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When Madonna's concert at Brixton Academy on October 2000 was streamed live on MSN's network to an audience of some three million, it looked like the online world had taken a big step forward in its promotional power in relation to music. The star even name-checked gossip web site Popbitch from the stage and it seemed online was the place where things happened - webcasts would replace tours, portals would replace gig promoters or record labels, and music marketing would revolve around the web more. As has often been the case, the future has turned out to be rather less extravagant, but evidence of the essential philosophy of the event, that the online audience deserves a unique experience, can still be found if you look around.

With the growth of broadband, portals are spearheading their recruitment drives with a music and video-driven collection of services, and a vast amount of content is transmitted every second. MSN, Tiscali and Wanadoo have bought into OD2's download package, as has Coca-Cola, whose Mycokemusic.com could be the most promoted download service in Europe. High-street retailers HMV and Virgin are onboard with OD2 as well, while Woolworth's Streets Online has been beta-testing a download service for months, managed by Recordstore.co.uk.

Charities are getting in on the act. War Child is planning a site of donated tracks in June (see box, p46) and Oxfam is on the verge of announcing an OD2-powered service. Meanwhile, US services like Apple's iTunes, Sony's Connect and Roxio's Napster 2.0 are set to appear in the UK later this summer.

"It's all happening now," says Paul Smith, UK marketing manager of OD2. "From being in a position where it was difficult to get people at record labels to return our calls, now they won't leave us alone. It comes from being the only player in Europe, although that luxury won't be with us for much longer, but over the last year we've seen sales really rocket."

As the evangelists are fond of saying, the net is the first truly global medium, which could be why the UK paid-download market feels like it ought to be bigger than it is. OD2, the UK market leader, announced its one-millionth download sale in January and VidZone streams 750,000 videos a month in Europe. Yet, in the US, iTunes has sold more than 70m tracks.

Effectively, the UK market is in the unfortunate position of having to wait for the arrival of the American sites - and American marketing budgets - before downloads can take off.

Mycokemusic is OD2's biggest single download site, just ahead of MSN, a fact which owes itself largely to the amount of money spent promoting it. "We did a promotion on 200 million Coke cans," says Smith. "They spent more than £1.5m in the first quarter on marketing for the site and that really is the first time a media partner of that magnitude has come on board and put its hand in its pocket. The biggest issue for the whole marketplace is the marketing."

For portals, downloads are not the only content driving traffic. Editorial, programmed radio stations, exclusive tracks provided as part of a record company's marketing for a particular artist and, increasingly, online-only programming that would fit just as comfortably on a music TV channel are the key tools of the online brand with musical leanings. The live event-driven audience-grabbers that appeared to point the way a few years ago have thinned out and are less likely to be initiated by portals these days. Even MSN has pulled out of live webcast events.

"We found it's not what people want," says Shannon Ferguson, director of Yahoo! Europe's Launch portal. "People don't use the net as an event-based, appointment-to-view service. They don't visit at a particular time, so live events didn't work."

Launch and AOL Music have identified pre-recorded shows as a more viable type of exclusive content, not to mention one that doesn't put stress on servers for short periods of time. AOL's music services include some 100 programmed radio stations, a strong line in audio and video exclusives, and Sessions@AOL, the live series it describes as its version of 'MTV Unplugged'. Nielsen//NetRatings rated AOL Music as the UK's most visited online music destination in March 2004, with 1.19m people spending an average of 13 minutes on site, and it may not be a coincidence that AOL is leading the way with exclusive content. "Sessions@AOL is one of the best parts of our programming," says AOL Music executive director Blair Schooff. "The whole premise is to showcase everyone, from emerging artists to superstars in a small studio performing three or four songs. They will do an interview and take questions. We record it, edit it and then serve it exclusively, maybe a week or two after." The series has been running in the UK since August and about 30 sessions have been produced, although an archive of more than 100 from the US is available online. A recent Sugababes session attracted 120,000 viewers live and in its archived state.

Although AOL Music is available only to AOL subscribers, the viewing figures make a point about the dual role of internet media - the content is intended to drive numbers to AOL's dial-up and broadband services, but it also has a promotional value to record companies. "What this really says to the industry is that they should take the online medium very seriously," says Schooff. "People are finding new ways to break artists and they shouldn't just rely on TV and radio." An exclusive free stream of the video for Britney Spears' recent number one, Toxic, was shown on AOL ahead of its first play on any TV channel and attracted 200,000 streams in a week.

If AOL's demographic is any guide, the typical audience for music online is fairly broad. "What is emerging more strongly at the moment are older consumers who don't want to fall off the music map completely, but don't watch MTV or listen to Radio One," says Danny Van Emden, director of new media at Virgin.

Virgin's site, The Raft (www.the-raft.com), maintains its own database of some 90,000 consumers who receive regular email updates. "They might be motivated by just one song and it's our job to make sure they find what they're looking for. On our pop-list we've got consumers aged from 11 to 50."

Yahoo!'s Launch site (www.launch.yahoo.com/launchcast) could have the broadest appeal of any online player in that most of its services can be accessed by anyone. According to director Shannon Ferguson, Launch will be advertiser-funded for the foreseeable future. In March, it was the second most-popular service with 893,000 visitors. It offers editorial, the UK's biggest library of streamed music videos, programming such as its Live@Launch showcase series (imported from the US for now), as well as 26 UK-programmed radio stations. "We are trying to replicate music media online, from a print, TV and radio perspective. In the US, we have a few premium subscription services. We might look at that in future, but we are primarily a music media site supported by advertising," she says.

Nonetheless, Launch Europe has recently branched out into subscriber-only services, with May's arrival of the customised version of its LAUNCHcast application, the new version of the customised radio station it offered in the days before record firms were prepared to license content online (see box, p45).

The idea of advertising-funded services is likely to appeal to consumers in an online world where music services are increasingly ring-fenced.

There are those only available to users of a particular broadband service, those that only export to specific hand-held devices, such as iTunes, and others for PC users only.

Napster 2.0 aims to make flexibility its key point in the UK. "We are all about choice," comments Napster Europe managing director Leanne Sharman.

"You can come to the service and download a track or an album, and at the same time you can choose to become a member. With that subscription offering, you become part of a community, so Napster is holding on to its old, traditional elements, and parallel to that are all these other services such as streamed radio."

Broadband's increasing penetration will do much to push streamed music, but the market for DVD, which has surged as CD has faltered, ought to be a reminder that consumers are just as likely to want video content.

BT's summer launch of its Rich Media platform should beef up the technology available to firms with content to sell and music is just a starting point.

"It's not just about audio," says Andy Brown, chief executive of BT Rich Media. "There are some great companies coming on the market, but if you're going to offer a quality service, consumers are going to want video and then they'll want other rich media content, like games."

Portals such as ntl Broadband Plus, Tiscali, Telewest and Wanadoo have all made streaming video an important part of their offerings, powered by subscription video-specialist VidZone, which works on the basis of an all-you-can-eat subscription for £4.99 a month or £39.99 a year. Wanadoo's version, Music Brigade, launched in March. "We are approaching a six-figure user base and, with the launch of Music Brigade, we expect that to increase," says Wanadoo portal channels director Deborah Sherry. "We're seeing a rapid increase in users, particularly compared to the early days, so we're expecting take-up to be very quick, in line with the take-up of broadband."

The fact that video providers like Video-C and VidZone charge for content that is available elsewhere as a free promotional stream exposes one of many pricing difficulties online. "There are many business models, one of which is Launch, where they use music videos for customer retention," says VidZone chief executive Adrian Workman. "That denigrates the value of music video. If you're going to provide all your audio content to the likes of OD2 and Napster on a paid basis, why give the video away, which is in many ways a richer experience for users?"

He thinks record companies will tighten up in this area when they understand the contradiction. Indeed, as online music matures, an increasingly standardised licensing framework will develop that will force portals to synchronise music offerings.

Not all music experiences demand video, of course, such as radio. One of the most integrated online/offline offerings is from BBC Radio, where the web offers sophisticated text, interactivity and audio-on-demand, which can claim to transform the radio experience. For two years, the BBC has offered a range of programmes on demand via bbc.co.uk/music for seven days after their first transmission. "We're opening up areas of our music output to parts of our audience who didn't know it was there or it wasn't available for them," says BBC Radio & Music controller of new media Simon Nelson. "Part of the function of the site is to disaggregate programmes from 24-hour-a-day radio schedules and create new access points. We're seeing big increases in some of our shows."

Nelson believes the BBC Radio Player offers "the best music available on the web at the moment" and plans to make it easier to find. The BBC's national radio stations now appear on digital TV and DAB digital radio with an accompanying text stream, and Nelson says things will get more sophisticated. "We would like to get more clever and understand more about individual preferences," he says. "Then we can introduce personalisation and let people know where the music they want is."

As the BBC illustrates, many of the web-music success stories can be found in areas of the industry where firms are following their own lead.

Independent labels like Warp and Twisted Nerve are creating some of the most promising music services online and creating a genuine experience for hardcore fans.

Warp Records' Bleep.com site sold 26,000 downloads in the first five days after its January launch and another 50,000 in the following two months, priced at £1 (£1.50 via SMS) or £6.99 for a whole album. On a more modest scale, Twisted Nerve (www.twistednerve.co.uk) launched its first download-only EP in January, featuring an exclusive Badly Drawn Boy track and five others, priced at £3.99. It sold 200 copies, but they were bought around the world, so in May the label hopes to launch an ongoing series of weekly EPs in a similar vein. Each one will feature no more than 15 minutes of music, will come in its own printable sleeve and be priced from £1.99 to £2.49.

This type of interactive community is clearly something which can only be created online, but it also has the opportunity to keep alive the tradition of the single, which is increasingly difficult to justify in the offline world due to falling sales.

The promise that online may offer an overflow for some of the niche material that is struggling to find an outlet in the offline world is one of the most encouraging aspects of the current online landscape. The real challenge for the music players is to give their mainstream services a similar appeal on a wider scale, at a time when most online services - with honourable exceptions - ultimately offer a scaled-down version of an equivalent offline experience.

As War Child managing director James Topham says of the content of the charity's forthcoming web offering: "This whole thing is limited only by our own imagination." L

LAUNCH CASTS THE NET WIDER WITH EUROPEAN YAHOO! LAUNCH

The industry has long satisfied itself that streaming music in a radio format is no more likely to kill sales than traditional radio. But the arrival in 1999 of Launch's LAUNCHcast, with a ratings system that let users mould the offering came perilously close to the once-dreaded music-on-demand model.

A victim of its own success, it was shut down in 2001 under the shadow of a law-suit from BMG, EMI, Sony and Universal, but May saw its official launch in Europe under new owner, Yahoo! (www.launch.yahoo.com/launchcast).

The software responds to feedback, providing a stream of music shaped by the user's own ratings, with 1.85 billion other track ratings built up over the service's history.

The remarkable insight with which your customised station replicates your offline listening habits, firing out favourite songs at random made the original LAUNCH-cast the forerunner of the iPod, with the advantage that you didn't have to upload music. But, just like the iPod, and unlike offline radio, you can skip the songs you hate.

"Pre-programmed radio stations are available in the US and less so here, but the customised LAUNCHcast is technology that's unique to us," says Shannon Ferguson, director of Launch Europe. "Some people let users rate music, but I don't think it feeds into the programming played back to users on their own station in the same way."

The basic LAUNCHcast player is available on the free Launch site, while an enhanced LAUNCHcast Plus model, which strips out ads, is of a higher quality, allows unlimited skips between tracks and links users to each other's customised stations. It can only be accessed by BT Yahoo! network customers.

WAR CHILD UNVEILS NEW ONLINE MUSIC CHARITY INITIATIVE

Charity albums can be effective, but it's probably fair to say the world needs only so many. War Child's 1996 Help album bucked the trend by collecting tracks from credible bands, many recorded specifically, but several albums later the charity knew it needed a new tack.

"We felt a bit of charity album fatigue had set in, both in the outer world and in the office," says managing director James Topham.

Warchildmusic.com, the charity's download site, will launch in June.

It will add eight to 10 new tracks a month, four or five from established artists and a similar number from newer acts, along with editorial overseen by Ben Knowles, ex-NME editor and current deputy editor of Zoo.

"We like the idea of building a community of like-minded people," says Topham, who says tracks will be available in as many formats and payment models as possible for maximum uptake.

Downloads are Apple and PC-compatible and can be bought via SMS, credit card, BT click&buy, direct debit or BT phone bill. Tracks are 99p and a £3.50 monthly subscription is available.

The charity's status as one of the industry's favourite good causes should make the process of collecting music straightforward, and artists such as Travis and Spiritualized have already offered material. "The albums are great, but we seem to find ourselves with about a month to do it in, so if a band says they'd love to do it but are on tour in Australia, we can't get them on."

The ongoing nature of the initiative will help War Child make the most of the songs it is offered. "The technology and awareness have only recently arrived, so it seems the right time. Everyone has been positive," adds Topham.