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Warner Music goes digital
Amid struggles with Internet piracy, the company creates a digital-only, lower-risk record label.
August 24, 2005: 8:32 AM EDT

NEW YORK (CNN/Money) - Warner Music Group said it will launch a digital-only record label that will be a boon to new artists, amid industry struggles with copyright infringement created by file sharing.

With the company's new "elabel," artists are not required to have enough material for an entire album, Chairman and Chief Executive Edgar Bronfman, Jr. said.

Warner will release clusters of songs online. The artists will retain ownership of their masters and copyrights while signed to the label.

"At Warner, we believe that we can create a digital-only label, what we're calling our 'elabel' that will transform the process for artists young and old and possibly give the stories of artists struggling to be heard a new and happier ending," Bronfman said during a speech at the Progress & Freedom Foundation's 2005 Aspen Summit.

PFF is a think tank that studies the impact of the digital revolution and its implications for public policy.

Bronfman said Warner wanted to take pressure off young artists to produce a hit major label debut album, acknowledging that the recent Grokster case also pushed the company to rethink the traditional record industry business model.

"We usually associate innovation with technology companies, but they aren't the only ones who must innovate. To survive and prosper, content companies must do so as well. And even our very concept of copyright must innovate," Bronfman said.

"The decision in the Grokster case creates an economic incentive to invest in the digital music space ... (accelerating) the growth of legitimate digital music services," he added.

In MGM v. Grokster, the high court overturned a ruling that had barred Hollywood and the music industry from suing Internet services used by consumers to swap songs and movies for free. (Full story.)

In Grokster, the court did not address the question of whether the technology at issue in the case -- known as file-sharing, or "peer-to-peer" -- is illegal. Rather, the justices focused on the actions of the peer-to-peer software companies named in the case and whether they encouraged the illegal use of their technology.

"The court's decision will not eradicate online piracy. But the industry was never so naive to think that it would," Bronfman said.

"So, while we'll still have to live with piracy, the Grokster decision affirmed certain important principles: that the Internet does not exist outside the law, that 'cyberspace' is not synonymous with 'anarchy' and that protection of copyright retains both its legal and moral underpinnings."

According to published reports, Warner will have to put very little money upfront to support artists on the "elabel," and Warner's major labels -- Warner Bros. Records and Atlantic Records -- will have the right to sign artists who produce hits in the digital world.

The New York Post said Warner is tapping Jac Holzman, who founded Elektra Records and discovered The Doors, to head up the new project.

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Read about Richard Branson's trademark debate.

Warner Music's earnings beat the Street. Click here for more.  Top of page

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