It was 1997 and the record industry was looking up.

MTV was making leaps and bounds promoting music sales, popular radio was spinning the industry’s top acts, and MTV’s Jesse was still living in a cardboard box somewhere in Times Square.

The industry was thriving.

Then, all across the World Wide Web, people began asking the question that made all five major labels do backflips — a $10 billion-per-year question that has found major labels suing, and out-of-court settlements flying:

What could shake up the record industry clear down to its foundations?

Three simple characters — MP3.

An MP3 is a device that allows anyone with an Internet connection to download CD-quality music off the Web. It can compress an audio file to less than one-tenth of its original size, making audio files accessible to anyone with a modem.

The effects of MP3s on the industry versus the effects of MP3s on music and musicians is a debated topic that is expected to heat up further in 1999.

Technology battles tradition

The days of mixed tapes are over; the days of mixed CDs have arrived.

With the arrival of CD recorders, CD burners and MP3 condensers, the music industry knows it is in danger of losing a large group of customers to the MP3 and bootlegging business.

The traditional compact discs the music industry has come to embrace don’t have a built-in encryption system. This enables anyone with the right equipment to record a CD onto a personal computer in order to copy it onto a blank CD or condense it to an MP3.

CDs used to be safe from illegal copying and bootlegging merely because the technology wasn’t available to potential violators. Now, computers are more powerful, recordable CDs are dirt cheap, and there are several easy ways to find MP3 encoders available for downloading.

The problem of illegal bootlegging and downloading is intensified on college campuses across the U.S. The dropping prices of CD burners transforms a regular dorm room into a bootlegging office, making the business of copying and selling CDs tempting to money-hungry students.

“You have a situation where any 13-year-old kid can become a world-wide publisher of Madonna because she bought the CD,” said Cary Sherman, general counsel for the Recording Industry Association of America (RIAA), in a recent interview with Billboard Magazine.

Now, thanks to a device invented by Diamond Systems, students can listen to that Madonna bootleg on the way to and from class.

Forget your Walkman, Discman, and MiniDisc players. With the invention of Diamond’s portable MP3 player called the Rio, anyone can carry 30 minutes of CD-quality music in a portable device the size of a pager.

After the announcement of the new device, the RIAA filed suit against Diamond, according to a November article in Billboard.

For 10 days, the release of the Rio was suspended by a federal judge. But after a short deliberation, the judge allowed Diamond to ship the device, ruling that since files cannot be copied from the Rio to another device, the Rio was in compliance with the Audio Home Recording Act issued in 1992.

Since then, Diamond has countersued the RIAA with conspiracy to withhold the Rio from the market. The case is still pending in the U.S. District Court in Los Angeles.

Bring the noise

Although MP3s have been facing enormous opposition, a group of artists have rallied behind MP3, as well as other online promotional companies, on their wild ride across the Web.

Leading the charge is Public Enemy’s frontman Chuck D, The Beastie Boys, Less Than Jake and Soul Coughing. All have released MP3s onto the Internet with the approval of their prospective labels.

All except Public Enemy.

A month ago, the band released its long-delayed and still unreleased album, “Bring the Noise: 2000,” as an MP3. Three weeks later, Polygram, Public Enemy’s label and the parent company of Def Jam, removed the tracks from the Internet.

This type of response from the labels is one that has caused artists to turn from the labels and support MP3s all the more.

“I’m glad to be a contributor to the bomb that might reverse some of [the record industry’s] fortunes,” Chuck D said in Billboard. “What’s the need for them if people can’t get what they want directly?”

Also supporting MP3 is Beastie Boys label Grand Royal Records. The label releases weekly B-sides and live tracks from the Beastie Boys and the label’s other musicians.

“We had a few MP3s on our site until a couple weeks ago,” said Lisa Lacour, director of Internet Relations for Grand Royal. “But right now we are in the process of releasing a huge library with a lot of different songs from different bands on Grand Royal.”

Grand Royal’s philosophy is that anything available to help promote its bands is a good thing.

“We definitely don’t see (MP3s) as a threat as other labels do,” Lacour said. “We just view it as another way to get music to our kids. We have come to embrace and love MP3s because of what they’ve done for us.

“What we’re looking at right now, though, is the aspect that MP3s are going to die fast. It’s not going to be long until there are new kinds of downloads that you cannot only get audio, but visual files, along with links to Web sites. Mike D always tells me that MP3s are the Pong or the Atari of the downloading world. So for us, MP3s are just the beginning, not the end.”

Another proponent of MP3s are small bands across the U.S. who want to be heard. Since recording and loading MP3s is next to dirt cheap, starving bands can get their name out without ever having to produce a CD.

Leading this trend is the popular Web site MP3.com, where Web surfers can go to find different band name generators. Here, they can listen to hundreds of new bands, as the generator is updated weekly.

Bandwagon.com

One thing that both opponents and proponents of MP3 can agree on is the skyrocketing popularity of MP3s and other music downloading systems.

Other systems include Liquid Audio, AT&T’s a2b Music, and IBM’s top secret Madison Project (all of which the five major labels have agreed to test out next year).

“The opportunity is to take advantage of [digital distribution] in a system that has rules,” said Howie Singer, a2b Music’s chief technology officer, in a recent interview with Billboard.

MP3.com’s president, Michael Robertson, has differing views.

“Security is restriction,” he told Billboard. “It lessens the value to the user. It prevents them from using the music the way they want.”

Restrictions or not, MP3, Liquid Audio and a2b Music have an abundance of mainstream groups on top of the smaller acts that are ready to put their songs on the Internet for download.

Among these artists are national names such as Busta Rhymes, Marilyn Manson, Eve 6, Tori Amos, Lenny Kravitz and Big Punisher.

Preston Klik, keyboardist/sampler for the Chicago-based My Scarlet Life, said he is among the many artists who have not jumped on the MP3 bandwagon.

“I’m not really getting into the whole MP3 thing,” Klik said. “I know that they’re doing great things for the industry, but they’re just something that we haven’t totally utilized yet.”

Klik approaches music on the Web as a good thing, but not a necessity for a band’s success.

“I’ve never been much of a surfer,” Klik said. “I’d much rather learn about bands in a magazine than on some Web page. I get tons of magazines. I’m just more traditional, I think. I guess I’d rather turn than click.”

“We do have a Web site with sound and video clips, but we just haven’t put any full tracks or MP3s up on the Web. Our Web site has helped us tremendously as far as informing the public when our concerts are, and mail ordering CDs, but I guess we just haven’t seen the need for entire tracks to be available in MP3 format.”

As the popularity of MP3s continues to grow among listeners, it can be expected that the positive use of MP3s by bands both large and small will increase, as well as the illegal downloading of tracks from the Internet.

Before people realize it, MP3 could hold the same household name stature as another three characters that rocked the music industry — MTV.