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What Will Be the Net Effect?

Online music technology is set to change the recording industry as we know it. Exactly what that means for labels, artists and consumers is open to debate.

July 04, 1999|GEOFF BOUCHER | Geoff Boucher is a Times staff writer

The prophets and profits of the music industry say a new world is fast approaching, one where you can hear any song you want, any time you want . . . with the mere click of a button.

This would be a world where you carry your favorite songs around with you on something that looks like a credit card, plays like a compact disc and fits in portable players.

A world where minutes after a concert's final note, fans with those memory cards flock to lobby kiosks to buy an instant copy of the show to take home--where an e-mail from the band is already waiting to thank them for attending.

Sound like Jules Verne territory?

Some of it could be reality in two years, and all of it within eight to 10, industry leaders agree.

What about your compact-disc collection? The CD will fade in the next five years and could be obsolete as early as 2009, according to some projections, replaced by "flash memory" devices and the Internet's digital download capabilities.

If that swirl of possibilities leaves you feeling giddy, intimidated and nervous all at once, perhaps you can begin to imagine the breathless state of the music industry in the summer of 1999.

"In terms of music, it's a seismic blast," says R.E.M.'s singer Michael Stipe. "It could really destroy the system that's set up now. I think that's really healthy."

For better or worse, the drumbeat of the music world will soon be accompanied by the hum and whirl of computers, and terms such as "digital download" and "music streaming" seem set to become as familiar to our ears as "hi-fi" and "audiocassettes."

But unlike past innovations, the music industry has not been setting the pace this time.

While record companies have been researching these frontiers for a decade, it is a computer file compression code called MP3 and its wildfire spread across the Internet in the past two years that have turned the future into a near place. A legion of casual "pirates," many of them students using the high-speed Internet access available on campuses, has been swapping and giving away illegally copied music. The industry is now scrambling to come up with its own, secured format and hoping to stall the growth of piracy until it can offer consumers a viable, legal--and profitable--alternative.

To that end, leaders in the recording industry and electronics manufacturers agreed last week on early standards for a new breed of portable digital music players. Those devices will hit the market by December and should instantly heighten both consumer interest and piracy--continuing the music industry's love-hate relationship with the new technologies.

The tumult has a dizzying number of subplots: Does this mark the twilight of the major record labels, or the eve of their greatest payday? Can digital piracy really be stopped? What happens to record stores? Should artists see the Internet as a wide, liberating landscape or just a new way to get lost in the crowd.

And are they really getting rid of CDs?

*

"I'd say we have a good 10 years left in the CD format," says Strauss Zelnick, delivering the survival forecast for the compact disc without remorse. "I could be wrong, but I don't think so."

Zelnick is president and CEO of BMG Music, which has sold quite a few CDs in recent years with youth pop acts such as the Backstreet Boys, Britney Spears and 'N Sync. Saying farewell to the format may cause replacement angst for fans, but that, he says, is the price of progress.

"I had a lot of vinyl records too," he said, "but now they're all probably sitting on a Salvation Army truck somewhere."

While some other industry leaders interviewed said the CD would hold on for two decades or more, all believed that the Internet and new flash-memory devices would begin pushing aside the shiny disc in the next decade.

But how exactly will music be bought and sold in the years to come?

Many envision music buyers compiling digital jukeboxes at home on powerful household machines that will be part computer, part television and a conduit to the Internet. Fans will pluck songs, albums or videos straight from the Internet (legally and for a price, industry leaders hope) and add them to their vast collection.

Zelnick predicts that within five years music buyers will be loading music files from their home computers to memory cards they can then play in their cars or in hand-held players.

So what about record stores?

The music retail realm has already been hard-hit by thin profit margins, leading to numerous consolidations and retreats. And then there are studies showing that youthful fans are spending more and more hours online. Even with all that, no one seems to be predicting music store extinction.

"Not everybody lives in nice houses," says Jimmy Iovine, co-founder of the Interscope Records label. "People want to get out of their house. Who wants to live in front of a computer?"

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