More Pain For Napster

Put Don Henley and Alanis Morissette in front of any crowd in the world, and you would expect an instant epidemic of air guitars. Any crowd, that is, except the Senate Judiciary Committee. Not a single lighter was raised when the ex-Eagle and the queen of ironic rock testified at a digital-music hearing last Tuesday. Indeed, the duo's presence had been effectively overshadowed by a single press release, and Henley knew it. "As Alanis and I sit here," he said, "there is a Ping-Pong game going on over our heads about business models on the Internet."

The focus of the digital-music debate is rapidly shifting. Once dominant song-swapping service Napster is a shell of its former self, with 1.6 million copyrighted tunes now fully blocked by court order. And the music industry has not wasted time before stepping into the void. Its first Ping-Pong ball was served in the early hours of Monday morning, when EMI, Bertelsmann and Warner Music--three of the labels long lampooned as dinosaurs that didn't get the Net--were inking a deal with Real Networks and AOL after a year of top-secret negotiations.

The company they created, MusicNet, is set to become an online clearinghouse (read: tollbooth) for any website that wants to license recordings for you to download. Of course, AOL and Real.com are first in line. Real owns 40% of MusicNet; the three labels own 20% each. (AOL, Warner Music and TIME are divisions of AOL Time Warner.) But the deal is so unavoidably big, even Napster is thinking about signing up.

It was enough to make you think the era of pay-to-play music downloading has finally dawned. Spurred on by the MusicNet deal, Sony and Vivendi Universal hastily announced that their licensing service, known as Duet, had found its first customer in the shape of Yahoo. MTV.com said it had done its own deal with all five major labels. And Microsoft hopped on the bandwagon with the radio-style site MSN Music. Result: in just one week "the landscape changed 100%," says Eric Scheirer, digital-music analyst at Forrester Research.

More precisely, it was as if a dormant volcano had just erupted. Nobody has a clue to what the new landscape is going to look like when the ash settles--like how much you will be shelling out for your tunes, though at first it's less likely to involve micropayments (99[cents] per Morissette single) and more likely to be subscription-based services ($9.99 a month for an Alanis buffet).

Still to be solved is the key question: In what format will your music arrive? Can the industry create a standard that will satisfy users who want MP3s they can transfer to portable players and CDs, while protecting copyright owners? "We don't know all the details," admits Richard Wolpert, the Real executive who helped create MusicNet. But "it's fair to say [the files] won't be free-and-clear MP3s as we know them."