The Big Four record labels - EMI, Sony BMG, Universal and Warner Music - have embraced digital music but continue to search for the best business model, reports Business Week.

Increasingly, the Big Four are looking to mobile phones as a sales channel. Ringtones accounted for 40 percent of their digital music revenue last year. Fueling this was a rash of new music services launched by cellphone companies worldwide in 2006.

Mobile music is expected to become a $1 billion business in Asia by 2010, driven largely by ringtones instead of full-track downloads. A hurdle facing the record industry is selling music licenses to companies such as mobile operators that are new to a process that carries a high learning curve. It took Motorola a year to get the rights for its 10,000-song library on MotoMusic.com.

As for the DRM debate, the record industry still struggles for a solution that leaves consumers happy while curbing piracy. The solution may be value-adding to digital music - whether it be album art, music content, or creating community features.