AUSTIN, Texas -- Somewhere between the live music showcases on Sixth Street and the endless schmoozing that ran well past midnight, the deep-fried drunkfest known as South by Southwest also squeezed in some discussion of technology and how it's changing the music industry.
In the tradition of the annual Austin music festival, which ended Saturday, panels covered both the industry and artistic side of the music game. Labels and managers, after all, are just as interested as the artists themselves in how the internet, digital downloading and other technologies are turning the music business on its head.
In some cases, talk focused on opportunities. But in many other instances, panelists warned about the perils and uncertainty that face both the artistic and business sides of the industry -- especially when it comes to peer-to-peer file sharing.
"It's stopping new artists from coming forward, and it's killing mid-level artists across the board," charged Jay Rosenthal, a music attorney at Washington, D.C.-based Berliner, Corcoran & Rowe and a board member of the Recording Artists Coalition. "There has never been an issue that has been so galvanizing."
But Wendy Seltzer, an attorney with the Electronic Frontier Foundation, said lawsuits against those who trade or enable the trading of copyright music files online will continue to have little effect on P2P traffic.
She said the Grokster case now before the U.S. Supreme Court could very well determine the future shape of copyright law as it relates to the internet. Oral arguments in that case are scheduled for March 29.
"We feel the future of technology development is at stake here," she said.
Finding business models that capitalize on file sharing is "the next logical step" for artists and labels, said Seltzer, who suggested collective licensing schemes and other mechanisms that would allow copyright holders to get paid when people use P2P networks.
But Rosenthal said most artists are still skeptical that P2P-based models will ever appropriately compensate them.
"I don't think the majority of artists, or even a minority of artists, believe that this is a business model that's going to help them in the future," he said.
Rosenthal said the Grokster case could hinge on whether Chief Justice William Rehnquist, who is suffering from thyroid cancer, will be healthy enough to participate in the decision.
Rosenthal noted that Rehnquist was among the dissenters of the court's Betamax decision, which has become a bedrock of copyright law in the United States.
That 1984 ruling held that products that enabled people to infringe copyrights were legal as long as they also had substantial non-infringing uses. Technologists have credited the Betamax decision with ushering in two decades of innovation ranging from the VCR to the MP3 player.
"No matter which way it goes in the Grokster case, we're going to end up back in Congress anyway," said Rosenthal, noting that one side or the other will likely seek legislation clarifying copyright law even after the decision.
In another panel, Eric Garland, CEO of media research firm BigChampagne, said "there's certainly cause for concern" with P2P because it's fast becoming a primary distribution channel.
"Most of the music people consume most of the time is not generating revenue for anyone," he said. "Music is free right now."
"Break out the hemlock," joked Chris Castle, senior vice president of legal affairs and general counsel of Snocap, which has developed audio-fingerprinting technology to help copyright owners track and potentially collect fees for music trading on P2P networks.
Castle said that even capturing a small portion of P2P traffic could be a boon to record companies and artists. "If you could monetize 10 percent of those tracks, that would be a phenomenal increase in revenues," he said.
Indeed, South by Southwest wasn't all gloom and doom on the technology front as artists anxiously learned about new revenue streams.
One growing market is mobile-phone ring tones. Scott Andrews, senior director of internet and mobile entertainment for royalty collection agency BMI, said ring-tone revenues are expected to double from $250 million in 2004 to $500 million in 2005. "This is a business that has scaled very quickly," Andrews said.
He added that potential synergies with other mobile technologies such as Bluetooth wireless could create even more opportunities for artists.
"Can you imagine being at a concert and saying, 'OK, everyone turn on your Bluetooth. We're going to send you a ring tone for free just for being here at the concert'?" Andrews said.
Furthermore, as the market transitions from polyphonic ring tones, which are essentially a series of beeps designed to mimic a song, to "master tones," which are an actual clip of the song derived from its original master recording, mobile phones could fast become a major music platform.
"This mobile space is going to be the biggest, if not one of the biggest players," said Donald Passman, an attorney with Los Angeles-based Gang, Tyre, Ramer and Brown. "Why do I need to carry around an iPod when I can just dial it up and listen to it?"
At one point, Mark Frieser, CEO of New York City-based mobile-research firm Consect, held up his mobile phone to the audience. "This is your new point of sale," he said. "Forget about record stores."
As artists, record labels and other music players at the Austin conference tried to figure out technology's impact on the music business, a prevailing sense of gradual progress on several fronts seemed to buoy their mood.
"We're at an inflection point here where we have a real chance to change the way the music business works," said Ted Cohen, senior VP of digital development and distribution for EMI Music. "We're interested in making sure everyone survives. I think this will be an interesting year and a turning point."
