''Phish has a very community-oriented fan base,'' said Steve Curry, Emusic's PR director. ''They've been open in the past, allowing fans to record concerts live--like the Grateful Dead used to. This is one more way to release material to their fan base and give the people what they want.'' This also explains why Phish is willing to release their music in an unprotected format like MP3.

Phish's Colorado College concert was recorded before the band had signed with Elektra. The band completely owns the material, including the electronic rights, which gives them the freedom to distribute the live set through Emusic instead of Elektra.

Curry would not disclose the exact financial terms of Emusic's deals, but did say it addresses contractual terms in a way similar to deals with Frank Black [ tickets ] and They Might Be Giants [ tickets ], who released a complete album on the site a few weeks ago. In those deals, Emusic splits profits equally with the artists, after Emusic pays credit card costs and referral fees to other Web sites. With a fifty-fifty split, musicians are able to earn more from their work than they can under a traditional royalty structure.

As the download community grows, some labels are not only moving to embrace downloads, but they are bringing the early works of big-name groups with them. On Oct. 13, Metal Blade, a label that is home to heavy metal bands like Slayer and GWAR, cut an exclusive deal with Emusic to release its entire catalog on the Web--including two early albums by the Goo Goo Dolls [ tickets ]. And on Oct. 19, Emusic signed a deal to become the online distributor for Concord Records, a major independent jazz label whose catalog includes work by singe Rosemary Clooney, vibist Gary Burton and drummer/bandleader Art Blakey.

Additionally, independent labels are hungry enough for exposure that they are willing to ignore concerns about copyright control to release new material as MP3s. Alt-rock band Bush has a new release on Trauma, ''The Science of Things,'' scheduled for traditional CD release on Oct. 26, but the band has been selling the first single as an MP3 on Emusic. Explained Curry, ''Even though they've got the stature of a major label band--because their stuff is distributed through Interscope--their label Trauma allowed the MP3.''

Musicians can have relationships with two companies, said Curry, releasing albums on their physical labels while releasing other material with an online music company. When the band wants to release material faster than the usual one-and-a-half year cycle that a major label usually sticks to, electronic releases are a welcome option.

But Steve Grady, vice president of marketing, emphasized Emusic was only pursuing these arrangments when bands already had a following. ''We're not trying to be an artist development company,'' he said, alluding to MP3.com, which presents all genres of music from mainly unsigned artists. ''We may evolve into that. But now, we sign an artist direct that already has a following and fan base. With They Might Be Giants, we just get their digital rights.''

While Emusic has cut several eye-catching deals in the last few weeks, they still have to get their revenues up--a situation they share with many new Internet companies. In their first-quarter earnings report for fiscal year 2000, their revenue was up more than 250% from the previous quarter. But the $180,000 in gross earnings is a drop in the bucket compared to the company's $13.5 million losses.

Grady said he could not disclose predictions about when the company would become profitable, but he did feel confident that Emusic was offering consumers a reasonable price and that the download infrastructure was still in its infant phase. He also stressed that the company believes that listeners will prefer open-format MP3 over copy-protected formats like Liquid Audio and Windows Media.

''If you build protection into your product,'' he said, ''it takes value out of the product. People get the illegal stuff because it doesn't have all the restrictions.''

As for the fear of online music pirates, Curry said that Emusic does not spend much time worrying about them. ''If consumers can find you, so can the authorities.''