The music industry is in the throes of a revolution, due to the proliferation of new compression technologies and the widespread availability of both original and pirated content on the Internet. This article describes the current developments affecting this industry and posits that major players in this domain need to re- invent their business models in order to embrace and extend this revolution. By moving toward a commonly available audio file formats such as MP3, and supporting technological solutions for copy protection and digital watermarking, record labels need to capture the distribution efficiencies and customer value that can be realized by moving to the online model.