Music boss sees future ... and it's on the Net

The man who discovered Oasis is in no doubt about how the next megaband will arrive: through MP3 files over the internet. Alan McGee, who spotted the Manchester band while killing time in a club before taking a train, now thinks that the future of the record industry lies in either embracing the Net - or being torn apart by it.

"The people who run the music industry and the British Phonographic Industry are in my opinion a load of 45-year-old fat old men who can't even switch on a computer, so you can't expect them to be able to understand what's going on," he said. "But the fact is that we're moving slowly but surely towards a subscription-based model, where you'll for example pay a certain amount per month to access a site, and for that you'll be able to download as much as you want." That could arrive within five years, he believes.

Mr McGee, who closed his company Creation Records because he was "sick of dealing with big record corporations" and instead set up a Net-based record company, Poptones, was one of the speakers yesterday at Netsounds, a conference in London organised by New Musical Express. It brought together members of a music business that is in crisis as sales of CDs continue to fall, with the people from the new industry built around the MP3 file format, which allows music to be downloaded and swapped over the internet with impunity.

Record companies are trying to fight back, using the law rather than technology. In the United States the biggest five record labels recently sued one site, MP3.com, for allowing people who have bought CDs to listen to those records in MP3 format when online. The companies claimed that was copyright violation, and a judge has agreed. Damages will be decided in a hearing in August.

Yet embracing new technology could only help the biglabels, insists Carolyn Kantor, senior vice-president of MP3.com. "The music industry is a $10bn industry locked in a $40bn body," she told the conference yesterday. "Progress is about embracing new forms of digital music distribution Look at the film industry - it has found a way to take one product through a huge life-cycle, where you pay to see a film, then you can see the film as pay-per-view on cable, then you can hire a video, and finally it's on TV for free. But the music industry hasn't created a model that let them make their money beyond the first release of the product."

Earlier this month, MP3.com launched a subscription-based service costing $10 a month, for which users can download any of 3,000 tracks on part of its site.

Some analysts reckon new technologies could make it possible to create "one-time" digital downloads, or songs that would only play on a particular machine. But in the meantime, some artists are also rebelling against the trend whereby people are swapping MP3 files by the million over the Net, rather than buying CDs. Last week the heavy metal band Metallica succeeded in getting Napster, which provides software enabling people to find files they want, to remove over 300,000 users from its system after it claimed they had illegally copied MP3s of Metallica's music.

Mr McGee is unimpressed. "That's probably the best piece of advertising Napster could ever have. And how stupid of Metallica to in effect sue 300,000 of their fans."

Some bands are much more supportive of MP3s. Chuck D, leader of the rap band Public Enemy, said recently: "Downloadable music eradicates the dominance of the middle man - it doesn't take them out completely. But the music industry as it is today is a banking system; it's not about art. They'd sell a hubcap with cheese on it if they could. Who needs them?"