INDUSTRY RECOVERS FROM Y2K's ONLINE WAKE-UP CALL.

Napster and MP3 brought the issue of downloading of music to the forefront in 2000. This year subscription will be the buzzword, says Toby Lewis

TECHNOLOGY STOCKS in general may have had the stuffing knocked out of them during the past 12 months, but there is an increasing focus to the music industry's new media activities. And, even if consumers remain, as yet, largely unmoved by plans to "monetise" the online music sector, developments of recent months will at least ensure that there will be some meat on the bones of the industry discussions raging in the seminar rooms and bars of Cannes next week.

While 2000 saw the Big Five's long-awaited entry into the digital music space, it was Napster which made the headlines. Armed with a fiendish concept and a questionable interpretation of copyright law, it consolidated its position as arguably the solitary world-class internet music brand, winning 48m subscribers to its file-sharing network. It was further rewarded in November with the announcement of a strategic alliance with Bertelsmann Consumer Group (BeCG)'s e-commerce division, although it continues to defend itself against the heaviest and most unequivocal legal assault ever mounted by the traditional music industry.

In the process, Napster, along with MP3.com, single-handedly turned MP3 into a household name and introduced an intrigued public and a horrified record industry to the concept of a central, on-demand repository for digital music.

By November, the Recording Industry Association of America (RIAA) was urging the US Copyright Office to commence the legislative proceedings required for subscription-based royalty rates to be set. "The recording industry understands the urgent need to bring subscription music services online," said RIAA chairman and CEO Hilary Rosen. "Our highest priority is enabling these new services to launch as soon as practicable."

Now subscription is one of the most discussed topics in the music business. Bertelsmann plans to turn Napster into a paid service; Seagram boss Edgar Bronfman Jr has begun to come good on his promise to "stop thinking about selling round things" by making 25,000 Universal Music tunes available in streamed form via the Farmclub.com Music Service; and EMI has most recently joined the bandwagon -- licensing its catalogue to subscriptions start-up Streamwaves. By 2005, according to a recent Jupiter report, subscription revenues will outpace those of downloads, accounting for almost $1 bn worth in sales.

"We have always believed that consumers will be more attracted to paying a fixed fee for more of an `all you can eat' model rather than paying on a per download basis", says MP3.com European president Carolyn Kantor.