By SARA FISHER

Staff Reporter

It's only one song just a couple of minutes worth of music. But that solitary tune is also a quiet battle cry from DreamWorks Records.

By posting a downloadable song by the group Buckcherry on a Web site earlier this month, the music division of L.A.-based DreamWorks SKG broke ranks with the most powerful record labels in the world. The move may represent the first major shot in a revolution overtaking the music industry.

Belief in the Internet's power and potential is precisely what fueled DreamWorks' decision to experiment.

"We know that lots of fans search for new music on the Internet, and we want to reach them," said Adam Summer, an executive in DreamWorks Records' multimedia division. "We believe that if they like what they hear, they'll buy the CD."

But the strategy is squarely at odds with what the $40 billion recording industry has asked its members to do. A former record label executive in Los Angeles described DreamWorks' move as a "major slap to the (industry's) face."

The Recording Industry Association of America has grown increasingly vocal over the last year about its opposition to MP3, a technology that allows users to copy music for free via the Internet at CD quality. Anyone with a home computer and some free specialized software can download music usually without paying a dime.

Particularly worrisome to the RIAA is the fact that online pirates have started a booming, albeit profitless, business by lifting popular songs off of CDs, converting them to MP3 files, and posting them on the Internet. There is no means to enforce copyright protections when this is done, meaning that neither record companies nor musicians see any royalties.

Once the sole domain of hard-core techies, MP3 technology has marched relentlessly into the mainstream over the last year. America Online chat rooms are filled with music fans peddling the hottest, latest music in MP3, and search engine Lycos just added an MP3 search function.

While the majority of songs floating around the Web are believed to be pirated material, the technology is also at the core of a rapidly growing niche of online music businesses. These companies are taking artists who haven't signed with a record label, or who have signed with smaller independent labels, and putting their work on the Internet, charging users a small fee to download the songs. Some of these businesses are also signing deals with more-established artists for new works, circumventing the record labels.

That is arguably the record industry's greatest concern: that digital distribution and marketing are the wave of the future, and the big labels will not be in control.

DreamWorks Records is the first significant label to make an official foray into MP3s. For the past several months, it also has been featuring 30-second snippets of its artists' music on its Internet site in that format.

Summer acknowledged that DreamWorks has broken ranks in the industry, but he notes that "It's hard to pass up this kind of opportunity."

DreamWorks worked with Encino-based online company Ultimate Band List in posting its MP3 song, which is accessible through both companies' Web sites. The two companies inked a marketing partnership in December, under which the Ultimate Band List site (www.ubl.com) will feature DreamWorks Records artists, banner advertising for the label, and likely more MP3 music files from up-and-coming bands.

Ultimate Band List President Steve Rennie said his site's MP3s have attracted so many visitors that the company has been forced to bulk up its computer server capacity.

"DreamWorks' and our motive was never to start a controversy, but to maximize the bands' exposure with the most bang for the buck," said Rennie, himself a former Epic Records executive. "All political issues aside, the MP3 is clearly the medium of choice for the most rabid music fans. And that's what's at the heart of every record label to attract the music fans in order to break a new band. That's every record label's ultimate goal, and DreamWorks was one label willing to try this."

There has been little outward sign of a backlash against DreamWorks from the other record labels. Primarily, the reaction has played itself out in the inner sancta of the other labels, according to industry sources.

The inter-office grumbling, however, may be tinged with jealousy. The record industry is aware that consumer habits are changing and the digital scene is growing in power. But because the labels' parent companies have a vested interest in preserving the traditional methods of distribution, this particular evolution has started without them.

Mark Hardie, an analyst at Cambridge, Mass.-based Forrester Research Inc., discovered that many executives at the Big Five music companies Sony, Time Warner, Bertelsmann, EMI Group, and Seagram's Universal are dreaming of new marketing campaigns and merchandizing packages that would incorporate digital distribution. "The higher-ups keep telling them 'no,' which at some point they'll have to stop saying," he said.

This internal conflict has become a source of frustration for officials at MP3.com, the San Diego-based company that runs the world's largest repository of legal MP3 music files on the Internet. Chief Executive Michael Robertson has worked with a variety of independent and smaller labels, as well as directly with musicians, to amass the 22,000 songs the site offers for free. The company's efforts to get cooperation from the major labels, however, have been largely unsuccessful.

"There is an incredible amount of backroom politics going on," said Robertson, who started his company 15 months ago during the early stages of MP3 popularity. "The label execs come and get really excited. Then they come back and say 'never mind' once the guys at the top hear the plan. It's amazing."

For its part, the RIAA is downplaying the DreamWorks decision. A spokeswoman for the trade group said, "Each company is free to decide what distribution method is best for it." She added that stomping out MP3s is not the "RIAA battle plan as such."

Yet its attack against the MP3 format has been fairly vehement. Last spring, the trade group unsuccessfully sued to block the release of Diamond Multimedia Co.'s Rio, a $199 Walkman-like player that records and plays MP3 songs. It also has pushed for piracy-proof alternatives to the MP3 technology, and is working on recommended anti-piracy specifications for the manufacturers of digital download devices.

If there is a digital technology the industry can live with, it's IBM Corp.'s Madison project. Introduced on Feb. 8, it is a music delivery system that allows songs to be downloaded via cable modem, but supposedly prevents piracy.

Each of the Big Five record companies contributed $1 million toward the technology, which will be tested first in San Diego. During the initial run, users will be able to download selections from a list of 200 songs but will have to pay for the privilege, perhaps nearly as much as it would cost to buy a CD at a traditional retailer.

While this may be a needed step toward establishing a uniform standard that the industry can agree upon, early word has it that the Madison project will likely fail. The prices for songs are too high and most of the technology is inconvenient for mass appeal, say some familiar with the device.

Meanwhile, as the music industry struggles to reach a consensus on how to handle MP3s, the standard continues to grow in popularity. And the next-generation MP4 technology will arrive soon. Expected to debut next month, this new compression technique is expected to be so effective that songs can be e-mailed with ease.

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