By Jamey Keaten, Associated Press

CANNES, France — It`s a bit disorienting: Slip on a set of headphones, turn up the volume and, while you move about the room, the music stays put — as if coming out of five speakers stuck on a wall.

Software engineers in Germany who developed the widely used MP3 audio file format have taken the technology to a higher level with a next-generation format that delivers cinema-like multichannel audio.

The headsets dazzled attendees at the Midem music conference in this French Riviera town, where goateed singers, sharply dressed executives and software designers in tennis shoes have been meeting this week to map out how music reaches ears in the future.

Tech gizmos are but a small part of the conference, now in its 39th year and typically devoted to the tough negotiations that go into record deals.

But technology is an increasing part of the business, especially as consumers show an unquenchable appetite for on-demand and on-the-go music.

The cutting-edge, but disorienting, Surround-sound headphones won`t be commercially available for some time. But music fans can hear the new MP3 Surround technology, developed by Germany`s Fraunhofer Institute, on personal computers provided they have special 5.1-channel sound cards and multiple speakers.

A free test version of the software, which encodes and plays audio in the new multi-channel format, is available for download.

The MP3 Surround Evaluation Software 1.0 is backwards compatible, so it will also play the regular stereo MP3 files already sitting on tens of millions of computers worldwide.

``We simulate a virtual room so that you get the impression of listening to Surround sound even if you have only stereo headphones,`` said Fraunhofer`s Oliver Baum.

Among other high-tech offerings, China`s Zhejiang Huahong Optronics Group showed off a flash-memory portable video player tentatively called the MTV Player, which is to go on sale in China in March — though no export date has been set. The palm-sized gadget has 2 gigabytes of storage space and could be just the thing for consumers willing to see dazzling dancers on a 2-inch screen.

Music videos are just the start.

``The plan is for people to download movies from their computers or from the Web,`` said company president Wang Yuan Long.

China was making its first big splash at the conference this year, hoping to strike deals for Western music that young Chinese crave and assuage concerns that Beijing has not done enough against the black market in pirated CDs.

The undercurrent of the six-day show, which kicked off with a concert featuring big-name stars including Anastacia and Jennifer Lopez, has been the rebounding fortunes of recording companies.

After a four-year slump, global sales of recorded music increased last year largely through the success of fee-charging online services and the expansion of portable music devices like Apple Computer Inc.`s iPod.

Now, music industry honchos hope gadget makers, software powerhouses like Microsoft and cell phone companies will help deliver tunes to a fee-paying public.

Perhaps the biggest debate is how listeners will receive their music. With digitized music increasingly delivered through the Internet or mobile phone, the CD could one day go the way of the 8-track.

Apple`s a-la-carte offering through its popular iTunes portal lets users pay to download songs to their iPods — but only iPods, not competing MP3 players.

Microsoft is fighting back with its PlaysForSure certification program, which helps consumers quickly recognize that a particular portable player supports files encoded in its Windows Media format.

When it comes to on-the-go music gadgetry, mobile phone companies like Vodafone Group PLC, Orange PLC, T-Mobile. in Europe or Verizon Communications, Cingular Wireless and Sprint in the United States could also become serious players.

Mobile operators offer downloads of songs directly into handsets, though the fees have typically been higher than the per-track prices for portable music players such as the iPod.

Motorola will soon let people play on its cell phones the songs they buy through Apple`s iTunes Music Store. Music fans in Japan already enjoy an over-the-cellular-network service offered by KDDI.

Online music distributor Napster, meantime, is pushing a new subscription service that will offer music lovers unlimited access to a catalog of 1 million songs transferrable to portable players — until their subscriptions lapse, that is. The songs are ``rented,`` encoded with Microsoft copy-protection software.

Whatever strategy ultimately becomes dominant, the competition to deliver show tunes, jazz riffs, operatic arias or hip-hip rhymes to the music lover continues to inject hope into the embattled music business.

As Napster president Brad Duea said, ``We have to encourage people to listen more.``