Web posted on: Wednesday, December 16, 1998 5:56:15 PM EST

NEW YORK (CNN) -- There's a revolution under way in the music business and it's enabling people with computers to swap "bootleg" recordings, to the dismay of major record companies. But it might also be helping the next generation of superstars get discovered.

It's called MP3, and it allows Internet users to easily download and send music, and dozens of websites have sprung up offering both legitimate and pirated music. Music fans with access to high-speed modems have been swapping songs over the Internet ever since the MP3 technology arrived. And now, with the "Rio" player, they can go mobile.

The Rio is the "Walkman" of the future, according to Ken Wirtz of Diamond Multimedia. "(It) runs 12 hours on a single double-A battery, and it's all solid state," says Wirtz. "There's no moving parts, so even if you shake it, it won't skip, whether you're running or skiing or bungee jumping or anything."

Unfortunately, Hilary Rosen of the Recording Industry Association of America (RIAA) says, "Right now about 95 percent of the MP3 downloads on the Internet are illegal downloads." Which explains why the RIAA has been fighting -- so far unsuccessfully -- to keep the Rio player off the market. And they've just announced an initiative to try to stop the digital 'bootlegging' of copyrighted music via the internet.

At a recent gathering of record companies in New York, industry executives said that they are joining forces with high-tech companies like IBM and Lucent to create barriers to the piracy. The group hopes to have a new technology standard in place by this time next year.

According to Strauss Zelnick, of industry giant BMG Entertainment: "Piracy is not a way to encourage artistry. People create and they have to be compensated for their creation. Right now, the music available on the web is largely pirated."

And, Rosen says, "Unauthorized use of these MP3 files is really creating a problem for artists in the music community."

Even among established recording artists, however, there are varying degrees of concern over MP3 and its impact on their livelihoods. Jim Sonefeld, of Hootie & The Blowfish fame, says, "It can hurt the artist, and it's not just a money issue, it's a control issue ... being able to control what you put out and market it properly."

CD-quality MP3 files can be downloaded from the Internet and played back using an MP3 player

On the other hand, Jewel takes a more philosophical approach.

"I'm not too worried about it in the long run. I have plenty of money, I'm okay," the singer-songwriter says.

For the unsigned or unknown artist, MP3 is creating opportunities. Through websites like MP3.com, these stars of the future can offer their music for sample or sale to a potentially global audience. MP3.com's Michael Robertson says, "What they're really doing is trying to use the internet as a radio, in effect, a hundred-million-person radio as a way for them to broadcast their music and alert new fans to their music."

While critics of the anti-piracy effort argue that the industry is trying to control a fast growing medium that can expose artists to a wider audience, music executives counter that they aren't shy about reaching new ears - so long as they get their cut.

Sony Music CEO Thomas Mottola says: "Our artists are very enthusiastic about the prospects and what we have to look forward to in opening a wide range of audience around the world, providing of course the proper protection can be provided."

And what about retailers? If someday soon you can store all of your music on your hard drive instead of your shelves, what is going to happen to the record stores? While major retailers are reluctant to speak about the digital future, even among MP3 proponents opinions are divided.

"If you're buying music over the internet, what will you be buying from the CD retailer?" asks Wirt.

Robertson is confident that record stores are here to stay.

"I don't think the CD retailers go away. I think that if record labels and artists use the internet effectively, there'll actually be a greater demand for CDs," he says.

Regardless of who's right, MP3 and its related hardware, the Rio player, are creating a revolution in the music industry. It remains to be seen who will win in the end.

Correspondent Mark Scheerer contributed to this report.