousin."

Additional reporting by Ed Christman in New York.

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