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owned by Sony, which hedged its record-industry bet by selling stereos and the like, including equipment that played pirated music. By the year 2000, Time Warner's label was owned by America Online. Not surprisingly, the country's largest Internet-access provider was more interested than stand-alone labels in making digital music broadly available to its customers.

Other serious differences of opinion came from executives within the same record company. Most labels had hawks, old-school leaders who turned purple with rage at the very idea of an MP3. And most labels had doves, frequently younger managers who saw the Internet as a way to reach fans that were being left behind in the all-consuming drive to get hits on Top Forty radio. The contrasts were at times startling to music outsiders from Silicon Valley who were trying this way and that to make friendly deals with the labels. They would be greeted enthusiastically one day and met with expletive-laced tirades the next. Overall, the hawks were in charge when the Internet began taking off in earnest in 1999. But the active encouragement of the doves was enough to keep the entrepreneurs' hopes cruelly alive.

So there were scores of digital-music companies in business by 2000, offering a multitude of strategies. There were streaming companies like Listen.com that allowed onetime listening and no copying. There were Internet radio companies like Spinner, which was bought by AOL. There were companies that offered short samples of songs and then invited the public to buy the CD electronically. And there were firms like Liquid Audio Inc., which offered their own secure digital formats for downloading in accordance with music companies' terms for payment. But to have much desirable content, all of those companies depended to some degree on cooperation from the big labels. And most of them didn't get the content they needed. Without that, most of the digital-music firms were on the ropes even before the advent of Napster. When Napster made everything available for free, it killed the majority of the legitimate start-ups in their cribs.

THE MOST IMPORTANT DIGITAL DEAL by the labels turned out to be with RealNetworks Inc. That venture, which became known as MusicNet, was

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