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Reality Hits the High-Tech World; How to download Tunes with MP3 Technology; Latest in Instant E-Mail Access is Hand-Held

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANNOUNCER: Today on CNNdotCOM...

PERRI PELTZ, CO-HOST: When a dot.com crashes, it can feel like the dream is over.

(BEGIN VIDEO CLIP)

JEFFREY KAY (ph), PSYCHOLOGIST: For some people, it's akin to a disaster.

(END VIDEO CLIP)

PELTZ: Reality hits the high tech world. So where do you turn if you've been axed? That's right, go online.

Too busy to browse? What you like to listen to may just be waiting online.

(BEGIN VIDEO CLIP)

DOUG GOTTLIEB, ASSOCIATE EDITOR, ROLLINGSTONE.COM: Classical music, jazz music, folk, blues, everything is available.

(END VIDEO CLIP)

PELTZ: Downloading tunes with MP3 technology -- we'll show you how.

Where's the future of the Internet? Right there on your belt. The latest in instant e-mail access is hand-held, and it's here to stay.

All that and more ahead on CNNdotCOM.

ANNOUNCER: CNNdotCOM, with Perri Peltz and James Hattori.

PELTZ: Welcome to CNNdotCOM. I'm Perri Peltz.

In today's frenzied, who-wants-to-be-a-millionaire Internet economy, reality is starting to take hold -- profit or perish. According to one source, since January 1, more than 60 Internet firms have laid off more than 5,000 people. From San Jose to Manhattan, the shakeout has lots of dot.com startups wondering how to raise more capital or how to tell their employees goodbye.

James Hattori takes a look at how some are coping with dot.com doom. For more on the story, let's go to New York's Silicon Alley.

(BEGIN VIDEOTAPE)

HOAG LEVINS, EXECUTIVE EDITOR, APBNEWS.COM: Clearly, I think the Internet is the future of journalism. It's the future of the news business. At the same time, right now it's a really high-risk business.

JAMES HATTORI, CO-HOST (voice-over): Hoag Levins knows better than most how risky the Internet is. He's executive editor of APBNews.com, a year-and-a-half-old crime news Web site that, by many measures, achieved great success.

LEVINS: In 18 months, we went from zero to between 18 and 22 million page views a month. No one has ever been able to build audiences that fast.

HATTORI: But on a Monday in early June, APBNews and its 140 employees became a casualty in the great dot.com shakeout.

LEVINS: They told us, the money has run out, the investors won't put more money in. We can't pay you. In effect, you're all fired. It was, like, wow, hit me in the head with a hammer.

HATTORI: Just a week earlier, Internet clothing retailer Boo.com made headlines when it collapsed after burning through $135 million in venture capital and just six months online.

RANDALL ROTHENBERG (ph), FINANCIAL JOURNALIST: Well, the mood, the mood is very worried.

HATTORI: Veteran financial journalist Randall Rothenberg says weak startups are falling victim to a new era of rationality in the Internet economy.

ROTHENBERG: I'd say about 75 percent of today's publicly traded dot.coms will be out of business in three to five years.

HATTORI: From online crime news to fashion commerce, a portal for barbecue supplies to a Web site for the environment, the growing list of dead and dying dot.coms is the nervous talk of the industry. And one way the industry is coping is through dark humor and parody.

(on camera): Well, this is a death watch for dot.com companies.

PHILIP KAPLAN (ph): Yes, I mean it's based on celebrity death watches, picking who's going to die and when they're going to die, and it's all pretty morbid.

HATTORI (voice-over): The startup downturn inspired Philip Kaplan, 24-year-old Internet consultant, to start a Web site whose name, which we can't mention on television, is a takeoff on the new economy bible, "Fast Company." KAPLAN: So then one weekend I was bored and just sort of as a joke, I made this Web site. I originally made it for just my six friends. I had no idea that it would catch on. But a couple of days later, I had about 20,000 users, and it's been growing exponentially since then.

HATTORI: Visitors to the site compete by picking five dot.coms they think will fail. So far, more than 70,000 people have entered the competition. You rack up points if your company reports bad news.

KAPLAN: A company has to have some type of event, whether it lays off people, whether they miss their -- they recall their IPO, maybe they're getting sued or an executive leaves, then the points are based on the odds. So, for instance, Napster, everyone's picking Napster.

HATTORI: True. Napster's lawsuits have earned it many headlines. But whether it succeeds or fails, picking lower-profile possible failures, like the prophetically named breakfast cereal portal Flake.com, can net a player even more points.

KAPLAN: "I'm discouraged, and I'm essentially broke," says the founder. That was Flake.com. The severity is 100. It's 200 points. And they have entered the FC hall of fame.

HATTORI: Over its first few weeks, the site has drawn more than 1 million visitors, many of whom are industry insiders.

KAPLAN: Whether they work for dot.coms, whether they own dot.coms, a lot of them work for investment companies, banks, venture capitalists. I can look at people's e-mail addresses, and there's very few AOL or Hotmail e-mail addresses. You know, you see PriceWaterhouse e-mail addresses and Anderson Consulting e-mail addresses.

HATTORI: But rest assured, Kaplan won't be soliciting investors any time soon.

KAPLAN: If somebody started a site like this to make money, I would probably list them on the side of the doomed company. There's no real business model, there's no idea that's going to sustain a corporation for the next 40 years in this Web site, and that's the problem with dot.coms today, with a lot of them.

HATTORI: Ironically, he says his Web site has reassured some of those caught in the dot.com shakeout.

KAPLAN: They say, You know, I was laid off yesterday, this is my third time being laid off. It's been really depressing, and I didn't know what to do. And then I went to your site and I saw we were listed, but I saw 20 other companies were listed the same day as laying off 100 people. And it made me feel really good.

KAY: For some people, it's akin to a disaster, it's a personal disaster for them. HATTORI: In Northern California, they're starting to see the real world effects of an Internet correction. San Francisco psychologist Jeffrey Kay says the emotional stakes are often especially high for workers in high tech.

KAY: The pace of the work, the expectations of management, the all-or-nothing, we're going to make it with this IPO and be rich, or we're going to be bust, is very stressful.

A lot of glamour to the field, or at least purported glamour, the Webbys were held just up the street from my office, and got a lot of media coverage, and was quite glamorous. And yet on a day-by-day basis, they go to their office, they work in a little tiny cubicle.

HATTORI (on camera): Not quite so glamorous.

KAY: Not quite so glamorous. They work very long hours. They miss out on friendships, they don't have time to enjoy themselves.

HATTORI (voice-over): Personal sacrifices can be magnified when expectations of a stock option windfall fail to materialize. Recent Wall Street jitters forced the delay or withdrawal of a number of high-profile initial public offerings, including Real.com and KBkids.com.

NICHOLAS HALL, STARTUPFAILURES.COM: There's a tremendous toll on the human side that startups take on people, and it just didn't seem like something that was being addressed.

HATTORI: After failing at three startups, Nicholas Hall decided others could learn from his mistakes. So he created Startupfailures.com, sort of an online 12-step program that takes the shame out of failure.

HALL: Startupfailures.com, the name is easy to remember, and the purpose is to help people bounce back from startup failures.

HATTORI: The site has an active message board that doubles as a support group, and certified career coaches who respond to specific e- mail questions.

HALL: We also have a resource listing where we have a lot of links to sites to help people bounce back, for their mind, body, money, and relationships. If people maybe haven't gone out on a date in a while, we have some different sites where they can maybe find a date.

HATTORI: Hall's message is as clear as it is simple.

HALL: My advice is to keep trying, to try and try and again. For me, I want people to be able to enjoy the roller coaster ride.

HATTORI: A worthwhile ride, even for some who've been thrown from the roller coaster, like APBNews.com's Hoag Levins.

LEVINS: There has never been a more volatile market than this one. There has never been a higher level of risk to bet your career on. But there's also never been such an exciting one. This thing is just really a trip.

(END VIDEOTAPE)

PELTZ: And what a long, strange trip it's been. Two weeks ago, APBNews.com hired back fewer than two dozen employees, hoping to continue limited operations while they search for new investors.

By the way, we wondered if the odds-makers out there think our own CNndotCOM Web site will survive. When we checked with Philip Kaplan from that company whose name we can't say on television, he had reassuring news for us. Only 20 visitors have picked the site to go under.

ANNOUNCER: For more information on the dot.com downturn, check out IDG.net/dotcomdoom.

And coming up, the music industry, it'll never be the same.

(BEGIN VIDEO CLIP)

GOTTLIEB: The MP3 for the digital music genie, for lack of a better word, is out of the bottle.

(END VIDEO CLIP)

ANNOUNCER: How to make MP3 sing your tune, still ahead on CNNdotCOM.

(COMMERCIAL BREAK)

PELTZ: Welcome back.

One online grocer puts another in its shopping cart. That kicks off this week's NewsFiles.

(BEGIN VIDEOTAPE)

(voice-over): Supermarket special. In a $1.2 billion deal, WebVan has acquired HomeGrocer.com, a leading competitor in the online shop and deliver business. With the deal, WebVan is expected to be trucking through 13 major metropolitan areas by year's end.

Despite the glitzy distribution centers and the convenience of door-to-door delivery, at this point WebVan and the other online grocers bring in less than 1 percent of the country's total supermarket sales. Not to mention that when the merger was announced, both stocks dropped. Try looking for them in the bargain section in aisle 10.

I spy Microsoft. High-tech Oracle has been snooping on allies of its even bigger rival, Microsoft. Oracle, run by CEO Larry Ellison, confirmed that it hired a detective agency to find out if supposedly independent trade groups were underwritten by guess who.

LARRY ELLISON, CEO, ORACLE: We proved, we got evidence, that in fact these groups were paid for by Microsoft's legal department.

PELTZ: But the story gets even trashier. Allegedly, the gumshoes hired by Oracle offered janitors at one trade group $1,200 for a chance to go dumpster diving through the garbage, hoping to find evidence that would embarrass Bill Gates. No sale, though. And Microsoft says it might just sue.

Virtual voodoo. Ever wish you could put a cyberhex on your ex? How about getting revenge for all those endless e-mail joke lists your cousin keeps sending you. Well, Pinstruck.com can help you take care of the people on your list. With very little effort, you can customize a curse and send it off anonymously. Pinstruck doesn't claim that your victim will feel actual pain or burning, but it does supply a victim's feedback link so you can see and enjoy any damage you may have caused.

And that's this week's NewsFiles.

(END VIDEOTAPE)

ANNOUNCER: Coming up, IDG's NerdWord. This week's dollop of digital (UNINTELLIGIBLE), "shebang." It'll blow you away.

(COMMERCIAL BREAK)

PELTZ: Now, NerdWord. Get ready for the whole shebang. No, it's not the finale of a Fourth of July fireworks display. And no, it's not the women's auxiliary branch of the NRA. A shebang, for people using the Unix operating system, is a term for the pound- exclamation point characters that must begin the first line of a script or sequence of instructions. In musical notation, the pound sign is called a sharp, and an exclamation point is sometimes referred to as a bang. So "shebang" is short for "sharp bang."

And we'll be back with a bang in a moment.

(COMMERCIAL BREAK)

PELTZ: MP3, you've probably heard the term. It's a way to download music from the Internet. And you may have read about the controversy it's caused in the music industry. How the major record labels deal with MP3 is still to be decided. But if you'd like to take advantage of this technology, you've come to the right place.

Mary Kathleen Flynn spoke with Doug Gottlieb of RollingStone.com and has these Tools for using MP3.

(BEGIN VIDEOTAPE)

GOTTLIEB: MP3 is a file format. It essentially enables users to compress very large, high-quality audio files and transmit them quickly over the Internet.

MARY KATHLEEN FLYNN, CNN CORRESPONDENT: What do people need to get started? What kind of software do they need? GOTTLIEB: There are numerous free applications, so you can go to Real.com, download the Real Jukebox and the Real Player. An excellent cataloging software for MP3 files, you can download the latest version of Quicktime on a Macintosh, which is capable of playing MP3 files.

FLYNN: How is MP3 changing the way that people enjoy and share music?

GOTTLIEB: The important thing is the concept of sharing and trading and distributing music digitally without having to run to the store and buy a piece of plastic. You can buy and listen to music 24 hours a day, seven days a week.

FLYNN: Who's using MP3?

GOTTLIEB: Right now, the initial audience has been huge on college campuses. College campuses, of course, have lots of high- bandwidth connections, which make transferring MP3 files very, very quick and very, very easy.

FLYNN: How do you find MP3 files on the World Wide Web?

GOTTLIEB: Well, there are many, many legitimate sites on the Internet, RollingStone.com being one of them, where you can go and search New Music and listen to new music and because it is a reputable source, RollingStone.com, emusic, MP3.com, there are many, many very big-name, trusted brands out there.

It couldn't be simpler to download an MP3 file. You simply go to a Web site such as RollingStone.com and point your browser at a file that you'd like to listen to, click Download, and it transfers to your hard drive.

FLYNN: You have your MP3 pick of the day.

GOTTLIEB: We do. It's the RollingStone editors' MP3 pick of the day from an unsigned artist. Today's pick is a band called Lux 66.

FLYNN: Never heard of them.

GOTTLIEB: Their song is called "Showstopper." It's really, really interesting. And downloading it is as simple as one mouse click.

FLYNN: Doug, how is anybody making any money off MP3?

GOTTLIEB: Well, there are a number of ways. A number of people are selling MP3 tracks on the Internet. But I think the most common use for MP3's currently is as a promotional device. The MP3 is roughly analogous to the old 45 RPM single, if people remember (UNINTELLIGIBLE)...

FLYNN: I remember them well.

GOTTLIEB: ... singles, and it's a very economical way to distribute songs, very quick, easy, great promotional vehicle for doing that. And I think that's driving a lot of album sales.

FLYNN: But what about the recording industry? They seem to have launched a lot of lawsuits against people using MP3.

GOTTLIEB: The recording industry in general is very used to doing business one particular way, and that's shipping plastic disks around the country and controlling the complete means of distribution. Really, I think they're going about it the wrong way. The MP3 or the digital music genie, for lack of a better word, is out of the bottle, and there's -- all the litigation in the world is not going to get it back in.

Instead of looking to close down channels of distribution for digital music, the labels really should be looking to expand and facilitate the distribution of music. There's going to be a lot more digital music. People love using the Internet to get their music. And I think it's definitely the shape of things to come.

(END VIDEOTAPE)

PELTZ: It looks like the record companies are starting to come to terms with the new technology. Two of the big five record labels, Warner Music Group and BMG Entertainment, recently signed a licensing agreement with MP3.com. In fact, they gave up hundreds of millions of dollars they could legally claim based on a lawsuit they won back in April.

Instead, MP3.com will pay record companies for each track it copies, and for each time a customer listens to a song. The other three major labels are expected to join the arrangement, meaning more music for us and lots more money for them.

ANNOUNCER: Up next, addicted to e-mail? Can't stand missing a message? Have we got the perfect thing for you, when CNNdotCOM continues.

(COMMERCIAL BREAK)

PELTZ: Remember when you needed a landline telephone -- you know, the kind that plugged into the wall -- to communicate with anyone who wasn't in the same room? Well, not any more. In this wireless world, being unreachable almost has to be a deliberate choice.

Here with the latest in instant access is Rick Lockridge and this week's TechnoFile.

(BEGIN VIDEOTAPE)

RICK LOCKRIDGE, CNN CORRESPONDENT: Ask any technophile which gadget in their collection they would never want to part with. Would they say, A, cell phone, B, MP3 player, C, palmtop organizer, or D, e- mail pager?

No, you can't use a lifeline. That's that other show. Don't be surprised if a lot of gadget lovers answer D, e-mail pager. Hey, if you don't have one of these yet, you'll have something like it soon. It's where the Internet is going, wireless handheld devices. And I don't mean cell phones. Have you ever tried to type an e-mail on a cell phone?

I'm talking about devices small enough to wear on your belt, like these two. The Rim Blackberry pager is the established leader in this arena. If you sign up with a topnotch wireless Internet service provider like GoAmerica.net, you can use the Rim to send and receive e-mails almost anywhere in the U.S. That's an amazing improvement over the coverage you could get just a couple years ago.

This Rim has two megs of onboard memory, enough to store a lot of old messages and a big contact list.

The thumb wheel is a nice touch, and while you have to type with your thumbs too, hey, if you're all thumbs anyway, like me, it's a bonus.

As for Web access, it's pretty much wherever you want to go. Let's check out ESPN.com. You see that GoAmerica strips out the graphics so you only get text, but with a screen this size, hey, that's the way it's got to be.

But Talkabout 900 by Motorola is the upstart newcomer. It's not as bulky as the Rim. You won't feel like a geek wearing it. And yet it still has a four-line, 80-character display. There's a flip top to keep the screen clean, a choice of 13 alerts, including Vibrate. Other than that, it has a lot in common with the Rim.

So for about $200 plus a monthly fee that varies according to how much Web access you want, you can holster one of these babies, let your fingers do the talking, and before long you'll be wowing your friends with your remarkably agile thumbs.

That's TechnoFile.

(END VIDEOTAPE)

PELTZ: And we'll check our pagers for your e-mail comments. You can reach us at thedot@cnn.com. And for the latest in tech news, log onto cnn.com/tech.

That's it for this week. Thanks so much for watching. For all of us here at THE DOT, I'm Perri Peltz. We hope to see you again next week.

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