At last week's Webnoize 2000 digital entertainment conference in Century City, you couldn't walk a pace without hearing someone mention Napster.

In fact, "Napster's Business Model and Revenue" could have served as the title of the three-day annual conference.

Through it all, the renegade twentysomething techies who this year came mostly from digital music companies like Liquid Audio Inc., MoodLogic Inc. and MyPlay Inc., were trying to see how Napster Inc. would make money with its peer-to-peer music file-sharing software after agreeing to partner with German media giant Bertelsmann AG.

But they got few concrete answers as Napster founder Shawn Fanning danced around that subject during a panel discussion that kicked off the Webnoize conference.

Fanning, who shocked Napster fans when he cozied up to Bertelsmann, said only that he and Bertelsmann e-commerce group CEO Andreas Schmidt were engaged in "high-level thinking" on the "next-generation interface."

"We will never threaten the user experience or the community," promised Fanning, who was joined on the panel by Schmidt and Napster interim CEO Hank Barry.

"The core value is you want people on the (music exchange) system, and you want people to share," Barry said. "We're not going to change that."

Under the deal, which Schmidt referred to as "Project Thunderball," Bertelsmann will loan Napster around $40 million and possibly take a 60 percent equity stake in the file-sharing company.

During the discussion, Schmidt said that Bertelsmann's BMG Music Group would drop its lawsuit against Napster if Fanning is able to transform Napster into a secure, paid music service.

Days are numbered

Project Thunderball and the lawsuit seemed to cast a pall over Webnoize, reminding everyone that the days of the free-for-all music exchange are soon going to be over.

"Last year, Webnoize had an optimistic edge, with a lot of 23-year-olds running around claiming they were going to change the world," said Webnoize attendee Sean Garret, who works in corporate communications at Listen.com. "That was unrealistic. This year, the companies that survived have much more careful business models."

For instance, Listen.com, a San Francisco-based music portal, is taking a consolidate-to-survive approach. The company, which recently acquired WildPlanet.com, has also bought the assets of bankrupt Scour, another peer-to-peer music file-sharing service that the major record labels sued.

Most attendees at Webnoize presented software and services that tap into the public's desire for online music. San Francisco-based MoodLogic offers a music-recommendation technology that is distributed either on Web sites or installed in music store kiosks that uses responses from consumers to classify songs according to a long list of attributes.

Liquid Audio, which was rumored at the conference to be the next Bertelsmann purchase, focuses on the copyright-safe B2B distribution of music. The Redwood City-based company offers software and services that move music from artists and record labels to retail Web sites, where fans can access the music as digital files.

San Francisco-based Music Buddha Inc. provides a service that graphically displays music genres and plays samples as a cursor is passed over a genre name. After a consumer indicates favorites, the service picks CDs that reflect the ratings.

Still, it was the potential of the Napster-Bertelsmann deal that generated the biggest buzz.

Power brokers gab

Even a panel discussion between Recording Industry Association of America CEO and president Hilary Rosen and Motion Picture Association of America CEO and president Jack Valenti quickly turned and stuck to Napster.

Rosen applauded the Bertelsmann-Napster deal.

"I think the deal is good for the industry," she said. "If Napster had been willing to do such a deal 12 months ago, we all might have had to work a lot less this past year."

Rosen said the resolution of the lawsuit filed against Napster by the RIAA depends on what an appeals court decides about Napster's right to continue operating.

"If the lawsuit hadn't been filed, there wouldn't be a (Bertelsmann) deal," Rosen said. "Napster finally realized it wanted to make money. If it makes the points that need to be said, maybe a trial isn't necessary."

Neither Valenti nor Rosen seemed dazzled by Fanning's efforts.

"There's nothing revolutionary about (Napster's) technology," Rosen said. "It's more evolutionary rather than revolutionary."

"There's probably some 16-year-old that's gonna out-Fanning Fanning in the audiovisual world," Valenti added.

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