Corporate leaders on a panel at the World Economic Forum – including major companies thatown the copyrights to music being shared for free on the Internet – documented the growth of thephenomenon. The head of Sony said it represented a “danger” to legitimate companies.

The forum, an annual six-day meeting of about 3,000 company, government and cultural leaders,turned to business issues following a weekend that focused on peace prospects in the Balkans,Middle East and Africa.

“In the past year there’s been an explosion in real-time communication,” such as the exchange ofmusic over the Internet fostered by Napster Inc., said Gates, the co-founder and chairman ofMicrosoft.

Napster allows people to share music without paying copyright fees, a development that terrifiesmany industry chiefs. Under the same principle, people could share videos, movies and evenbooks in digital form.

“The Internet is a kind of power shift,” said Nobuyuki Idei, chief executive of Sony, which hasextensive music copyright holdings. “Now the consumer has more power than the company.”

Jean-Marie Messier, head of Vivendi, which last June acquired the Universal movie and musicstudios, said Napster’s key to success was “community and free access.”

Thomas Middelhoff, head of Bertelsmann AG, which has been working with Napster to assurepayments to artists, said the Internet upstart already has 56 million clients, with 1.6 millionexchanging digital music at any time. Napster expects further growth to be rapid, he said.

Gates said young people are not just using the Internet to “chat” by punching their keyboards,but were actually talking through their PCs with telephone devices.

The flexibility of the PC made possible the Napster phenomenon of “peer to peer”communication, he said.

The necessary software for Napster came from a previously unknown developer, and it could beused because of the widespread availability and flexibility of the PC, Gates said.