QUOTE OF THE WEEK:
"Contrarianism is an interesting strategy: Buy when everybody else is depressed, and sell when they are euphoric."
Michael Martin,
author of ""I HATE IT WHEN PEOPLE AGREE WITH ME,"
featured below.

SUCCESS SECRETS OF CEOs: How (and why) Robin "Hood" Richards, the founding president and former COO of MP3.com, stole rock 'n roll from the corporate elite and gave it back to the people. By N.W. Pace.
Stock Report Card: iTunes. eMusic. Wonder who’s positioned to win the battle for online music? It may be the outsiders: Apple Computer, Real Networks, and a new contender, BuyMusic.com. Check out this week’s Stock Report Card.

Muzak and Sequel Hell. Will the shark-infested cyber world of free downloads eat up the music and film industry, leaving us poor consumers with an eternity of Muzak and sequel hell? Gaze into the misty future of music, as seen through the eyes of the music barons who direct the future of the industry, the workers, and a teenage cyber-user.
WIN 10: WHICH COMPANIES ARE WINNING the MUSIC WAR in CYBER SPACE? Ten quick questions with Jonathan Daniel, who sits on the advisory board of Listen.com and represents Big Champagne, a company that tracks peer to peer file trading.
CYBER Stealware. HOW free online music services STEAL from the companies and charities that you love to fund their operations. Most of us wouldn't want to be responsible for opening our neighbor's door for a burglar. Online digital downloads appear to be just that. By N.W. Pace.
Investor's Guide to Short Selling. "I HATE IT WHEN PEOPLE AGREE WITH ME." By Michael Martin.
Gazing into the crystal ball of Top Money Managers and Advisors for Short and Long Term Market Trends.
Your Self-Worth Makes Your Net-Worth, By Chellie Campbell, author of The Wealthy Spirit: Daily Affirmations for Financial Stress Reduction.
WINsider CALENDAR: Investor's Boot Camp, a Night of Healing to benefit the victims of the Santa Monica Farmer's Market tragedy, and a Great Balls of Fire gala event to protect our nation's men from one of the most deadly killers on the planet today-prostate cancer.
Companies in the NewsÉ News highlights, as reported by the most respected sources in the world. Alphabetized for easy reference.

ÈSUCCESS SECRETS OF CEOs:

Robin Richards, founding president and former COO of MP3.com

How (and why) Robin "Hood" Richards, the founding president and former COO of MP3.com, stole rock Ôn roll from the corporate elite and gave it back to the people. Interview by N.W. Pace

He may have started out as a pirate adversary to the music industry, but Robin Richards ultimately became a partner and an asset to Vivendi Universal. After taking MP3.com public in 1999, in the largest IPO for an Internet company at the time, and raising almost $400 million, Robin Richards was appointed the CEO of Vivendi Universal Net USA, an entity created in the fall of 2001 to oversee the U.S. Internet-related companies owned by Vivendi Universal. In 2001, Mr. Richards was instrumental in reducing VUNet's EBITDA loss by $100 million, creating a division that is poised to become cash flow positive within a year.

Because of his vital role in the ongoing development of the Internet with Tickets.com, MP3.com, and now Vivendi Universal Net USA, Robin Richards is considered a pioneer in the multi-billion dollar industry of online commerce, and is regularly invited to speak at leading industry conferences. Outside of the for-profit world, Mr. Richards serves as president of the Chase Foundation, an organization that provides millions of dollars to fund play rooms and emotional support for terminally ill children who have been hospitalized in the Los Angeles area. Mr. Richards holds a Bachelor of Science degree from Michigan State University and attended Whittier College School of Law.

What does Robin Richards think about the future of rock Ôn roll?

"In the new world, it is my belief that Bob Dylan will make substantially more money than Brittany Spears. The old world is not set up to reward longevity and passion like that. The new world will be."

Read on for more predictions on the emerging world of music, as told by the man who pioneered the new road.

N.W. PaceÑLet's talk about two hot tips you gave me in April, namely Web- MD and PetSmart. Give our readers your reasons for buying stock in these companies.

R. Richards--PetSmart has perhaps reached the stage of being overvalued, but I don't feel that way about Web-MD. I noticed Web-MD about six months ago. I started off by using their portal. Then I read more and more about the company. I realized that they were providing the infrastructure for connectivity between payers and providers. I then took a look at their balance sheet, and was extra impressed with the cash versus debt, and was surprised to find out that they had free cash-flow of close to $100 million projected for the year. I liked all of what I saw and began to acquire shares. The shares have been on a pretty consistent rise for the last six months. Going from $4.90 to $12.40. I've acquired all along the entire path.

I think the real strength of this company is the amount of different processes and infrastructure that they are acquiring throughout the entire health care chain. It's a hard company to see the full picture because you have to knit all the blankets together. Once you do, you think, "Oh, my god! This could be one of the great companies of our generation." New regulations by HIPAA (Health Insurance Portability and Accountability Act of 1996) dictate that providers, beginning in October, must send their request for payment to the payers electronically, as opposed to physically. This event alone should send WebMD sales through the ceiling, as they are the largest provider of infrastructure for electronic payment. I'm not an analyst, but an investor, but I see this stock as a long-term hold. I see this stock as a stock that will hit $20 in this calendar year. I would be disappointed if it didn't hit $50.

(WIN note: If the stock hits this target, you heard it here first! If not, errr, we're not brokers, and this tip is certainly NOT a buy recommendation. As a multi-media service, the only thing we can recommend is that you consider every piece of information that you find about a company as one piece of a much larger puzzle.)

N.W. Pace--How did you get involved with MP3.com?

R. Richards--MP3.com was a really fortuitous, opportunistic story. I was running a web company called Tickets.com that we'd just sold. The new company didn't have much use or need for our management team, or so they thought. I was about to be out of work, after a very good 90 days of selling the company. In walked a young man that was a little bit unsophisticated, extraordinarily intelligent in the world of technology, and had this company he called Z Companies. Underneath the umbrella of Z Companies, Michael Robertson had file Z, music Z, calendar Z, and all of these little applications that he'd written that he thought the net would be useful for. We began to talk about this new thing going on called MP3. Michael said, "I really think music is going to be going over the Internet in great propensity in the future. They're going to do it with this technology that condenses the file, called MP3. Music Z uses MP3. We're just going to start posting no-name bands on a site, using this file format and see what happens."

I said, "Wow. If you're right, you're going to revolutionize the world of music." He said, "I don't know if I'm right, but yesterday, there were 100 people here. It's not yet noon, and there are 300 people here." I said, "I'd like to visit you at your office."

I drove down to San Diego on Christmas Eve, 1999. Michael didn't have a fax machine, a telephone system, or even a copy machine. All he had were computers and two coders. He started telling me about what had happened with his web site in the last three days. Now there were about 1000 people coming to try and get music in the MP3 format. I said, "Well, this thing's going to be huge. I'd like to be your president. I'd like to help you assemble a team and go public. We'll be public in six months."

We needed to assemble a team and get out of the 200 square foot office. We got $10 million in funding within ten weeks. We then raised an additional $50 million. We sold the largest advertising contract in Internet history a month later. We then went public in July, which was 6 months after I started, and raised over $300 million in the public markets.

N.W. Pace--How in the world did you secure the URL? That was such an advantage. Everyone must have been fighting to get it.

R. Richards--We bought MP3.com for $900 from Martin Paul III. Right. You got it. MP3. We took all the other businesses from Z Companies and sold them to Idea Lab, and then concentrated all of our efforts on the world of music. We changed our name from Z Companies to MP3.com.

N.W. Pace--I've heard executives complain that MP3.com and Napster were reckless business plans predicated upon piracyÑessentially illegal assaults on intellectual property. Was that what you were thinking in the business plan? Clothesline the record companies, knock them completely off their feet, and then sell them the technology that would get them profitable again? What exactly was the MP3.com revenue model and exit strategy?

R. Richards--The revenue model was to provide services to both sides of the equation, the consumers and the corporations that ran the music industry. We would get advertising dollars and we believed that consumers would pay a fee for music services, ultimately. We invented the music locker, where you can store all of your music online and access it anytime, anywhere from any device.

We also thought that because this was such a great way to bring the world's music together, this would be a boon for the record companies, not only to promote the bands they signed, but to access unsigned bands and their followings, to reduce the cost of A&R substantially. It was a way to test bands and messages in new and exciting ways. We believed that music was a service, not a product. That's where music is headed. The record companies even today don't believe that music is a service, although they're about ready to go there. They're used to manufacturing a widget and selling it for X amount of dollars. All the ownership laws are all geared toward splitting up the profits of the widget (the CD). In the service model, not only would there be revenue from widgets, or downloads, but there will be various revenue models based upon "listens." So, based upon usage, the most popular bands would make the most money in the future. There is a completely interesting distinction here. I buy CDs that I burn out on very quickly. I also have CDs from 1964, like Blood on the Tracks from Bob Dylan, that, years later, I still listen to every two weeks. In the new world, it is my belief that Bob Dylan will make substantially more money than Brittany Spears. The old world is not set up to reward longevity and passion like that. The new world will be.

The record companies had a big problem with MP3s going into the atmosphere uncontrolled.

N.W. Pace-- What was the core difference between MP3.com and Napster that allowed you to succeed, where Napster went belly-up? How did you get to the IPO so fast?

R. Richards--Napster was a network with a central depository of songs that anyone could add to or take from. Users could serially copy them and send them to their friends without any concept of copyright or control. MP3 on the other hand, had the concept that you didn't need to download songs, if they were always available.

MP3, at its essence, was similar to the evolution of money. Five years ago, if you went to Europe, you brought $3,000 and two checks and ran off. Today, I can get on a plane with $50 in my pocket, and access an ATM machine anywhere in the world to get more money. Then, you had to download the cash because you might not be able to get it when you wanted. In the 2^nd example, you can stream cash from multiple devicesÑATM machines. In a world that can be digitized, there will be no need for downloads. You'll listen to your music whenever, wherever, through whatever device you want, and when you're done, you're done. You won't need to carry a backpack with CDs anymore. If it's not five years, it'll be ten years. Nobody will have to hold digital entertainment because they're worried that they can't get it again. It will stream to them whenever them want it.

If record companies would make life simple for people, they would find out that people wouldn't steal. They will pay a fair fee for a great service. But people will not allow themselves to buy something that comes with rules. When I buy something, I want to own it. The record companies are asking kids to buy something, but it has rules. You can't burn it to a CD more than 3 times per month. Until record companies say, "Give us X dollars and we'll give you X songs," online subscription services won't ever work.

Steve Jobs, who knew nothing about music, who was Johnny Come Lately with I-Tunes, said, "I'll take a small library of songs and charge a dollar for them. People can come and take them and do whatever they want with them." He sold a million songs out of the box on the first day. How long will it be before the record companies deliver what the consumer wants? IT will be the end of the black market when they do. Like any good government, when you take care of the people, the people play by the rules. When you don't, they revolt. That's what's happening in music today.

N.W. Pace--Insiders say you walked away with oodles of dough. How long did you stay with MP3 after the IPO?

R. RichardsÑI stayed until I successfully sold the company to Vivendi. I was there from the beginning to the end. I think we did very well for our shareholders. In the climate we were in, with the extraordinary pressure that the record companies were putting on us, I'm very proud of what our team accomplished.

N.W. Pace--What kind of extra pressure were you under?

R. Richards--Lawsuits and more lawsuits and more lawsuits.

N.W. Pace--In 2000, you were embroiled in litigation with record companies and publishers and testifying before Congress, trying to establish a legal basis for your business. What was that like? Why were your arguments rejected?

R. Richards--It was an 18-hour day, 16-month war. Gary Stiffelman of the fine entertainment firm, Ziffren, Brittenham, Branca & Fischer, LLP, helped me negotiate with each and every single one of the record companies. Without him, I don't think we'd have been able to do that. He was an insider. I was an outsider. It cost a great deal of money to convince record companies to license their music, even with all the fences they put around those licenses. It was a Herculean achievement to get all five major record companies to license their music. We ultimately got all five. When final disposition of the Universal lawsuit occurred, we had all five licenses. Ultimately, Universal bought us.

When I look back on all of this, the funny thing is, in 1999, I remember an executive from Microsoft standing up at a conference saying, "In two years, nobody will remember what MP3 is." We're here in 2003 and MP3 as a format has well over 95% of the market. It's never going away. It will ultimately, in my mind, be under the control of a major corporation, like a Microsoft or Apple, because consumers are going to use MP3. So record companies and software companies can keep wishing it away and spend hundreds of millions to create new formats, but at the end of the day when we're old and gray, MP3 will still be the only meaningful format for listening to music in a digital manner.

N.W. Pace--What did you come away with from the experience of trying to innovate an entrenched industry like the music industry?

R. Richards--I learned a lot. I met a lot of nice people. What I learned most, though, was that when you're in an industry where only a few companies dominate, there's always room for entrepreneurs because the big guys are not flexible. They are very dogmatic. They learn from pain, not ingenuity. They don't take risks. When will things change for the music business? When the record companies have had enough pain. When they've lost enough sales. Then maybe, three out of the five will survive.

The man who invented the icebox, had close to 100% market share. He had zero percent of the refrigeration market. The people that manufactured the buggies--the companies in the horse and buggies days--not one of them was in the car market. And the people who invented aluminum foil and had close to 100% of the market, never made the jump to Saran Wrap, and eventually lost their company to the people who started Saran Wrap. Having too much market share makes people's minds close and gives entrepreneurs great opportunity.

N.W. Pace--What inspired you to switch from innovations in music (MP3.com) to innovations in prostate cancer (CAP Cure)?

R. Richards-- By the end of this decade, 300,000 men will contract prostate cancer on an annual basis. It's an epidemic and getting worse. There are, to date, no preventive drugs that have been created or sent to market. Lycopene and Palmetto are the best we can do as a society for the potential prevention of this disease?

(WIN note: Saw Palmetto is an herbal extract of a palm tree, while Lycopene is the red in tomatoes and watermelon. Both are recommended, preventive diets for prostate cancer, along with reducing fat and increasing soy products. So eat your edamame!)

It seemed to me that there was something wrong with the financing of drugs. I wanted to see what the holdup was when such a huge group of people were contracting the disease. Why weren't the FDA and drug companies more aggressive in prevention, in controlling late stage prostate cancer? So, I was disappointed in what was going on at both ends of the disease. I joined the Prostate Cancer Foundation (formerly CAP Cure) to see if I could help them figure those things out. There's a tremendous amount of money in the drug of choice, Lupron, for late stage patients. There doesn't seem to be any money or any product as of yet for prevention. Prostate Cancer Foundation has put more money into trying to help on all spectrums of prostate cancer research than all of the private organizations combined. This disease is getting the attention of the FDA now, from the good work that the Prostate Cancer Foundation has done. So many major contributors to our society have contracted the disease--Rudy Giuliani, Andy Grove, Mike Milken, Jay Chiatt, and Joe Torre. The list never ends. It's a bad disease. Something will be done about it because of this organization, and the credentials of the people that are contracting it. They will demand that a voice be heard, as opposed to hope a voice will be heard. I expect this disease, in the next ten years, to have major breakthroughs.

N.W. Pace--Please tell us more about the Chase Foundation and the personal experience that led to its creation.

R. Richards--The Chase Foundation started about eleven years ago, when my son, who was three, passed away from cancer. We wanted to ensure that his life was worth living, so we had to do something in his name. We created a series of playrooms at Children's Hospital LA. The hospital was kind enough to give us a room on every floor to make the best and most important child-life program in the country, probably in the world. There's now a safe haven for these kids who are in the hospital for a protracted time. In the Chase Play Rooms, we use art and play therapy to help kids cope with what's going on in their lives. Too often, our society treats the objective only, when the subjective needs it just as bad--the soft tissues, the mind, the heart. Children need that outlet. We all need that outlet. Children really need someone to treat them from the inside out when they're going through major disease and trauma. The Chase Foundation funds seventeen full-time specialists, who are managed by the Children's Hospital.

N.W. Pace--What do Child-Life Specialists do? What are their credentials?

R. RichardsÑMost have their Master's degree in health care, with credentials in either art or music. It is very difficult to find these people, and to create community vehicles, using art and play and paint and poetry, to get through to the kids, to give them coping skills and understanding skills. This program is very effective. We not only take care of the kids, we have sessions with siblings and parents, to help the whole family deal with what's happening. It is probably the most popular program amongst the patients at Children's Hospital. It's not unusual to have a bunch of little patients standing out there before nine a.m., waiting for it to open. We now have a Child-Life specialist in the Emergency Room to deal with the trauma for mothers and fathers who come in for immediate need.

I'm proud, not just because it has my son's name on the door. I'm very proud of our 990 form, which is the form that explains how much money you collect, and what you do with it. I believe we are the only charity that collects and gives away $500,000 year and has an expense ratio of 1.25% only. 98.75% of every dollar goes directly to Children's Hospital to support the staff and the programs for the children. That's an amazing ratio. As we get bigger, I pray we can keep it up. We'll always be cognizant of how we spend our money. We have no staff, offices, or consultants. We pay to rent a golf course and food once a year for our golf tournament. Everything else is donated by friends and family.

We just announced last week that the Chase Foundation entered into an agreement with Children's Hospital to give $6.5 million to this program in the coming years. That only funds the need about 50%.

N.W. PaceÑHow can individuals help?

R. RichardsÑTax-deductible donations, made payable to the Chase Foundation, can be sent to:

The Chase Foundation
28920 Linden Terrace
Calabasas, CA 91302

N.W. PaceÑThe Chase Foundation has an extraordinarily efficient track record. Donated dollars go directly to fund the program, the Child Life Specialists and the playrooms. If you donate to this charity, you can be assured that you are truly giving the gift of play and emotional rescue to terminally ill children and their families, who live their lives 24/7 in the hospital.

» Stock Report Card:
iTunes. eMusic. Wonder who’s positioned to win the battle for online music? It may be the outsiders: Apple Computer, Real Networks, and a new contender, BuyMusic.com. Check out this week’s Stock Report Card.

What do Sony, EMI-Virgin, Apple, BMG, BuyMusic.com, Real Networks, Vivendi Universal and Warner Bros. Music have in common? They’re all positioning themselves to capitalize upon the enormous online music market, that has yet to be proven as a profit-generating market. Napster’s free music downloads created a monster that didn’t die with its bankruptcy. Morpheus, LimeWire, BearWare and KaZaa might have numbered days, but in the meantime, there are serving millions upon millions of customers. Enter Apple Computer, Real Networks, BuyMusic.com, and all of the Big 5 record companies, who are determined to get Americans to pay for the music that they’re currently getting for FREE. If BuyMusic.com is successful, they will serve a Windows market that dwarfs the size of the Mac market, though Apple iTunes is clearly the leader in the pack of pay-for-play contenders.

What’s the key element in all this speculation? The online music market is only a little beyond speculation at this point. Of the seven companies featured, only two* are clearly profitable. (*Sony and EMI-Virgin. BMG is owned by Bertelsmann, a privately-held company that may be profitable. The financial reports are not readily available to the public.) BuyMusic.com is not yet publicly traded, but is included in this stock report card because the founder has big aspirations, big connections and a track record of successful IPOs. (You might want to put the company on your stock radar.) Apple certainly found gold on the first day of its download offering, selling more than a million songs at 99 cents each, but will the model sustain itself against the free competition still available at Morpheus, LimeWire, BearWare and KaZaa? Real Networks deserves a serious look because 1) they demonstrated the ability to survive during the towering NASDAQ inferno of the last three years, 2) the company deserves kudos for keeping operating costs reasonable during a cash burn period, 3) Real Networks has a diversified product/service line centered on delivering digital media to PCs, mobile phones and consumer electronic devices. These markets are already exploding in Asia, where first-generation technology goes before US consumers get it. It would be important to determine Real Networks actual market share prior to investing, and equally important to recognize that Real Networks has not had one quarter of profitability, since inception.

Certainly it is recommended that investors read this issue cover to cover before considering an investment in any of these companies. Click here to look at the Music Stock Report Card for yourself!

È Muzak and Sequel Hell.

Aslyn. Her song, "That's When I love you" is available on the soundtrack for the Mandy Moore film, How To Deal. Hear Aslyn at www.aslyn.net.

Will the shark-infested cyber world of free downloads eat up the music and film industry, leaving us poor consumers with an eternity of Muzak and sequel hell? Can a shrinking giant transform itself quickly enough to survive, or will computer giants, like Apple and Microsoft, control the future of entertainment? Gaze into the misty future of music, as seen through the eyes of the music barons who direct the future of the industry, the workers, and a teenage cyber-user.

The Motion Picture Association of America (MPAA) has launched a battle against piracy in the digital age, and is currently advertising its message on movie screens across America and at www.Respectcopyrights.com. Their message centers around the argument that when you download, you're getting cheaper quality, you're threatening the livelihood of thousands of people who work in movies and you're running the risk that an unprofitable industry will turn out crappier pictures. (Err. Would that be something like the sequel mania summers that we've seen of late?) The organization boldly puts the future of the motion picture industry in the hands of the online user, asking the question, "Do you really want the makeup person, the best boy, the sound tech, the caterer and the limo driver to lose their jobs?"

Should users have their hands slapped until they understand that wanting movies and music downloads is a bad, bad thing? Is the user responsible for meeting the demands of a changing world? Or, rather, will the companies that find a way to profit from online screening and download demands be in the best position to rehire the best boys, gaffers and makeup artists when the bullheaded entertainment behemoths become obsolete? History doesn't stop its march toward innovation. The refrigerator replaced the icebox. The car replaced the horse-drawn buggy. ATM machines are here to stay, and I, for one, can't wait for the day when I can pack clothes into the giant spot in my suitcase that is currently reserved for CDs and DVDs.

As Apple Computer proved with the launch of iTunes, consumers are now willing to pay for online musicÑunder certain conditions.

EMI-Virgin chairman Eric Nicoli, in his Chairman's statement at the 2003 General Meeting on 7.9.03 in London, said, "EMI remains at the forefront of industry initiatives to combat piracy in all its formsÉ We are actively supporting the development of legitimate online music services and the early results are encouraging." EMI, like all of the other five corporate music giants, are trying to squash free on-line downloads, mostly through lawsuits aimed at the companies and the users, in order to successfully launch pay to play services. Vivendi Universal and EMI recently filed a lawsuit against Bertelsmann (BMG) for digital piracy damages suffered while Napster was in business. Bertelsmann has responded saying that US law doesn't permit recovery from 3^rd party lenders. (Bertelsmann bought Napster before Napster's bankruptcy, and was trying to develop the platform as a legitimate online music service.) (July 25, 2003 Reuters)

The most successful subscription-based service to date, however, has been an outsider of the music industry, Apple Computer. iTunes reported a million downloads on the 1^st day of business, at ninety-nine cents a pop. What miracle did wizard Steven Jobs perform? A miracle of public relations, of product or of software? It may, in fact, be all three.

MP3 technology has been around for years, but software may have been a key ingredient in why iTunes launched a successful entry into the marketplace. According to teenager, Davis Lau, "Most kids are downloading from Kazaa, but my friend, David, buys songs off of iTunes because downloading is all messed up on MACs. It doesn't work anymore." According to Davis, his friends won't pay for online music, as long as they can get it for free and, at least in his perception, the only kids who get it for free anymore are kids with PCs. In Davis' mind, free downloads aren't inherently wrong because his friends still go to concerts and still buy CDs, IF they like the ENTIRE ALBUM, if they can't download for free and IF don't have a CD burner. (One problem cited by many music lovers is that there are only a few good songs on a CD anyway. Who wants to own the whole thing?)

Music companies also fight negative perception from music fans. In plain English, Davis, who has probably never even seen a music executive, looked at an artist's contract, or considered what the perfect price of a CD should be, believes that "music companies are assholes and CDs are overpriced." He considers the current crisis in the industry to be EDEN. "Everything is fine now. We all get free music, and it's cool."

Are music companies spinning their wheels trying to convince these kids that they should pay for music but listen to it only under certain conditions and at certain times, while Apple cut to the core, so to speak, by cutting off the free channels of access, and by making iTunes cheap and easy to understand with fewer restrictions? Music executives, like Robin Richards, former CEO of MP3.com and Jonathan Daniel, a board member of Listen.com, have long been saying that people will pay for online music, but only if they can use it on their own termsÑbasically anywhere, anytime, on any computer, with options to burn CDs at will. Mr. Richards believes that music will be as accessible and convenient, in the future, as ATM machines.

If the first step toward establishing subscription-based music is cutting off the free flow of KaZaa, LimeWire, BearShare and Morpheus, is the most effective strategy litigation (what the music companies are doing) or software (Apple's approach)? Will cyberspace host the next battlefield face-off between Microsoft and Apple? If BuyMusic.com has it's way, their service will be bigger and better than iTunes, by offering the same music downloads for Windows users, which is a much larger market than Apple's slice. Apple, however, has an early lead, by being the first viable solution that the masses have embraced. Users and investors have a lot of fledgling companies to keep track of in the online arena: Rhapsody.com, Listen.com, BuyMusic.com, iTunes, and more.

The battle for the future of rock n' roll and film is certainly on. So far, the only one winning, however, is the happy consumer.

È WIN 10: WHICH COMPANIES ARE WINNING the MUSIC WAR in CYBER SPACE?

Ten quick questions with Jonathan Daniel, who sits on the advisory board of Listen.com and represents Big Champagne, a company that tracks peer to peer file trading.

1. Who is the current#1 file trader?

Jonathan DanielÑFast Track Network

2. How many users are currently trading files in cyberspace? Last October, when we interviewed you, there were 50 million users and 20 million active traders.

Jonathan DanielÑHard to say exactly, but I think those are conservative estimates at this point.

3. Any comments on iTunes' success?  

Jonathan DanielÑIt's essentially eMusic 4 years later, which is a sad comment on the state of the online music industry. It seems to be doing well, which provides optimism, but also could mean that people are interested in iPod accessorizing.

4. Visionaries, like MP3.com and eMusic which are both owned by Vivendi Universal, certainly blazed the trail. What differentiates the big 5 music companies, especially in their position to move into the future and meet the demands of online user?

Jonathan DanielÑAs far as I can tell, there's very little meaningful differentiation in terms of online music.

5. N.W. PaceÑLast year you said that "Napster killed the promise of the online music business."  Do you think there is and/or will be a viable online subscriber service?

Jonathan DanielÑHard to say. There COULD be a viable online service. Whether or not one materializes is an entirely different matter.

6. N.W. PaceÑIs there now a flat licensing rate for all songs, or is it still a nightmare of trying to negotiate licensing agreements with thousands of publishers and music companies, who each have different rate structures and usage restrictions?

Jonathan DanielÑNo, there's not a flat rate. Without legislation, I can't see that happening.

7. N.W. PaceÑLast October, you said that if a technology company got in and started making deals with the labels, that might be a company for investors to look at.  Does that spell APPLE?

Jonathan DanielÑIt's hard to recommend Apple as an investment when it's share price has increased almost 100% in the past three months. I like the iPod a lot, as a product. I also like satellite radio. However, a good product doesn't necessarily equal an attractive stock.

WIN note: Apple's share price is at a 52-week high, at $21.54, off of April's lows of $12.72. (Anyone who purchased AAPL in April is happy right now!)

8. N.W. PaceÑHow are your artists holding up during these tough times?

Jonathan Daniel--Aslyn has a song in the new Mandy Moore movie, How To Deal, and she is recording her first album for Capitol Records. Butch Walker was nominated for a Grammy last year for best pop song. Social Burn has a big hit currently out. Fall Out Boy is big on MP3.com. So is Acceptance.

9. What are the top file-sharing tracks currently?

Jonathan DanielÑYou can get the top 10 list off of BigChampagne.com each week. This week's top downloads are Chingy, Michelle Branch, Black Eyed Peas, Fabolous, 5 Cent, R. Kelly, Evanescence, Linkin Park, Sean Paul and Coldplay. BigChampagne.com tracks file-sharing hits and other important market research data for the music industry, with the goal of improving permission-based marketing, customer profiling and distribution.

10. Do you think that the policy of swapping affiliate codes to expropriate revenues, a policy used by LimeWire, Morpheus, KaZaa and BearWare, is stealing or fair business?

Jonathan DanielÑThat seems to be theft. I find it hard to believe that the affiliate programs make much money anyway, but that sounds pretty illegitimate.

(WIN note: If you haven't already stopped LimeWire, Morpheus, KaZaa and BearWare from expropriating funds from your favorite charities and businesses, please read the next article. These companies might already be using YOUR COMPUTER to steal from your favorite charity, without your knowledge.)

È CYBER Stealware. HOW free online music services STEAL from the companies and charities that you love to fund their operations.

Most of us wouldn't want to be responsible for opening our neighbor's door for a burglar. Online digital downloads appear to be just that. By N.W. Pace

If you or your child have ever downloaded so-called "FREE" music from KaZaa, Morpheus, LimeWire or BearWare, what you don't know about the Trojan horse than enters your computer will likely ENRAGE you. These organizations have software that substitutes their affiliate numbers for all the companies that you frequent, in order to reap the profits of online partnerships, referrals, etc. That means that your cyber click to help victims of breast cancer or famine or tragedy will likely wind up in the coffers of the digital pirates, not in the funds of the charity that you are trying to help.

GETTING RID OF STEALWARE, SPYWARE and/or CRAPWARE is easier than you think! Lava Soft makes software that effectively vacuums the waste, dirt and crap out of your computer, called Ad-Aware. BETTER YET, the SOFTWARE IS COMPLETELY FREE and was awarded Best Software Product by PC World Magazine.

Click here now for your free download, or go to http://www.lavasoftusa.com/software/adaware.

My dad used to always say, "Nothing's ever free in this world. There's always a price to pay." You be the judge on whether the ten or twenty bucks a month you save on free digital downloads is worth the price of stealing from your favorite charity. If the answer is no, there are many subscriber-based online services popping up, from iTunes, to Rhapsody, to Listen.com, to MP3.com, to BUYMUSIC.com that may have more legitimate sources of funding. One thing is absolute. It pays to read the fine print of the corporate terms that you agree to, prior to downloading any software!

È Investor's Guide to Short Selling.

In the real world, I will listen to the consensus. When I'm looking for an entertainment idea or a new restaurant, I will listen to the recommendations of other people and try them out myself. However, in the financial world, the exact opposite is true. When I have a trading idea, I want to hear the so-called experts in the TV and print media expounding on how the idea will never work. In fact, ideally I want my friends and colleagues in the financial world to think my idea is crazy! This is the world of the investment contrarian.

In a way, the market is like a giant poker game. If you keep your eyes and ears open, other investors will willingly tip their hand and give you an advantage. How? There's an old saying on Wall Street: "The mouth follows the money." Meaning, if people are talking bullishly, they have already bought and their buying power is diminished. As the number of bulls increases, the total potential buying power of the investment community decreases because their money has already been put to work. If everybody is a bull, and there is nobody left to do any buying, prices can't go up much further and might be headed for a decline. The reverse is true as well. The more bears you hear talking, the greater number of people that have already sold. They are finished influencing the market on the downside.

I will often use this phenomenon to confirm a trading idea. From March into June of this year, stocks had a huge rally. Using my own fundamental and technical analysis, it looked like it might be a good time to sell index futures short. Index futures track the major stock indices one to one. Going short is the act of selling something first, and then buying it back later and making (or losing) the difference in price. Basically, I wanted to place a trade that would profit if stocks were to decline.

I placed a similar trade a couple of years ago. During the big run up in stocks in late 2001, I went short NASDAQ index futures when the Nasdaq-100 index was at 1400. Unfortunately, I was early. Overly eager, and not having refined my bull/bear technique, I jumped in at the end of October. The first thing the market did after I had sold it short was to continue rocketing upwards. By Dec 6, the index had increased to 1700 and I had lost $6000 per contract ($20 per point, times 300 points!). Mercifully, I had a small number of contracts, but I was very close to buying them back at a $6000 loss each and stopping out the trade. At that point the market turned around and started going down. As the Nasdaq-100 fell back to 1400, erasing my loss, I started selling in earnest as the index continued downward. Seven months later, with the index at 950, I bought back all the contracts I had sold short and netted an average gain of $9000 per contract ($20 per point, times 450 points.) It was a successful trade, but there had to be a way to be more precise on the entry.

In June 2003, with the S&P index over 1000, the burning question was: Is this the top of the current rally, or is the market going to continue even higher, like it did in late 2001? To help me answer to that question, I listened closely to the investment community. By the middle of June, the mouths really started following the money. The pundits and portfolio managers on CNBC seemed to be 80-90% bullish. The term "new bull market" was thrown around hourly. Also, the number of bullish vs. bearish articles in the Wall Street Journal was increasing. A weekly poll, called the Investor's Intelligence Bull/Bear Sentiment survey, had the highest reading in years. The world was filling with bulls, and maybe the market was becoming vulnerable.

What I wanted to see next was a cavalcade of bullish magazine covers at the newsstand. The most reliable contrarian indicators are the covers of national magazines. The infamous "The Death of Equities" cover of Business Week came out in August 1979 after a terrible 14-year period for the Dow. It was immediately followed by one of the biggest financial bull markets in U.S. history, in which the Dow jumped twelve-fold. Another Wall Street adage is "Buy when you see two national magazines with bears on the cover." (Bonus points for showing teeth and claws!) A similar psychology occurs at market tops as well. Does anyone remember all the bullish covers decrying the "New Economy" in late 1999 and early 2000? Or the book titles The Roaring 2000's and Dow 100,000? What immediately followed was an 80% crash of the NASDAQ, and a bear market in the S&P and Dow from which we have yet to recover.

Do authors and magazine editors have the remarkable prescience to keep picking the tops and bottoms of the market? I don't think so. There is a special psychology that takes hold of the entire financial community at these emotional moments that is palpable, and it spills over into the media.

In my search for bullish covers to confirm my bearish trade, the results were mixed. Among the mainstream magazines such as Time and Newsweek, there was nothing at all. As for the financial magazines, the June Business Week issue had a small picture of a bull on it, and Fortune's headline was "The Market Gets Hot Again." Okay material to consider selling on, but there were also some bearish covers: Forbes' midyear Investment Guide had a picture of a stack of money with a lock on it, and Kiplinger's headline was "Simple and Safe." Not a slam-dunk.

I then tested the waters with people I knew who were financially savvy, to see what their thoughts were. Were they as bullish as the portfolio managers on CNBC? I ran my idea of shorting the market by them to hear what they had to say about it. Actually, I heard quite a bit of bearish talk. Some people even agreed with me and thought it was a good idea. That made me very nervous. These were people with lots of money on the sidelines and no current plans to buy stocks, but these are the very investors that would jump back in and make the market take off if it were to show upward momentum.

My conclusion was that although the portfolio managers seemed to have bought into this rally hook, line, and sinker, there were still a fair amount of bears (potential buyers) out there among individual investors. There was also not the amount of "irrational exuberance" in the print media that I had hoped to see. Therefore, I kept the size of my planned short sale a bit smaller and, in case I was wrong, would bring the stops in a little closer.

When I thought the rally had gone far enough and the amount of bullishness had peaked, I started selling S&P and Dow futures short in mid June and sold NASDAQ futures short soon after. My beginning leverage (the total value of the futures contracts divided by my equity) started a non-nail-biting size of -150%. I plan to continue the trade until later this year, increasing its size if the market goes down, but will begin buying the contracts back (at a loss) if the S&P index makes a new closing high. (This almost happened in mid July!) So far so good, but time will tell if this trade is successful.

The Buy and Hold strategy of buying stocks and forgetting about them used to be the best way to make money, but this method crashed in 2000 and has yet to return. [WIN note: Our favorite strategy, "Buy low, sell high," never goes out of favorÉ] Contrarianism is an interesting strategy because it is cyclical: Buy when everybody else is depressed, and sell when they are euphoric. The only problem is that you are not necessarily happy when people agree with you.

To contact Michael Martin, or to comment on this article, please email info@NataliePace.com.

Now you know where the saying, "Eat your shorts" comes from! With so many experts calling, "Bear," let's hope Michael Martin doesn't end up eating his. (See below for Market Trends from the experts, who seem to be painting a slightly bearish scenario.) .) Remember Michael's theory is that the market goes opposite of the headlines, and the headlines this week were pretty bearish. If the contrarian model works, we'll have continued gains right into the Santa Claus 4th quarter rally. Consult your crystal ball, or trust the reasonably reliable theory that is based upon market movement during the third year of an presidential term. The President needs a strong economy to win next year's election. Magical things tend to happen in the third year of an election cycle.

Please note: the NataliePace.com does not act or operate like a broker. We are a media and information center. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The short-selling strategy mentioned in this article is not intended to be a buy or sell recommendation. In fact, short selling is NOT recommended for most individual investors. It's risky, with tremendous LOSS potential, as well as GAIN potential. (We've seen short selling ruin the lives and businesses of PROFESSIONALS.) ALWAYS do your research and/or consult an experienced, reputable financial professional before buying or selling any stock.