NEW YORK -- With much fanfare, BMG and Universal Music recently announced the launch of Getmusic.com, an online music retailer that would compete with CDNow and Amazon.com in the online retail space, and purportedly offer a promotional alternative to MTV and Rolling Stone magazine in the media space. It was a classic case of two industry elephants playing catch up in an arena that is changing too much and too soon for their comfort. The basic assumption underlying their announcement is questionable. Accustomed to the luxury of free (or cheap) downloads on the Internet, consumers will treat music as a commodity. The source to profitability and growth does not lie in squeezing the last penny out of a music track. Rather, it lies in offering a bundle of value-added services to customers in the physical and digital worlds.

Over the past year, the music industry has been buffeted by a revolution in the way music is produced, distributed and eventually consumed. The chief 'aide and abettor 'of this revolution has been the Internet. The proliferation of MP3s, the changing habits of demanding and Internet-savvy consumers, and the breathtaking speed of developments in compression and storage technologies have left the big labels largely gasping for breath. New audio devices like the popular Rio MP3 player and the EMPEG car player are redefining the way music is consumed. With commonplace broadband access and further advances in portable storage just around the corner, the writing may be on the wall unless the big labels don't get their act together in a matter of months. A recent survey by the Recording Industry Association of America (RIAA) points to a significant drop-off in the proportion of purchases accounted for by 15 to 24 year-olds (32.2% in 1996 vs. 28% in 1998), mainly attributed to the free availability of MP3 tracks on the Internet. It should be taken as a dire warning of things to come.