The Sweet Sound of Synergy

Is the AOL Time Warner Inc. deal the end of the music industry, or a new beginning? Depends who you ask. While Wired News' headline ominously asked if the merger was "A Music Industry Death Knell," the Washington Post cheerfully suggested that "Deal May Make Online Music Pay."

In fact, the stories aren't that different. Both suggest that, as the Washington Post's David Segal wrote, "By tossing their combined weight behind the pay-for-play approach, AOL and Time Warner could enhance not only their own bottom lines, but also, if they are able to set a standard for distributing digitized music, those of the dozens of companies now angling to turn the Internet into the music marketplace of the future." In other words, it's not the music industry that's dead, just the analog music industry. Segal used much of his story to rehash the issues that have swirled around the record business since the dawn of MP3, while Wired News' Michael Stroud made forceful - and convincing - predictions about the future. He quoted entertainment attorney Peter Dekom: "The music model predicated on album sales is going to vaporize.

This merger is all about Warner Bros. throwing up its hands and recognizing that it has to change the way it sells music."

No one was sure exactly how the new music economy would work. "It remains to be seen exactly which economic models will replace the venerable model of album sales," wrote Stroud. "Possibilities include charging fans small fees to listen to individual songs, linking advertisements to music, and selling encrypted music files over the Internet that open when a user provides a credit card."

Importantly, Stroud's story also included a warning that "Time Warner will be tempted to use AOL's marketing and distribution capabilities to promote its own music. And that could alienate consumers." After all, AOL Time Warner will own the music, the magazines to promote it, the Web sites on which fans can chat with artists, the online stores that sell songs, the online radio stations (like Spinner) that play them and software such as Winamp that organizes them.

Does anyone really believe Warner artists won't come out ahead?

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