Weekly AUDIO NEWS for July 4, 2001

Classical CD Distributors Cut Off, Then Reinstated - On May 1 Tower Records issued a memo to their 113 stores in the U.S. putting the three major distributors of many different classical CD labels on immediate buying hold. They named Allegro, Harmonia Mundi and Qualiton distributors. None of these firms were notified about this in front. Tower explained that deep-catalog classical CDs have the slowest turnover and they already held high stock levels from these distributors. Tower is struggling financially, and the major labels - EMI, Sony, BMG and Universal - have given them 360 days to pay for product sold and have also given Tower greater discounts than the three smaller distributors can afford.

As of June 27, Tower rescinded its ominous memo so that its stores may now order from these three distributors. However, none has yet shipped a single CD because they cannot come to agreement on terms with Tower, who want 180 days to pay for product sold vs. the traditional 60 days. The indies say even 90 days would be too great a risk to take given Tower's shaking financial situation. Not good news for recorded classical music. The labels would lose out if Tower filed for bankruptcy since any inventory would be considered an asset. The company is currently restructuring by selling its operations in Argentina, Taiwan, Hong Kong and Canada and switching to an automatic replenishment and/or centralized buying system.

Napster Now Offline - Napster has gone offline while upgrading its music identification system to better comply with court orders that it must prevent unauthorized music-swapping by its users. Its new fee-based service will pay royalties to the artists. They are testing finger-printing technology (see last week's Audio News) for the planned commercial service. The new service, when in operation, will no longer allow use of the previous software. BMG, Napster's main financial backer, has promised a launch date of the new Napster before the end of the summer.

Meanwhile - Aimster - This file-swapping network hopes to fill the void left by Napster. It was launched last year and turns AOL's Instant Messaging Service into a system for swapping MP3 files. This approach makes it hard for the RIAA to sue Aimster for copyright violation since their site is not a repository for illegal files like Napster was - just a conduit for file sharing. When MicroSoft expands its competing Windows Messaging Service this fall, it will allow users to trade music (like Aimster), plus video and text. One observer concludes that as fast as the RIAA shuts down file-swapping sites, new ones will spring up. The RIAA needs to face the future and find a way to negotiate with the online music world rather than fight it.

Recent Artist Obits - Conductors Giuseppe Sinopoli and Peter Maag, saxophonist Joe Henderson, Afro-Cuban band leader Chico O'Farrill, blues master John Lee Hooker.

- John Sunier

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