Joint Effort Takes Spin at On-Site CDs : Music: Blockbuster Entertainment Corp. and IBM are hooking up to create technology that would give record stores the ability to make discs at customers’ request.

Blockbuster Entertainment Corp. and IBM are teaming to create technology that would give record stores the ability to make audio compact discs for customers on demand.

For consumers, the new system would mean nearly instant access to CDs that might otherwise be out of stock. Retailers would gain sales and save on inventory costs, and record companies would no longer have to make thousands of copies of a recording and ship them to stores.

CDs could be produced in a matter of minutes, the companies said, and eventually the technology could also extend to the production and sale of computer software, videos and video games.

But the new venture--to be operated through NewLeaf Entertainment Corp., a Blockbuster subsidiary--has yet to come to agreement with any of the recording labels that would need to supply the databases from which the CDs would be downloaded.

Music industry executives said a number of their concerns will have to be resolved first, including making sure the system has adequate safeguards against piracy. In addition, they said, retailers must be able to take orders and make the compact discs quickly so customers won’t have to wait long.

Industry analysts said the main advantage of the technology would lie in making older and more obscure musical selections instantly available. As things stand now, the latest Guns N’ Roses hit is easy to obtain unless it’s sold out, but customers might have to special-order some limited-release version of the collected works of Palestrina. CDs on demand could make both available all the time.

The technology is still in the laboratory stage, and analysts caution that it may never catch on, at least in its current form. The NewLeaf venture is just one of several avenues both companies are pursuing as they scramble to ensure a role for themselves in the rapidly growing multimedia market.

“IBM is cutting every deal under the sun for the delivery of digital information,” said Bruce Ryon, a multimedia analyst at Dataquest, a market research firm in San Jose. “I have to believe only a few of them are going to pan out, and I think this one is one of the more far-fetched.”

The market for multimedia, meaning technology that combines text, graphics, video and sound, is expected to grow to about $9 billion by 1996 from $1.9 billion in 1992, according to Dataquest.

At the same time, pay-per-view and an explosion in the number of TV channels threaten to eclipse Blockbuster’s core video rental business. The Ft. Lauderdale, Fla.-based company has been aggressively expanding into other entertainment ventures such as music sales, and plans mega-stores that would market videos, music and computer software.

Blockbuster has about 3,170 video stores in 48 states and nine foreign countries, two thirds of which are company-owned. The company also has 237 Sound Warehouse and Music+ stores operating in 40 cities.