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"In case the music industry starts to go like gangbusters, we won't look like schmucks for selling." -- Dick Parsons, CEO of Time Warner, on his option to buy back a piece of Warner Music Group When J.P. Morgan Chase (JPM) announced in July that it would buy underwater stock options from Microsoft (MSFT) employees, the rest of Wall Street started salivating. Investment bankers fell over themselves to pitch the idea to corporate clients, arguing that it would lift morale by letting workers sell their worthless options and boost company balance sheets by reducing options' costs.

Investment bankers have yet to find other takers. Potential clients are turned off by laws restricting such third-party option transfers and the need for the IRS and the SEC to O.K. any deal. "Just because we pitch [these deals] doesn't mean they catch on," admits one banker. Microsoft says it's pleased that 51% of its eligible employees agreed to participate in the program.

J.P. Morgan has earned $10 million in fees on the deal. But it will pay out $382 million for the options. The bank won't wait for the options to come into the money. It will use them to manage volatility in Microsoft stock and to offset its own Microsoft holdings. How well it does that will dictate profits and won't be clear until the last option expires in 2006. "This is going to be three years of managing our risk," says Carlos Hernandez, Morgan's head of North American equities. No wonder the field is wide open. Coming soon: TiVo-like features for your radio. On Jan. 7, Panasonic and Kenwood will unveil the first car radios that can receive digital signals from local stations. The $600 to $900 radios are aimed initially at audiophiles, but analysts say that within two years they will sell in the $200 range.

By then, 1,500 of the nation's 13,000 AM and FM stations will offer crystal-clear digital broadcasts, says market researcher In-Stat/MDR. Listeners will get TiVo-like recording capabilities that let them skip ads, customize traffic reports, and shop interactively with advertisers at the click of a button.

The technology could help AM stations to return to playing music. It's mostly talk shows now because of poor sound quality. But with hi-fi digital broadcasts, AM stations can offer opera or jazz -- challenging satellite radio's niche formats. "As local radio adds the things that satellite offers, it could cap the adoption of satellite," says UBS Warburg analyst Tim Wallace.

Satellite radio has 1.2 million subscribers, a sliver of the market. The radio costs about $200 on top of $9.95 a month for 100 nearly ad-free channels. But local stations are free, which could give digital radio a wide-open lane. Consider this: There are 200 million cars on the road, with 98% of their drivers tuned to the radio. The Internet's not just for underdogs anymore. Increasingly, corporations are using the Web to mobilize support for their causes. Big companies are launching sites to lobby legislators, win support for takeovers, and turn up the heat on partners.

When cable giant Cox Communications wanted to pressure ESPN and Fox Sports Networks to lower their programming charges, it launched Cox claims the site's visitors sent 25,000 angry e-mails to the networks. Brewers and beer distributors, meanwhile, lobby for lower taxes through And Kmart briefly operated to bolster morale during its bankruptcy. "You're seeing a lot of companies launching issue-specific mini-sites," says Gregory Neichin, vice-president at GetActive Software, which writes programs for Web campaigns.

Companies typically publicize the sites through newspaper and TV ads and banner ads at other Web sites. Auto makers launched to defeat laws allowing companies to be held liable for damages caused by drivers in leased cars. By buying banner ads at local newspaper sites in Rhode Island, Connecticut, and New York, auto makers generated over 18,000 e-mails to legislators in those states. Connecticut and Rhode Island outlawed the suits this summer, and a New York law is being debated.

Web campaigns have become so successful at generating letters that site designers are now taking steps to force e-mail writers to make their correspondence more personal. Some sites no longer include automatic subject headings for e-mails, so authors must think up their own headings. "It has to be a personalized message," says Lisa Meltz, a senior account supervisor in Hill & Knowlton's Internet group. "It can't look like a mass campaign." Suddenly, writing a letter doesn't seem so old-fashioned. Advertising can be in-your-face. But on your face? A Providence-based company pays collegians up to $150 to wear temporary logo tattoos on their foreheads for a week. Headvertise is the brainchild of Justin Kapust, a senior at Johnson and Wales University in Providence, and Nathan Allen, a former classmate. The pair have eight clients, all seeking recognition in the coveted 18-to-24 crowd. Thus far, 64 students have worn the decals, which cost companies about $600 for the use of five heads for one week. If the concept is a hit, maybe they'll recruit the over-50 crowd -- receding hairlines could mean more ad space. War, epidemics, scandals -- and that was just the first six months. Take our annual quiz to see how much you remember about the year in business news. Sorry, despite an improving economy, there's still no prize.

1. SARS was blamed for all of the following except:

a. The deaths of at least 774 people

b. A $1 billion hit to Toronto's economy

c. A delay in the Miss World pageant in China's Hainan Province

d. A 41% decline in Hong Kong's tourism business

2. How did the Dow Jones industrial average react in the week leading up to war in Iraq?

a. Lost 9%

b. Lost 4%

c. Stayed flat

d. Gained 4%

e. Gained 9%

3. Which is true of the auto business?

a. Ford's European operations keep it afloat

b. GM's profits come largely from its finance division

c. DaimlerChrysler is betting on hybrid technology for its 2004 models

d. Toyota sells more U. S. cars than Ford or Chrysler

4. The Federal Reserve lowered its short-term interest-rate target to what record low in June?

a. 0.75%

b. 1%

c. 1.25%

d. 1.5%

5. Which company added a "chief ethics officer" in 2003?

a. Boeing

b. Enron

c. HealthSouth

d. MCI

e. Tyco

6. Which is not a provision of the Medicare reform bill?

a. The right to buy drugs from Canada

b. A free physical at age 65

c. A $250 deductible for drug costs after 2006

d. A free drug card for some low-income seniors

7. Which of these channels will not be part of NBC after it completes the acquisition of Vivendi's TV and movie assets?

a. The Bravo Network

b. Telemundo

c. USA Network

d. Sci-Fi Channel

e. Comedy Central

8. How much cumulative prison time has been doled out to executives implicated in the Enron scandal?

a. None

c. 20 years

b. 5 years

d. 50 years

9. Bank of America got $20 million worth of publicity after who played in a golf tournament it sponsored?

a. Tiger Woods

b. George W. Bush

c. Annika Sorenstam

d. Bill Gates

10. After several delays, the National Do Not Call Registry finally went into effect on Oct. 9. Who can still make unsolicited calls?

a. Your bank

b. Charities

c. Pollsters

d. Political organizations

e. All of the above

11. The U.S. dollar did NOT fall to multiyear lows against which currency?

a. The euro

b. The Canadian dollar

c. The Japanese yen

d. The Chinese yuan

e. The British pound

12. Which company generated the biggest savings from outsourcing tech services and research to India?

a. Citibank

b. American Express

c. Infosys

d. General Electric

13. Which European nation had the largest GDP growth -- 2.4% -- in the third quarter of 2003?

a. Spain

b. Italy

c. Britain

d. France

14. Which hedge fund was the first to be charged by New York Attorney General Eliot Spitzer for late trading and market timing?

a. Canary Capital

b. Birdseed Partners

c. Hartz Financial

d. Millennium Partners

15. Which technology company scrapped its stock option plan and will now pay employees with stock?

a. Microsoft

b. Cisco

c. Intel

d. IBM

16. What was done to the U.S. tax code in 2003?

a. The estate tax was repealed

b. The excise tax on fishing tackle boxes was repealed

c. Dividend taxes were eliminated for certain taxpayers

d. Non-itemizers were allowed to deduct gifts to charities

17. According to Apple, what was the 25 millionth song legally downloaded from its iTunes online music store?

a. Say Goodbye Hollywood by Eminem

b. Let it Snow! Let it Snow! Let it Snow! by Frank Sinatra

c. Revolution by The Beatles

d. The Times They Are A-Changin' by Bob Dylan

18. In 2003, Hollywood made the most money by selling what product?

a. Movie tickets

b. Videocassettes

c. Merchandise

d. DVDs

ANSWER KEY: 1-c; 2-e; 3-b; 4-b; 5-d; 6-a; 7-e; 8-b; 9-c; 10-e; 11-d; 12-d; 13-a; 14-a; 15-a; 16-c; 17-b; 18-d

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