Recording industry tries to change its tune

After years of fighting downloading, 2008 may be year that it embraces it

	A recording industry report says retail space for CDs may shrink 30 percent this year.
Ric Francis / AP file

updated 4:24 p.m. ET Jan. 6, 2008

LOS ANGELES - When you're not inclined to give your product away for free, make your customers believe they're getting something for nothing.

That's the thinking behind some of the offerings music fans may see this year as the recording industry scrambles to offset losses from plunging CD sales and find new sources of revenue when many consumers simply download music for free.

Among the business models music fans are likely to see more of: music subscriptions bundled with the price of Internet access, and services like Nokia Corp.'s upcoming Comes With Music, which would give users of select mobile phones a year's worth of unlimited access to music, for no extra charge.

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Music companies also are expected to license songs for more ad-supported Web sites like imeem, which lets visitors watch videos or listen to full-length tracks posted by other music fans for free.

Major recording labels, long-criticized for being too slow in adapting to changes brought by the Internet over the last decade, are under pressure to explore new ways to get music fans to pay for music, leading to more choices for consumers.

In 2007, the recording industry arguably took the boldest steps yet.

After years championing the necessity of copy-protection safeguards on digital music, three of the world's biggest recording companies agreed to license their music for sale online as unprotected MP3 files. Many analysts expect the last holdout, Sony BMG Music Entertainment, to follow this year.

That's an important step for music lovers hesitant about buying digital music because songs are generally tied to specific devices — for example, Apple Inc.'s iPod players can't play copy-protected music not bought at Apple's iTunes store.

"It seems clear there's an accelerated pace of change that comes hand in glove with accelerated decline in traditional business," said Eric Garland, chief executive at BigChampagne Online Media Measurement, which tracks online entertainment.

Recording company executives who once saw new technology as the enemy seem to now see it as a lifeline.

The major labels — Sony BMG, Vivendi SA's Universal Music Group, Warner Music Group Corp. and Britain's EMI Group PLC — declined to comment.

In a recent memo to employees, Warner Music Chairman and CEO Edgar Bronfman Jr. touched on the importance of developing new areas of digital music. The company's stock price has plunged more than 75 percent over the past year.

"There's no denying that WMG and the industry as a whole have been struggling for almost a decade now with the challenges and opportunities that the digital space presents," Bronfman wrote. "The recent trend of dramatic changes in the recorded music market will continue. ... And, though it's a cliche, it's a cliche because it's true: technology will also provide us with new opportunities."

Bronfman alluded that the industry this year would pursue a way to "monetize the unauthorized flow of our artists' audio content on the Internet."