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This is Celia Hirschman with On the Beat for KCRW.

The big news this week was that iTunes beat Wal-Mart as the #1 music retailer. It's pretty amazing, considering Wal-Mart is the largest employer in America and iTunes probably only has a few hundred people working in Cupertino. Welcome to the digital economy. Selling music direct to consumer with minimal labor costs is rapidly becoming the new face of retail. The number three retailer in music is Best Buy and number four is Amazon. Watch that number go up in the next few months.

And in related news, MySpace and three of the four major labels have announced they'll be working together on a new joint venture.

MySpace Music will offer free streams plus DRM-free downloads, merchandising and concert tickets for purchase by major-label artists.

The deal, two years in the making, was hamstrung by a lawsuit between Universal Music and MySpace, now partners in the new venture. With legal haranguing finally out of the way, the giants can all sit down at the table and try and earn more money.

The fourth major label conglomerate, EMI is not a part of the new venture yet, nor are the independent bands who made MySpace popular, but rumor has it that everyone will be getting into the MySpace Music game.

In other news, Live Nation, the largest concert promoter and newly minted record label, has announced two major deals.

U2 signed up with Live Nation, formalizing a longstanding business relationship. For the next 12 years, all of U2's touring, merchandising and website presence will be handled by the concert promoting king

It's a great show of support for Live Nation as U2 consistently earns top dollars when they tour.

And in a one-two punch, Jay Z is signing on the dotted line with Live Nation for $150 million. For that much money, Live Nation has the rights to release Jay Z's records, plus share in profits from his highly successful clothing line, his touring income, licensing and publishing revenue. Jay Z will also be given his own imprint and funds to sign other artists.

This is a perfect example of the new 360° deals currently being solicited by record labels. Traditionally, labels don't participate in publishing, merchandising, licensing or touring revenue, only in music sales. But since music isn't selling very well nowadays, labels are offering their expertise to commission additional revenue streams. 360° deals are their best hope for making investment in music possible.

And finally, this week two judges, one in Boston, and one in New York, weighed in on two cases regarding peer-to-peer downloading. The judge in Boston, found that the act of uploading a song onto a peer-to-peer site would not infringe on the owner's copyright.

But in a separate case, the judge in New York, found that putting a copyrighted music file in a folder shared by peer-to-peer software users, could constitute copyright infringement. One week, two judges, two different verdicts.

If the legal system can't figure it out, protecting rights in online sales will be forever compromised.

ITunes can be #1, but artists and labels cannot live on iTunes income alone. Until the business addresses peer-to-peer downloading, the industry will remain the emperor with no clothes.

This is Celia Hirschman with On the Beat for KCRW.