Ames says his company has an edge in such an environment. "We can get things rolling and experiment in the market while others are still trying to find definitive answers," he said.
Robert W. Pittman, who oversees AOL Time Warner's subscription services, compares the online music phenomenon to the rise of the album-oriented radio format that put Warner on the map in the 1970s. "The way it became a real force in the music business was by riding the change in consumer behavior that came about as a result of FM radio, which played albums instead of 45s," said Pittman, who nurtured another phenomenon, MTV, in the 1980s. "Online music clearly is another one of those big turning points."
Executives at Warner Music, meanwhile, say the company is working with AOL to develop new ways to promote its brands on the Internet. With its various corporate affiliations, the label already gives new acts marketing and promotional advantages.
For example, Eden's Crush, a pop group formed for a series on the WB Network, also owned by AOL Time Warner, sold more than 500,000 copies of its debut CD on Warner's London-Sire label. The group was heavily promoted online by AOL. And AOL is sponsoringMadonna's planned tour and recently offered subscribers an early chance at tickets.
In turn, Warner hopes to instruct its corporate parent how to address issues unique to the record industry, like satisfying the sometimes divergent interests of composers, producers and performers.
Executives at AOL say they know the importance of creating systems that work with many record companies, not just Warner Music. "It's in AOL's interest to have a relationship with all of the music companies," said Richard Parsons, the AOL Time Warner executive responsible for Warner Music. "And it's in Warner Music Group's interest to have a relationship with all of the digital distribution companies."
Warner has licensing deals with eight online retailers, such as Launch.com. Last week, MusicNet, a joint venture of RealNetworks, AOL Time Warner, Bertelsmann and EMI, showed early details of its service to Congress in a hearing on digital music's future. The service is scheduled to open to consumers in late summer.
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