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Sony last week unveiled a new line of high-end audio products that promised to deliver a better online listening experience. That comes amid growing evidence that music fans are tired of the poor quality of the sound that they get on their portable music players. Case in point: the successful business of a recording engineer, Cookie Marenco. She sells super high-definition music downloads. NPR's Laura Sydell has this report.

COOKIE MARENCO: Want to come around the front?

LAURA SYDELL, BYLINE: Cookie Marenco, a sturdy-looking, energetic woman, stands in front of a room of almost entirely men at the California Audio Show just outside of San Francisco.

MARENCO: So, today, we have a special event: live Recording Direct to DSD.

SYDELL: DSD: That stands for Direct Stream Digital. It's really high-resolution audio. That means that it's much closer to the experience of hearing a musician right in front of you than a traditional CD, and it's definitely better than what you're hearing on your iPhone. Marenco has invited guitarist Gregory James and violinist Emily Palen to play for the crowd.

(SOUNDBITE OF MUSIC)

SYDELL: Marenco then plays back her recording almost immediately.

(SOUNDBITE OF MUSIC)

SYDELL: Sorry you can't judge for yourself, because, frankly, what's coming out of your radio is compressed audio for broadcast. But for audiophiles, there is a big difference.

JAMES FORTE: All you have to do is hear it, and you can get hooked pretty quickly.

SYDELL: James Forte from San Francisco first discovered Marenco and her DSD recordings three years ago at the California show. The DSD format has been around since the late 1960s. It's only been used commercially on Super Audio CDs for 13 years. But around that same time, an entirely new way of selling music on the Internet was born.

(SOUNDBITE OF SONG, "ELECTRIC BARBARELLA")

DURAN DURAN: (Singing) I knew when I first saw you on the showroom floor. You were made for me.

SYDELL: In 1997, "Electric Barbarella" by Duran Duran was the first single to be purchased online. At the time, Cookie Marenco was working for one of the first companies to offer commercial music downloads: Liquid Audio.

MARENCO: My artist and label friends looked at me like I was talking about things in a crystal ball. Music on the Internet? Are you crazy? How is that even possible?

SYDELL: It's not only possible, Marenco's built a successful business offering high-quality audio online. More on that later. Now, back to the bad-old days. Marenco and Liquid Audio were offering compressed audio downloads in formats like MP3 and AAC, which is what iTunes uses now. Even though she's a musician herself and could hear the difference, she thought MP3s could change the industry in a way that helped artists, even though the quality was low.

MARENCO: I thought that this was going to be a great way for an independent artist to compete on their own. And what it turned out to be was technology companies taking over the music business, and technology companies who don't necessarily care much about what happens to music and the musicians. I don't think anybody expected MP3 to take over and completely demolish the record industry.

SYDELL: MP3s were lower quality audio because they had to be. MP3 files were small, and so they could move quickly over a slow speed Internet connection. Marenco now says she feels guilty for helping to make MP3s popular. Marenco had her own recording studio, but at the same time, it was getting easier for musicians to use computers to record at home, and people weren't expecting the same quality anymore. It hurt her business and those of her friends.

MARENCO: Pretty soon, nobody was going into the studios. And then musicians are thinking, well, I can record in my own bedroom.

SYDELL: Marenco decided to take a break from the business. One day, she invited a dozen engineers and artists to do a blind test of three different audio formats: Analog tape recording, high resolution digital - better than CD - and DSD. She used this recording.

(SOUNDBITE OF MUSIC)

MARENCO: Tape was still everyone's choice in a blindfold test, but to everybody's consensus in that room that day, we discovered that DSD was the closest thing to tape.

(SOUNDBITE OF MUSIC)

SYDELL: Marenco waited another five years before she started her own label, Blue Coast Records. And she sold Super Audio CDs that she had mastered to DSD in her own studio. Marenco knew her timing was rotten, and the industry was in decline.

MARENCO: High quality audio in 2007 to musicians was a very foreign concept. Everybody had gotten so used to MP3s and so emotionally disillusioned by what had happened to the music that the musicians I knew had just kind of given up.

SYDELL: Today, Marenco's back at work as an engineer in a studio she built in her home.

MARENCO: You guys ready? OK. We're rolling.

SYDELL: Marenco's got four musicians here. They don't wear headphones, because she prefers they actually play together as they would if they were on stage, part of her adherence to authentic, quality sound.

(SOUNDBITE OF SONG)

UNIDENTIFIED MAN: (Singing) Got them sad eyes staring out from torn screen door, babies crawling around on an unswept floor...

SYDELL: About three years ago, as people got faster Internet connections and bigger hard drives, Marenco decided to make her DSD music files available for download. At the same time, her regular customers could only play DSD on one device, a Sony PlayStation 3. And she charged five bucks a song, $50 an album. Sure doesn't sound like a formula for success.

MARENCO: And we were shocked. Thousands of people came to download. What was interesting to me as a business owner was they never asked us to lower the price. They asked for more content.

SYDELL: Since then, she's gone from a customer base of hundreds of people to thousands around the world, and she did it with a roster of largely unknown artists. This year, she says she started making more money from her online music sales than she does from her work as a recording engineer. Marenco was one of the first to offer DSD as paid downloads. Now, Mark Waldrep says more are ready to follow. Waldrep is an audio engineer who sits on the board of the audio division of the Consumer Electronics Association.

MARK WALDREP: We now have the tools, techniques and delivery chain to give people a real life experience, if we chose, and the record labels chose to actually embrace that greater potential.

SYDELL: Music fans are ready, according to a study done by the Consumer Electronics Association in 2011. It found 90 percent of consumers say sound quality is the most important part of a listening experience. And the industry may finally be ready to give it to them. Musician Neil Young is endorsing a new high resolution player called Pono that will launch next year with the backing of Warner Music Group. And Sony's new line of audio equipment will let consumers play back a variety of high resolution formats, including DSD. The Consumer Electronics Association says there's more to come. It's still expensive, but Cookie Marenco looks at the world of coffee.

MARENCO: Starbucks created a model of better quality should cost more. They've managed to turn a certain percentage of those coffee drinkers into coffee connoisseurs.

SYDELL: Marenco believes that same potential is there for music lovers who are willing to pay more for their no-foam audio latte. Laura Sydell, NPR News, San Francisco.

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