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NEW YORK--Despite the digital music industry's stagnating growth, Jupiter Media Metrix's Plug In digital music conference has returned for its seventh annual showing here, featuring a lineup of familiar industry figures discussing the distribution and legislation issues that have plagued the market for years.

An economic downturn and a changing business environment are afflicting the still-nascent digital music industry, analysts said. Revenue for the sector in 2002 will total $900 million, Jupiter forecasts, the same total it calculated for 2001. The company has revised downwards its future growth estimates for the sector: At last year's Plug In, Jupiter predicted U.S. consumer online music spending would reach $6.2 billion in 2006. Its current five-year projection calls for spending to grow to $5.2 billion by 2007.

The digital music industry has changed significantly in the past year: At 2001's show, industry-backed subscription services MusicNet and Pressplay discussed their prelaunch plans, and Napster named a new chief executive, who hailed Napster as a brand that "cannot be killed." Now, Napster is bankrupt and MusicNet and Pressplay are struggling to draw customers to their available but limited services. They're also under investigation by the U.S. Department of Justice for possible anticompetitive practices.

Webcasting Takes a Hit

One of the biggest flaps of the moment at the usually tumultuous intersection of music and technology relates to the fees imposed on Web broadcasters by the U.S. Copyright Office's Copyright Arbitration Royalty Panel (CARP). It determined that Webcasters should pay a per-song, per-stream royalty that many independent sites say will bankrupt them. The recommended rate has already been cut in half from the panel's initial recommendation, to 0.07 of a cent, but even that is unacceptable, said Congressman Rick Boucher in a keynote address Monday morning.

Boucher, a Democrat from Virginia who has been a U.S. House of Representatives point man on digital media and Internet commerce issues, termed the CARP decision "inappropriate in the extreme" and called for an overhaul of the entire CARP process, which he deemed "truly broken." The proposed royalty rates were unfairly set by a panel lacking the expertise and reliable data needed for a reasonable decision, he said, and will have a devastating effect on fledgling Webcasters.

Boucher said he is teaming with Representative Jay Inslee, a Washington Democrat, to introduce this week legislation to defer any requirement that small Webcasters make royalty payments. Boucher offered no further details of his plan, but said he hopes it will delay any payments owed until a new fee structure is in place. More-flexible payment plans, such as sliding fees based on a Webcaster's gross revenues, will better spur the industry's development, he said.

In a later keynote, Hilary Rosen, Recording Industry Association of America chief executive officer, said she's doubtful Boucher's bill-to-be will pass. The RIAA has already expressed its approval of the CARP's initial decision and its dismay over the subsequent reduction of the proposed royalty rate for music Webcasts, saying the lower rates don't reflect music's fair market value. In response to an audience question about the consequences of steep fees on small broadcasters, Rosen suggested that broadcasters without the resources to pay the proposed fees shouldn't be in the market.

"This is not about mom-and-pop [businesses] versus big corporations. This is a business-model issue," she said. "This is something that should be anticipated when you build a business."

Legislative Plans

Boucher also used his keynote to tout the Music Online Competition Act (MOCA), another piece of intended legislation he co-authored last year and hopes will pass before the end of this year. MOCA is aimed at tweaking various aspects of the U.S. Copyright Act with updates Boucher says will sensibly adapt the act for new, high-tech uses.

Rosen and other executives disputed his proposed legislative remedies for the industry's ills.

"No legislation that gets passed this year is going to help anybody in this room, because for everything they give you, they're going to take something away," Rosen said, referring to the U.S. Congress.

MOCA and other plans to spur industry competition and growth are unnecessary, said Ted Cohen, vice president of New Media with EMI Recorded Music.

"What he's envisioning through legislation, we've already gotten through negotiation," Cohen said during a panel discussion on subscription music services.

Fellow panel member Chris Gladwin, chief executive officer of FullAudio, used his time on the stage to announce an alliance with Internet service provider EarthLink, which on Monday introduced a FullAudio-powered subscription music offering for its nearly 5 million subscribers. The service features access to 75,000 songs from several major labels, with monthly fees starting at $10 for 50-track downloads.

This event is the last Plug In run by the current incarnation of Jupiter Media Metrix. Created two years ago through the merger of research firm Jupiter Communications and Internet traffic measurement firm Media Metrix, the company is dissolving after losing more than $500 million in 2001. Competitor ComScore Networks agreed in early June to buy the Media Metrix measurement business. Publisher INT Media Group announced several weeks later a $250,000 buyout of Jupiter Media Metrix's research and events operations.

Alan Meckler, INT Media Group chief executive officer, opened this week's show with the news that his company will shortly rename itself Jupiter Media and preserve Jupiter Research and Jupiter Events.