Web marketing is music to artists' ears but piracy hits dangerous note

Seeing Mr Larry Rosen, one of those well-heeled US men whom middle age flatters, dressed in trendy black, with the small oval wire-rims currently in vogue, and plenty of smooth, good-humoured patter you'd probably guess "music industry" or "new media".

He's both a pioneer in each medium. As a record producer, he says he was the first to try out digital recording and the first to have artists release their music on an entirely new but controversial format, the compact disk. "Everyone said, `Are you crazy? They'll never sell'," he says now, with a barking laugh.

These days, as founder of a modest musical empire called N2K (www.n2k.com), he runs the second largest music retail Website, Music Boulevard (www. musicboulevard.com) and an online record label called N2K Encoded Music. He does nothing by halves to pull the money together to launch N2K he talked to a few old friends and ended up with investments from David Bowie and the Rolling Stones, and got Phil Ramone as N2K Encoded Music's producer.

"The things I've done in the music industry were always coupled together with technology," Mr Rosen says. "It was a natural extension to move onto the Web." Although miniscule now, digital music delivery's potential is highlighted by the numbers who downloaded a Bowie single Mr Rosen offered for free on Music Boulevard there were over 300,000 takers.

Overall, Music Boulevard offers 200,000 titles, including 60 singles which can be purchased and downloaded directly from the Web. The site is one of the fastest growing Web locations, according to site trackers Media Metrix.

Mr Rosen is excited. . . "to get music fans on a one-to-one basis". "In the past, you always needed an intermediary." The intermediaries, in the forms of the music company promotional machine and the big record stores, mean that major artists receive all the promotional backing while lesser-known artists and genres get lost in the "clutter", says Mr Rosen.

He should know. Mr Rosen and Grammy Award-winning partner, Mr David Grusin, who is also his partner in N2K, set up the eclectic jazz label GRP, the first all-CD record label (they sold it to MCA for $40 million [£28 million] in 1990). Jazz and classical music make up only 3 per cent of US music store sales, he says; but at Music Boulevard, jazz is 15 per cent while classical is 12 per cent of total sales, and world music also does very well.

"A different demographic is buying online," he says.

He believes the Net also offers new opportunities for artists which is why he is testing the online waters with N2K Encoded Music (distributed in bricks-and-mortar stores by Sony). The artists currently with the label range from the relatively unknown to those with a firm following they're just not Top 10 musicians. Artists "are probably fed up with the major record companies", believes Mr Rosen.

"Today you're dealing with big bureaucracies that are more like banks than part of the music business we once knew."

Artists feel "beholden", with record companies taking a cut of up to $6 of every CD sold, while artists get an average of $1.50.

In contrast, the Web allows artists to be closer to fans and to deliver music in new ways (for example, a single could be offered online within hours of its recording, circumventing the usual record company approach of only releasing singles once an entire album of tracks has been recorded). Mr Rosen says N2K Encoded Music gives artists a larger cut of their CD profits up to $6.

"I think artists have choices they've never had before," he says.

However, the Web brings its own worries to artists as well. Nearly everyone recognises the possibilities of a medium which can actually deliver a musical purchase digitally, over the Web itself. But the Web also makes music piracy relatively simple, which is why the music business as a whole still approaches the online world with some trepidation.

That fear is reflected in the Recording Industry Association of America and BMI's current clampdowns on pirate sites which offer (often for free) downloadable singles. Mr Rosen wholeheartedly supports such actions including those taken against sites typically run by college students offering singles for free.

"Is the argument that there's big bank robbers and then there's small guys who hold up gas stations, and we should ignore the guys who hold up the gas stations?" The online music industry's fast growth means smalltime traders are a significant threat, he argues: "If you don't stop it at this particular point, it's going to get out of hand."

Both bandwidth and copyright problems are limiting factors to digital distribution, he says; bandwidth will come, and N2K is working with software partners to develop what it calls E-Mod (encoded music for online delivery). E-mod will eventually incorporate digital watermarking, encryption (so that only the original download site could play the music) and technologies which will allow only a single CD to be burned from music held on a hard-drive.

Like most Web enterprises, N2K has yet to show a profit. In 1997, the company took in $11.3 million but had losses of $28.7 million. Analysts predict it will be 2000 before N2K which is publicly-quoted on the Nasdaq

is in the black. Still, the future looks good. A recent European deal makes Music Boulevard the sole music purveyor on Internet service AOL Europe, further extending an arrangement N2K already has with America Online in the US. Music Boulevard is gaining rapidly on industry leader CDnow, which took in $17.4 million in 1997.

Industry analyst Jupiter predicts online music sales will jump to $1.6 billion by 2000, a figure Mr Rosen says is conservative.

Ever the optimist, he believes that CD sales will grow much faster, and that 20 per cent of online music sales will be delivered digitally three years from now. For Mr Rosen, it's thumbs up to the Web: "It's a better way to deliver music that's the bottom line."

Karlin Lillington is at klillington@irish-times.ie