From...

July 21, 1999
Web posted at: 12:34 p.m. EDT (1634 GMT)

by Lessley Anderson

(IDG) -- "Offensive" was the buzzword on the opening day of Plug In, Jupiter Communication's annual digital-music conference, as recording-industry execs flexed their muscles before the Net community and international press. What began three years ago as a small, Net-head curiosity exploded this year due to recent attention lavished upon the digital-music business. Traditional music-industry execs outnumbered new-media types, with overall attendance doubling from 700 last year to more than 1,400 this time.

Jupiter analyst Mark Mooradian's opening remarks stressed that the coming year would see the traditional music biz operating in the online space offensively rather than defensively. He complimented the "alacrity" with which members of the Secure Digital Music Initiative had reached consensus on a standard for portable players.

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The recording industry's speedy response reflects the general frenzy that has overtaken the online music space. A year ago, music technologies were far from attracting a mainstream interest; for most people, online music meant selling CDs over the Net. Appropriately, at last year's Plug In, Larry Rosen, then-CEO of album-peddler N2K, held court amid a swarm of admirers in the small exhibit hall. At the time, online radio was gaining some steam: TheDJ.com relaunched as Spinner.com the first day of the show, and Broadcast.com went public that week. But while music-encoding companies A2B Music and Liquid Audio participated in the conference, music-download site MP3.com – which recently has become a major player in the online music industry – did not even attend. In fact, virtually no one at the show had even heard of the MP3 format.

On the eve of MP3.com's sure-to-be staggering IPO, the online music industry is attracting major offline attention. Last year, tech dragon Rob Glaser gave the conference's keynote speech. This year, the honor was given to traditional media mogul Strauss Zelnick, chairman of BMG Entertainment.

Zelnick didn't attempt to hide his old-media roots. He spent a third of his speech chiding Internet company valuations. Joked Zelnick: "I was on vacation last weekend, and I'll tell you – there's nothing more depressing than a bunch of middle-aged guys complaining about missing out on the Net-stock run-up."

Zelnick vowed there would be many losers among those who lacked long-term, profitable business models. For the scores of music startups that packed the ballroom of the Marriott, where the keynote was given, Zelnick suggested subscription models a la AOL and the porn industry, and direct marketing through e-mail. Regarding the MP3 revolution, he said: "The key activity of the record company is finding and marketing talent. The Net can enhance the discovery of talent, but it can't replace it."

Despite Zelnick's caution, a growing number of traditional music-industry execs have jumped ship to join or start Net companies, and their presence had a volatile effect on the conference.

Al Teller, former head of MCA and now CEO of digital record label Atomic Pop, took a stab at BMG during a panel following Zelnick's keynote.

"Strauss is completely wrong," said Teller of Zelnick's comparison between today's Net-bedazzled Wall Street barons and miscalculating thought leaders of yesteryear. "Ten years from now, the music industry will be unrecognizable."

Kevin Conroy of BMG, responded coolly from his seat next to Teller, saying, "Thanks for the introduction, Al." He then tempered Teller's predictions with his own: "The answer is rarely at the extremes. It's somewhere in the middle."