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One Company's story illustrates how music-industry giants are retooling in an attempt to survive the digital future.

by Karen Lowry Miller

The battle for digital control    (I)    in the movie business, but    (II)    virtually over in music. The giants are winning. Court rulings have forced free music upstarts like Grokster and Napster out of business, and earlier this month required Kazaa, the producer of file-sharing technology, to introduce filters to prevent piracy. The idea that free music would gut the big record companies seems a distant memory, even though it was still the conventional wisdom just a year ago. "We're finally seeing a raft of new initiatives from really big players", says Eric Nicoli, chairman of one of the big four music companies, the EMI Group. "This stuff is happening all day, every day now".

Just consider the last month: Apple and Motorola unveiled a phone that can play music from iTunes, and announced partnerships with big U.S. and British phone companies to develop the mobile music market. In London, two giant retailers, HMV and Virgin, announced digital music ventures, a sign that the online sector is reaching mass-market size. The big labels have arrested a four-year, 25 percent plunge in sales and can now concentrate on exploring new business models to navigate the digital landscape. Nicoli has the buoyant air of a man who has just survived a close scrape with death. In a recent series of interviews, he and other top execs at EMI offered a detailed glimpse at the recent tumult, and where EMI – and their industry – is likely to go from here.

(Adapted from Newsweek.)

The words and verb forms which properly fill in blanks I and II in the text are:

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