MidemNet sprung to life today (Jan. 20) with a heated first-up panel debate.

The digital music conference, which precedes the annual Midem music trade fair, began with a "touchy feely" morning discussion which quickly turned into a high-octane argument over the industry's litigation tactics and digital rights management.

Speaking on the "Content and Technology-Make it Work!" panel, Consumer Electronics Assn. President and CEO Gary Shapiro warned that DRM served to irritate consumers, and would ultimately inhibit the recorded music market. "Consumers don't like DRM. We are hearing this increasing," he said. "The risk you take [with removing DRM] is with unscrupulous users disseminating content around the world. But it's a business risk worth taking."

He then gave both barrels to the RIAA and its CEO Mitch Bainwol for launching legal cases which were "devastating financially" for thousands of consumers.

When Bainwol accused Shapiro of "making us look evil", Shapiro hit back: "I don't make you look evil. The law suits you make against old people and kids make you look evil."

Bainwol retorted that the issue of DRM wasn't high on the list of consumers' concerns. "You're manufacturing a problem that doesn't exist," he said. "The problem is people don't respect intellectual property. If we don't respect IP, it will be difficult to monetise it and to create it."

And after Shapiro accused RIAA of "dominating behaviour", Bainwol claimed Shapiro was "engaging in hyperbole" and "distorting the truth."

The tricky subject of monetizing activity in user-generated online services was brought into focus during a separate panel, entitled "User Generated Content - Is There a Market Out There?", comprising GoFish CEO Michael Downing, and MTV Networks' president of Global Digital Media Mika Salmi.

The big issue is trying to establish a "comfort level" between screening and filtering porn, keeping sponsors and advertisers comfortable, while retaining "street cred" with users, Downing explained.

"It's a fine balance." Salmi went on to explain that services such as YouTube had become ever-more important for new, emerging artists. "Independent bands have revived the music video format. It's a social currency for them."

"In another panel, "Music 2.0-Consumers Take Center Stage," president of Universal Music Group/eLabs Larry Kenswil went further in support of the indies. Saying it was harder than ever to get signed to a major, he declared: "I think it will fall on indies even more to find new talent."

These comments were seized upon by Tom Silverman founder and CEO of Tommy Boy Records during the press conference to launch Merlin, the new digital rights licensing agency for independent labels. Citing artists from Elvis Presley to Nirvana and labels from Sun Records to Island Records, he claimed: "The majors are responsible for no new genres, and almost all of the world's most important artists started on independent labels. It's time we found a way to monetise this and Merlin is that way."

At the same press conference, Impala and Beggars Group chairman Martin Mills caused a stir by reading out a purported e-mail exchange between one of his member labels and a "household name music destination", in which the latter admitted making deals with majors for using video content, but declined to do the same for indie labels. He didn't name either party, but concluded: "That's why we're here."

While many were considering new business models, outgoing BPI chairman Peter Jamieson had sobering words for the U.K. bricks-and-mortar retail market. He predicted physical retail "will decline without the permission of the consumer" and, while CDs remained crucial for the gifting market, digital sales would achieve critical mass much quicker than he had previously predicted,

"I will be very interested to see the sales figures in the next six months when there's no gift market around to see how close we are to revolution," he said.

QUOTES OF THE DAY

Looking into his crystal ball for 2007, France Telecom-Orange's Herve Payan, said, "I hope that majors will become much less shy about new products. That will make our job a lot easier here."

"Microsoft should stick with computers for the time being." - an unnamed consumer discussing the Zune player, in footage played at the "Focus Group: I'm the Consumer, Do You Know Me" discussion.

"We are totally committed to the music business." - Chris Stephenson, GM, global marketing entertainment business, Microsoft.

"Merlin will license collectively the individually unlicensable, and aggregate our collective volume as the virtual fifth major. Magic."- Martin Mills, chairman of the Merlin steering group, IMPALA and the Beggars Group.