He foresees new pricing models emerging over the next few years. There could be subscription services that give members access to all the music from a particular label for a monthly fee. Mr. Varian notes that, while the online music start-ups are transforming distribution, the industry could make up for this in marketing and promotion. Those services, he says, grow more valuable as the Internet widens the audience for all types of music. Ultimately, experts see the industry seeking to use or mimic Internet distribution networks.
Several companies plan to sell digital music over the Internet before year's end.
What the industry seems to be counting on, in addition to vigorous legal actions, is encoding music in ways that make it available only to authorized users. But those codes likely will prove juicy targets for those wanting free music or those dedicated to fighting growing restrictions to online content. Indeed, some worry that the threat to copyright could lead to heightened controls of the Internet. He cites two bills in Congress that would extend copyright protections to any collection of information, not just creative expression. On the Napster issue, though, Congress seems inclined to let the courts and the market resolve the issue, at least for now.