PlayJ has found one solution to "the Napster problem" -- advertising.

AS THE BATTLE OVER ONLINE MUSIC comes to a boil, a slew of companies has sprung up claiming to have the answer to "the Napster problem" -- the trouble that arises when a file-swapping service ignores copyright concerns. The question is how to go about solving that problem.

New York-based software company EverAd is championing PlayJ, its proprietary music format that embeds advertisements in each file -- the latest business model to hit online music. Dubbed "feels free," it works like this: Instead of charging consumers for music downloads, PlayJ formats its songs to launch a half-size banner window automatically on the listener's desktop; that window showcases a rotating series of ads for as long as the music plays. (The company encrypts PlayJ files to prevent them from being burned onto a CD or copied to a portable player.) Ad revenues are split evenly between EverAd, the record label and the Web site affiliate that distributes the download.

EverAd's solution does not end with music. The company has launched similar products for software and games, and plans to get into the e-books market within a month.

While the feels-free model is gaining steam, it faces a host of challenges, both practical and philosophical. Meanwhile, more established players like MP3.com and EMusic.com are touting "all you can eat" subscription offerings as the wave of the future. A smattering of other models -- like incentive programs, virtual tip jars and limited-time promotions -- is also finding supporters.

PlayJ, meanwhile, is busy building its business. EverAd CEO Angela Pumo says there have been nearly 2 million downloads of either the PlayJ player or plug-in, which works with most major MP3 players, including RealPlayer, Windows Media Player, Winamp and Sonique. The company has struck partnerships with music sites such as Listen.com and Launch.com to promote and distribute PlayJ files. And the content deals are rolling in. In addition to dozens of lesser-known indie labels, EverAd's PlayJ division last week announced it would distribute music from Artemis Records, the label run by former Mercury Records CEO Danny Goldberg and home to such artists as Rickie Lee Jones, Steve Earl and Kittie. Also last week, hip-hop frontman Wyclef Jean released an exclusive single in the PlayJ format, with a portion of revenues going to charity.