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Thursday, May 30, 2002
 Record companies look for answers as CD burning, file-swapping threaten industry
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Message Text: A new technology lets people copy music for free. Lawsuits are filed. Music sales dip. The viability of the recording industry is in doubt. The technology? Not the CD burning and Internet file-sharing that's currently revolutionizing the way people listen to music. No, it was the cassette tape that had record companies worried about their future when it gained popularity more than three decades ago.

"This was heralded by the record industry as doom," said Stan Cornyn, a longtime Warner Bros. executive and author of the new book "Exploding," about Warner Music Group.

But predictions of the end of the music industry didn't pan out: New musical styles and the new technology of the compact disc allowed it to flourish. And many record executives look to that time in hopes they can respond creatively to overcome the current crisis.

"What cures business at a time like this is innovation — thinking what the customer wants, giving the customer what they will buy — and I don't feel a lot of that is going on right now," Cornyn said. "(But) record companies will come around to redefining themselves. They've done that again and again through history."

The labels have taken some steps to reposition, even reinvent themselves. They're putting music online themselves, offering rebates and experimenting with new ways of promoting artists. (They're also filing lawsuits, trying to exert pressure on technology manufacturers and floating copy-proof CDs.)

They argue that their role as filters and promoters will be ever more important as the universe of online music expands.

But can they adapt fast enough to slow the erosion of their audience?

"The challenge to our business is how do we co-opt the file-swapping world to become a part of our business?" says Charles Goldstuck, president and chief operating officer of J Records, home to artists such as Alicia Keys, Luther Vandross, O-Town and Busta Rhymes.

File-swapping could be "a positive for our business, because it has raised the awareness of music among the consumer base to an unprecedented level, and that cannot be a bad thing," he says. "How do we use that as a positive?"

The doomsayers certainly have a lot on their side. After 10 years of growth in the music business, 2001 marked the first year that music sales declined, by 5 percent overall. Sales this year are down approximately 12 percent from the same period last year.

While some of the drop can be blamed on the burst of the teen music bubble, another obvious culprit is the growth of Internet piracy and recordable CDs.

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