Wall Street Journal

by Holman W. Jenkins Jr.

Twice now, Larry Rosen has been an agent of creative destruction in the music business. A jazz drummer who neglected to go to college, and who probably owns only one necktie, clip-on, he has a knack for technology. Two decades ago he made friends with the MIT professor who was pioneering the recording of music in the digital age.

"The sound quality!" recalls Mr. Rosen. "We said, 'This is a storage medium.'"

But the disco tide was rolling out, and his partner, Arista Records, was in no mood to try selling $20 CDs to play on $1,000 machines. But Mr. Rosen understood something about his jazz customers: They aren't penny-pinching teenagers. He started bringing out jazz CDs and selling them through hi-fi stores. Soon his company was Billboard's biggest-selling jazz label. "When we started, nobody would have figured that in six or seven years LPs wouldn't exist anymore."

He can look back on a bloodless revolution. Record stampers became disk manufacturers, but at least there was still something to manufacture. Record stores had to rip out their 12 inch bins and put in new shelving, but at least they had a physical object to traffic in. And God made it up to all involved when every Homer Simpson in the country had to go out and replace his record collection with CDs.

Happily for Mr. Rosen, he muffed his chance to become wedded to the existing order. He sold his record company to the Hollywood MCA conglomerate, and briefly became a big MCA shareholder, but cashed out again when MCA was sold to Matsushita. After his management contract expired, he waved sayonara and sailed his boat to Venezuela for three months of scuba diving.

When he came back, he saw the Web was about to change everything again, and decided to help it. He was blessedly free of any entanglement with the suspenders and pedigrees of the status quo.

His new company, N2K, runs a Web site, Music Boulevard, and aims to become the Amazon.com of record sales. Right now that means taking orders and shipping out CDs by mail, but get ready to learn about "streaming" and "burning." Streaming means music delivered directly to your speakers as a digital feed over the Internet. Burning means to record such digits for future playback on your own recordable CD.

The very prospect raises what Mr. Rosen nicely call "business issues" for the music establishment. The "mind-blowing" part, he says, is that electronic sales will allow musicians to know who's buying what and market directly to their fans. The industry no longer will have to blanket the universe with promotions just to let devotees know about their favorite band's latest release.

But for every silver lining, there is a cloud. When customers can shop around without running from store to store, much of the fat will be squeezed out of prices. Record stores and factories will be kaput, and record companies no longer will be able to dictate terms to the talent because they'll no longer have exclusive control over the distribution channels. David Bowie already has released one single as a downloadable file, cutting out his record company.

Worse for record producers and distributors, they no longer will be able to make us pay for their vast archive of forgettable songs to get the few songs we like.

"People are p-sed off with the whole experience of buying music," says Mr. Rosen. Music Boulevard already has experimented with inviting customers to choose their 10 favorite Miles Davis pieces. The tunes were etched on a CD in the order specified by the fan, and shipped out. It was a big success.

To a lot of people, the current distribution chain may be wasteful and spendthrift, but it's a living. The snake in their woodpile is MP3, a data format that allows kids around the world to copy songs off CDs, trade them over the Internet, and churn out their own compilations using new recordable CDs.

Technically, this is stealing, and Mr. Rosen doesn't hold with stealing. But given the geometric speed at which stolen music can be copied, recopied and passed around by college students, the existing system of copyright ownership has a sketchy tightrope walk ahead of it.

"There's a whole generation that thinks this is how you get music," says Mr. Rosen. "What are you going to do? Go to the universities and arrest everyone?" Somehow the record companies will have to puzzle out a way to make their archives and new artists available at a price people are willing to pay. Maybe that means a one-time playback over the Internet for 99 cents.

We are meeting at 55 Broad Street, heart of New York's Silicon Alley. He wears a black T-shirt and is surrounded by sleek gadgetry. Despite his computer literacy, Mr. Rosen maintains that he is, and always was, cool. "I was never a geeky kid."

OK already.

His firm has become an obligatory stop for music industrialists and media moguls looking for a partnership or just looking for ideas to steal. And, among those who have tramped through his lobby, at least figuratively, Mr. Rosen believes Edgar Bronfman Jr. gets it.

The Seagram heir and former songwriter has been the subject of much kibitzing. Is he a wannabe who overspends and makes crazy deals? Or does he have a plan? Since returning from his prodigal wanderings to the family bosom, he has been pouring the family liquor and chemical money into showbiz. For $5.7 billion, he bought MCA back from the Japanese.

His latest acquisition, combining PolyGram with Universal records, would make him the one Hollywood mogul focusing intently on music. He would become the owner of a huge backlist, including the collected works of Elton John and U2. That would both put him on the hot seat about when and how to begin distributing music over the Internet and make him the biggest mark for the pirates. Mr. Rosen can take a disinterested view because he dumped his MCA stock long ago.

At 58, Mr. Rosen has avoided becoming respectable for about as long as a man decently can. Last year he did an IPO. For the first time in his business life he owes a "fiduciary duty" to public shareholders. He even uses words like "fiduciary."

Memo to the suspenders and pedigree crown: Send your resumés to Larry Rosen c/o N2K, Silicon Alley, Big Apple.