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Austin's a renowned live music mecca, which is no doubt why it became the home to South by Southwest (SXSW) the annual indie music festival. But it's not just where indie bands come to be discovered and hipster kids come to rock out, it's also the destination for music industry folks to sort out the future of a challenged business. Appropriately for the industry transformed by the ability to download songs over the internet, the music fest is preceded by an Interactive festival.

There covering the music festival, I quickly found that there wasn't a hot up and coming band in the spotlight-- it's technology that's at center stage. These days it's impossible to talk entertainment without discussing its distribution mechanism. I sat down with execs from Napster

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[NAPS  Loading...      ()   ] and Real Networks (which owns Rhapsody), both of which run subscription services, which give consumers access to their respective 3 million song libraries, and give the respective companies, nice steady revenue streams. Both are partnering with cell phone companies to offer access to their music libraries over the phone. So instead of having to dock your iPod and load up music when you're at your computer, you can now make a music impulse purchase, or dip into your existing subscription service, on the go.

And mobile phone music is quickly headed to the mainstream. By the end of this year a third of all phones purchased will be music-enabled, by 2010 it'll be two thirds. Apple's iPhone may be coming out this year, but at $500-plus per phone, Nokia's offering through Rhapsody, which demands no expensive additional hardware, will sound awfully appealing. Plus, it appears that Apple won't allow you to actually buy music for your iPhone unless you're at your computer, whereas with these mobile phone deals all your music downloading, streaming, and purchasing will be wireless.

Tom Anderson, Co-founder and President of MySpace

The biggest celebrity at South By Southwest wasn't a musician-- he was a regular guy in a baseball cap who's your friend, that is if you're a MySpace member. Tom Anderson, co-founder and president of MySpace, is the guy who's listed as your first "friend" when you sign up for myspace, which makes him friends with the popular social networking website's 160 million or so members. So why was he chased down, signing autographs and mugging for the camera with fans? Because he (and his MySpace colleagues) are responsible for trasnforming the music industry.

MySpace may be owned by septugenarian Rupert Murdoch's News Corp but it is friend to teenie boppers and indie rockers-- there are between 2.5 and 3 million bands with MySpace pages. MySpace allows bands to market to fans, and sell their songs directly (taking a piece of course). By connecting unsigned bands to gigs and fans MySpace has actually allowed many to make a living at music making, who might not have in the previously music label-dominated world. Oh, and MySpace actually has its own music label, where it plucks bands from its site to put onto CDs it releases in stores.

My last observation of SXSW (as it's referred to) is that there was lots of gray hair. Baby boomers are still hot. The Rolling Stones were the biggest concert tour last year, bringing in 138 million dollars. And the 45-plus demographic buys more CDs than any other. (Both the Beatles new album, 'Love' and Dylan's newest album were in the top 10 on Billboard's list). It makes sense -- this demo has plenty of cash, is the ultimate music-loving generation, and they're not necessarily eager to illegally download and burn CDs. But it's not that they're computer illiterate. This middle-aged and older demo was responsible for about a quarter of iTunes downloads. I had the pleasure of interviewing Emmylou Harris (stunningly beautiful as she nears her 60th birthday), and the Who's Pete Townshend, who's back on tour and rockin' after all these years.

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