New York Times

by Peter Evers

With revenue of $12.36 billion in 1997, profits in the music business have been essentially flat for the last few years. So, lured by an on-line music market that the research firm Jupiter Communications predicts will reach $2.8 billion a year by 2002, the record industry, from producers to retailers, has struggled with how to take advantage of Internet technologies to realize better margins.

After experimenting with audio, video, live "Webcasts" and other multimedia technologies, the vanguard of the new-media recording industry says it is poised to employ the Internet to radically alter the way tomorrow's artists will be sold, promoted, and even discovered.

But like everything on the Internet, there is no road map to profits from on-line music. On the Atlantic and Pacific coasts, two very different pioneers are blazing divergent paths to the future.

In New York, N2K Inc. was formed in 1996 as a complete on-line music and entertainment endeavor with a huge retail music store, its own record label and magazine-type content organized around communities of shared musical tastes and interests -- jazz, classical, rock and country.

Unlike most start-ups in the Internet world, N2K is headed not by youngsters with more vision than experience but by respected longtime players in the music industry.

Across the country and in another universe financially -- but just a mouse click away on the Web -- is Red Button, a San Francisco-based company founded last spring as a platform for unknown bands to distribute their music. Recently, the company shifted into recording and artist management.

About the only thing these two companies have in common is a desire to make a business out of music and an unwavering believe that the Internet is the place to do it.

N2K's leaders were adapting new technologies to the recording business long before there was an Internet. Its chief executive, 58-year-old Larry Rosen, founded GRP Records, the label that introduced all-digital recordings for CDs in 1982. It was sold to MCA Inc. in 1990 for $40 million.