As music adapts, consumers win

The editors at Spin magazine weren't joking when they named "your hard drive" the best album of 2000.

Three years later, the volume of music downloading, legal and otherwise, continues unabated as a new generation of music lovers grows up without setting foot in record stores, their entire music collections collapsed into binary codes in the innards of computers.

Even the recording industry, which warned Monday that it is suing hundreds - and ultimately thousands - of music swappers for copyright infringement, knows that more and more of its customers want music that is both available in digital form and less expensive. That's what millions of young music lovers have been accomplishing through online piracy.

So the industry, in addition to filing lawsuits, is adapting in ways that, taken together, represent a dramatic shift in power from the record companies to consumers.

Not only is the Recording Industry Association of America (RIAA) adopting a we-want-you-back tone, but Universal Records, in a bid to win back its fast-disappearing customer base, is slashing the price of CDs by as much as 30 percent.

The industry is also rapidly making more music available to buy as a digital music file (significantly, the Rolling Stones recently announced that their entire back catalog would be made available for purchase online this month).

The industry, which is losing an estimated $700 million a year to file sharing, is clearly listening to the demand of their potential customers who currently engage in illegal downloading.

"They're losing the battle, and they know it," says Wayne Rosso, president of Grokster, one of the most popular online music file-sharing sites, which sees spikes in file-swapping traffic every time the RIAA announces its next move. By trying to scare consumers away from file-sharing sites, Mr. Rosso says, "they have just started to open up a Pandora's box, and now it's between them and the American citizenry."

Even the slashing of CD prices, industry analysts argue, means little to the 57 million Americans who get their music free - and who gladly opt for digital files over glossy CDs. Music in a plastic case, it seems, is fast becoming passé.

"The long-term effect is going to be to make any sort of physical media obsolete," says Josh Bernoff, music-industry analyst at Forrester Research in Boston. "CDs? On the way out. DVDs? Those shiny DVDs? The next format is, 'Send this to my computer or television.' "

Nearly 50 percent of 12- to 22-year-olds downloaded music in July, according to Forrester's latest report on file-sharing trends, and one in five of this young generation of file sharers say they have begun to download movies as well. It is only a matter of time, Mr. Bernoff predicts, before movies are swapped as freely as the Beatles and Britney. Even books and newspapers, he adds, may not be far behind.

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