"And yet even if they can shore up their position in recorded music, the big firms may find themselves sitting on the sidelines. For only their bit of the music business has been shrinking: live touring and sponsorship are big earners and are in fine shape. In the past 12 months, according to a manager who oversees the career of one of the world's foremost divas, his star earned roughly $20m from sponsorship, $15m from touring, $15m from films, $3m from merchandise and $9m from CD sales. Her contract means that her record label will share only in the $9m."

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Music industry executives say that Shawn Fanning, founder of Napster, the first file-sharing network, is working out how to attach prices to tracks downloaded from such services, with a new venture called "Snocap". Mr Fanning tried to make the original Napster legal back in 2001, but the music industry decided instead to sue it out of existence. Sam Yagan, boss of eDonkey, currently the most popular file-sharing network, says he had meetings with three of the four major labels last summer about how his network could start selling their music alongside free content. As IE Music's experiment shows, that is not an impossible dream. Music executives may not have the confidence yet to make a deal with their arch-enemies. But eventually they have to get bolder."