LONDON, England (CNN) -- Four years ago, former Genesis frontman Peter Gabriel co-founded UK online music distributor On Demand Distribution (OD2). It was sold to U.S. company Loudeye in June for $38.6m (£21.1m).

The new company offers everything from 30-second snippets of songs to anti-piracy measures for music labels.

OD2 has long been viewed as Europe's primary digital download provider for music but it has found it increasingly difficult to retain that title as big players, including Sony, Apple and the now legal Napster, join the market.

Here, CNN's Becky Anderson talks to Gabriel about OD2 and the future of digital music downloading.

Anderson: What motivated you, a successful, musician and artist in your own right, to get involved in the business of digital distribution of music?

Gabriel: A number of reasons. I thought it was a good opportunity. I think it's very important for artists to get involved in the distribution. A new world is being created -- one is dying -- and if artists don't get involved, they're going to get screwed, like they usually do. My father pioneered this sort of digital content of electronic content in the 70s with a thing called "Dial-a-Program" and that was trying to provide entertainment-on-demand, education [and] all sorts of things that are now part of our everyday lives. And so I'd grown up with the idea that everything should be available on tap to everybody, so that was an interest for me. When we were working on this idea of an "experience park," sort of involving artists and scientists, we met a guy called Charles Grimsdale. [He] was running a company in Bristol, which was doing virtual reality, and that's how our connection originally happened. He approached me and said: 'I've been thinking about looking at music, do you think this is interesting?' And then we got involved and started it up and that was [in] about 1999, I think.

Anderson: There was a difference in what OD2 set out to be and what it eventually became, wasn't there?

Gabriel: It set out to provide -- and it still does -- a largely behind-the-scenes operation. So, you see it front other retailers -- whether it's Virgin, or Wannadoo, MSN or Tiscali -- and we basically provide the digital back-end and sort out all the payments afterwards. We were originally thinking we were going to do this for the independent record labels because the majors [record companies] had all these big announcements and big plans -- most of which died a death, fortunately for us -- so we gradually ended up working with all of the majors in Europe. It's very complicated, as I think some of the American big boys who are coming in now, are beginning to find. Each country has its own set of rules, its own sort of collection society for publishing, and so on. It wasn't that easy to get going, but once we were established, I think more and more people thought what we were trying to offer made sense.

Anderson: What influence has i-Tunes had how does what i-Tunes does, differ from OD2, and ultimately, Loudeye.

Gabriel: Since this sort of merger with Loudeye, Apple are now our clients instead of [our] competition. Really, I've been an Apple fan for many years. What [Apple CEO] Steve Jobs has also been brilliant at is marketing, [so] now maybe there's an extra zero here and there, but it does actually deliver. And the style in which they do things as a retailer here and as a producer of hardware, I think is excellent. You know, they've always had great design, great looks. They've successfully made the iPod into the product every young person or music fan wants to have. It's been a tremendous boost, I think, for the digital music world and I'm very pleased for that.

Anderson: The Internet has transformed the way we buy and listen to music; the digital revolution has an opportunity to transform the way that music is physically made, doesn't it? It's always been the big guys running this industry so is this an opportunity for musicians to come to the fore at this point?

Gabriel: Well, I really hope so, and there is an initiative that I began with [musician and producer] Brian Eno, called Mudda, which is a magnificent union of digitally downloading artists, and unlike OD2 -- which was always set out to be a commercial venture -- this is a more idealistic venture, which would be owned by artists for artists. So, there would be no business people or investors you [would] have to satisfy, but we need some initial capital, so we're working on that at the moment. But the theory then is that artists could become their own distributors, almost certainly with their record companies, but they can deliver stuff independently if they want. It's not really trying to set up something in opposition to the record companies, but for instance, on some deals now, an artist on a download of an album, or sorry a track, would see maybe only eight pence a track, which is much less if they would see in a physical sale. What I'm afraid of, personally, is that the business will, every time there is a technological breakthrough, the business thinks: "Ah, here we have another chance to claw a big chunk of the cake back for the business and away from the artist." And I think it's really important that artists act together -- which we are notoriously bad at doing -- and I hope that this union idea may get some blood behind it, and we will be able to become our own retailers in part.

Anderson: But you're not suggesting that record labels are going to get written out of the game, surely?

Gabriel: Well you see, I think that a lot of artists aren't very good when it comes to marketing or accounts or doing a lot of the jobs that record companies do, so we're going to want somebody to do that. And probably the people we will look to do it are probably those who have the experience. But what I fundamentally believe is that the relationship should be a partnership. It shouldn't be "we own you therefore we do what we want with your work." Those days should be gone, and if artists aren't smart enough to get off their arses and change that now, then we deserve what we get, because we have the opportunity [to change that]. It's quite hard talking to artists sometimes to get them motivated because there is not a lot of money in it at this point. But I think there will be and it's more sort of a power balance and I just think people in record companies now are a lot more willing to consider power-sharing deals.

Anderson: Do musicians then become retailers themselves?

Gabriel: Well, I think you'll have options. I think for your specific group of hardcore fans, you'll be able to sell them all sorts of things, as some artists are already doing. For the groups that I love, I would love to hear the whole creative process -- not just a piece of product that someone in a record company has decided is the only thing I should hear. I want to hear them scratching away trying to write the songs, failing to get the mixes and arrangements right, doing things in different ways, hearing different live versions, acoustic versions -- whatever it is. That whole process should be something that is available, where artists are comfortable opening it up to the public. You know, I feel fine about that and that sort of thing artists should be able to sell directly to their audience, you know once they've produced a piece of product as the business would call it, then it should go through all the normal commercial channels and all the normal retailers and there may be some special collaborations that people can do with different retailers because they have some marketing experience, they have some of their own music lovers that they will get to, that you won't. So, I think we all need each other in some way I'd like it to be a level playing field.

Anderson: I suggested that you have been a pioneer in the digital revolution as far as the music industry is concerned, what is the future?

Gabriel: The future should be [that] you can get anything, anytime, from wherever you are, anywhere, and whoever you are, whatever country, whatever language you speak. And then the question that is fundamental to me that follows that as day follows night, is how do I actually filter the stuff, how do I really get to the stuff that means something to me? And that you can only do with an intelligent filter systems, and we were beginning to look at that with OD2 and I'm sure we'll continue. It's something that interests me a lot because you have limited time, and you don't want, like with e-mail, you don't want all of the junk, you just want the bits that have some meaning for you.

Anderson: Are you convinced that the Internet and digital platforms will be accessible and successful as a platform for small independent labels and indeed small independent artists going forward, as they will be for the big boys?

Gabriel: That's always the question. There are deals being done now where the independents are going to get screwed again, I think. Where they're told they're on a level playing field but actually the big boys are. And again, I think it's only by staying together, and consolidating as a lump, that has some leverage and some power, that the little guy can have a chance to compete. The great thing about the economics of the digital world is that it's much cheaper to do everything and to reach people.

Wow. That is very cool coming from Peter Gabriel. I have always respected his work. And, not to pat ourself on the back or anything, but it seems that all of us in the NFO seem to be years, if not decades, ahead of our time!

Thanks for sharing this, Frank!

Peace,
JD