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Swimming upstream
  The music industry is dragging its feet, bitterly investing in the Internet. (Is that possible?) The artists, at least some of them, want to distribute their work thru the net, but the executives, locked into a certain kind of thinking that I understand (been there myself) want to put the brakes on.
  If they had their way there never would have been an MP3, there never would have been a public network. But that's water under the bridge, there is a non-copy-protected format, and there is a public network that's good at distributing the format, and hard disks are big and fast and cheap, so there's a market developing around the new technology, and that market is going to happen, I know it at an intuitive level.
Software copy protection
  Lessons learned in my former life as a software industry exec..
  In the mid-80s we tried to copy protect our software. Disks had special tracks that looked bad to the operating system. If you tried to copy the disk, the OS would complain that the disk was bad. When the software started, it would look for the bad block, read the bytes it contains using low level techniques and if the bytes were correct it would run, if not, it would not.
  This went on for a few years, until the users got smart and made a stink. They argued that copy protection only penalized honest users, that pirates could easily figure out how to work around the tricks.
  Eventually companies went into business producing utilities that would "back up" programs with such copy protection. It got so bad that users would report bugs if one of the copy utilities failed to copy your software.
  And the letters! The users fumed with profanity. Letterheads like Ford, Boeing, NASA and MIT, even record companies, they weren't pirates, they were the customers we wanted to buy and be happy with our software!
  As a software company president it was hard to digest. On one hand, we believed that no one would pay for the software if it wasn't protected; on the other hand, we were interfering with a process we wanted to be easy. (It's unsafe to use software without being protected from disk failure, especially in those days when disks were less reliable, but that's exactly what we were advocating for our users.)
  Eventually the copy protection came off, one by one, all the software companies realized that they couldn't be so hostile to their customers and hope to stay in business.
Embrace MP3 as-is
  So when I lecture the execs of the music industry I come from experience. I had to deal with a similar quagmire.
  My advice: Get over it and get on with it.
  Embrace MP3. The first big label who does will reap huge rewards. The musicians must want it. Most of the customers are honest. We will pay for the tunes we use. New channels can develop. Focus on the honest customers, make product for them, the dishonest ones will get a clue.
  (They aren't buying your product anyway.)
Lo-rez scans?
  I think there's a simple solution to the problem. Now, it may be naive, I'm just a user, albeit a passionate one. I love music. I almost always have music on when I'm writing and browsing. As the editor of a community site, I'd love to have a song of the day, in fact I do sometimes, but we let the lyrics stand in for the tune. The lyrics of almost every song is on the net somewhere, Alta Vista can find them, and I link to them, and I don't worry about royalties for the record companies, any more than the users of Visicalc and 1-2-3 worried about the profits of Personal Software and Lotus Development.
  My solution for the record companies -- distribute low-resolution scans of your libraries thru the Internet. On the page where I download the song, include the lyrics, and a One-Click button to purchase the high-resolution version of the song. It arrives on CD a few days later. Each song has an official web page. The pirate sites will wither and go away. The theory is that if I love the music, I'll buy the music. Just give me a reason to buy it. If the hi-rez versions sounds more beautiful, I'll buy it. I like to spend money on the things I like, especially if they're cool. I hate spending money on sticks in the mud, but spending money for courageous leaders, that's easy.
  I can hear the response. Why should we do that? The answer is what we all know, an informal piracy network already exists. I can already get your song if I look hard enough. But I'm honest and I don't look, yet.
Embrace the web
  All is fair in love and war, and the users are going to war with the record labels and they love the music, so they lose on both counts. And the artists must know, in their guts, that they want to make this transition. (Think of the music they'll create for the new medium. Lead times go to zero! Wow.)
  That's why the first label to fully embrace the Internet model will get the support of the artists. In this transition, there will be a leader and bunch of followers. The industry cartel will eventually break because the Internet as a distribution system is way too powerful and opens huge new possibilities for creative people (the musicians).
Trust the web
  The future is bright, your shareholders will be happy (spin out your Internet brand and IPO it), your customers ecstatic, there will be many ways to profit, and the record stores won't close, at least not for a few years, giving you time to study, listen and learn, and figure out what comes next. The web happened, making much writing free of charge, and it didn't make writers homeless, at least not yet.
Dave Winer
  PS: Software developers are creating great software for managing all those songs on all those hard disks. I downloaded RealJukebox yesterday, and while I couldn't get it to scan my audio CDs, it has a nice outliner-style browser for my music catalog. It's ready for me to start copying songs there. I have a 19 gigabyte hard drive with lots of empty space! Perfect timing. BTW, they're an honest company, they aren't pirating the tunes, but they are making it tempting to do so. There's the market window for one of the big labels. Thanks to Rob Glaser for pressing this issue. The music industry will eventually thank him too, I'm sure of it.