Merger Signals Music Firms' Web Plans




For those who want to get their music sooner, easier and perhaps even cheaper, this may be your year.


After running scared from the Internet for several years, the music industry is now rushing headlong into the technology-driven future.


Time Warner Inc.'s back-to-back deals with America Online Inc. and music giant EMI Group signal a rising conviction in the music industry that its future hinges on a medium that so far has mainly threatened it.


Record companies that until now have spent much of their energies fighting online piracy and fretting about the net's ability to undermine their business model are now planning to distribute at least some of their music online as early as this year, industry executives said Sunday.


"All of the major labels are now focused on the Internet in a big way," said Dick Wingate, senior vice president of label relations at Liquidaudio.com, which makes software to download music online. "A year ago things were very different."


For consumers, the changes in store promise more choice, immediacy and control. Downloaded songs can be stored on recordable CDs, or loaded into a growing array of solid-state devices that play back with CD-like quality. Consumers probably won't have to buy entire albums, pay CD prices or even go to the store.


While that may upset the traditional structure of album-based music sales and entails a great deal of short-term turmoil, record firms now see opportunity where they once felt only panic. The Internet, in theory at least, cuts virtually the entire cost structure out of record company distribution, raising the prospects of more sales and higher profits.


Record executives see a world in which CDs are still bought in retail stores, though that portion of the business will gradually be eroded by online delivery systems.


For the moment, industry executives are still trying to assess the impact of Time Warner's two deals. In the span of two weeks, Time Warner has undergone a breathtaking transformation from a company grounded in the 20th-century businesses of cable, movies and magazines to one poised to add the most popular Internet service in the world, and the second largest music conglomerate.


Many industry executives saw the deal as an endorsement of their product's importance in the Internet age.


"It confirms the value of music as content," said Jay Boberg, president of MCA Records, a unit of Seagram/Polygram. "It shows just how important music is if you want to be a viable player in entertainment in the next century."


There are still serious issues the industry has to overcome before the net becomes a viable means of delivering music for profit.


But the greatest issue still confronting the industry is piracy.


Even though no major record label yet distributes music on the Internet, vast chunks of their music libraries are already online illegally thanks to the surging popularity of MP3, a compression format that turns CD recordings into computer files that can be swapped across the net almost effortlessly.


The Recording Industry Association has been engaged in what many consider a futile effort to stamp out illegal MP3 copying and trading.


"There are already a lot of people who have proved they will download music," Wingate said. "The challenge is turning them into paid downloads."