THE WAR is on.

On one side is the record industry. On the other are the blank-tape manufacturers and countless millions of Americans who are making their own tapes of albums, radio programs and concerts.

Caught in the crossfire is the consumer, who may end up paying for the lost revenue. No one is certain how much home taping costs the record industry in unpaid royalties and unsold albums, but one recent study hints at a 15-percent figure -- which translates to $550 million to $600 million a year in the United States alone.

Not surprisingly, the record industry is attacking on several fronts. Elektra Asylum president Joe Smith, in a recent letter to the indsutry, called home taping of music "the most dangerous threat thus far to our well-being." In particular, he cited the practice of taping albums played without commercial interruption over the radio.

Warner Communications Inc., E/A's parent company, is contemplating a cash award to anyone developing a spoiler signal to prevent off-the-air taping. c"Whoever invents that one will make a million," says one blank-tape executive. "

In May of this year, Polygram, one of the world's largest record conglomerates, informed retailers that it "will not pay for any advertisement which includes blank recording tape on the same page or in the same radio or television copy." Arista Records joined in last week, and other companies are expected to follow along.

The 500-member National Association of Recording Merchandisers recently passed a resolution asking the record companies to improve the packing and promotion of prerecorded tapes, which along with blank tapes account for 40 percent of their business.

The widespread practice of home taping -- now considered unstoppable -- is a recent phenomenon. In 1977, a billion cassettes were sold worldwide. No one complained about home taping, and in 1978 the record industry had its best year ever, going over the $4-billion mark in the sale of albums and prerecorded tapes. But in 1979, with unit prices up 6 percent, unit sales dropped 6 to 10 percent in the industry. Record company executives started looking for scapegoats. Home taping started to becme an issue.

Last year, sales of blank tapes reached an all-time high volume -- more than a quarter of a billion units in the United States alone -- as retailers turned to tapes and accessories to bolster sagging profits from a soft year in record sales.

"We realize that people initially start home taping because of price, the quality of prerecorded product and its availability, and the lack of substantial advertising for tape configurations," says Joe Cohen, NARM's executive vice president. "What is most frightening is that very soon it becomes a hobby and the consumer starts to take pride in his creation of greatest hits tpaes or the quality of his taping. And after it becomes a hobby, it becomes a habit."

Both the hobby and the habit have been fueled by the incredibly rapid expansion of tape technology. An average home taping system can provide a tape of higher quality than prerecorded tapes sold by most record companies.

And this year the number of car and portable playback systems will finally outstrip the number of home playback units, though both will reach record high sales. Cassettes, which have replaced the bulkier 8-track as the favoirte medium, represent one of the fastest-growing aspects of the music business.

A recent Billboard survey of five major chains representing 350 outlets uncovered sales increases of between 30 and 400 percent over the last two years for blank tapes. Much of that has resulted from heavy consumer print advertisting. (The latest Rolling Sone magazine has 6 1/2 pages of ads for blank tapes, the same basic ratio applies to advertising the playback systems for records and tapes).

"There's a growing awareness of the quantities of blank tape that are being sold," states Stanley M. Gortikov, preisdent of the Reocrding Industry Association of America, a 53-company trade group whose members account for 90 percent of all reocrd and prerecorded tape sales. Getting to the Source

Just how much taping is actually being done is the subject of two recent studies sponsored by the industry and the government. A study by the federal government's Copyright Royalty Trubunal reported that 20 percent of the population aged 10 or older have personally taped in the past 12 months and that the 10-17 and 18-29 age brackets each represent about a third of home tapers.

What the study also showed, and what the blank-tape manufacturers hasten to point out, is that "the largest single source of their recordings was their own record and tape collections" -- 37 percent of the total. The next-largest source was radio programs (30 percent) with borrowed records and tapes accounting for 24 percent and live concerts another 10 percent.

The RIAA and Copyright Royalty Trubunal surveys indicated that not only did 37 percent tape from their own collections, but "those who record music on tape are much heavier buyers for their own use of records, prerecorded tapes and blank tapes than nonrecorders." (Blank-tape manufacturers suggest that the record industry's phenomenal growth from 1976 to 1978 may have been partly due to a mobile generation's shifting to taped music as an antidote to bland radio programming -- and that auto playback units did nothing but boost music usage.)

Many consumers tape a record immediately after purchase to have a copy for their car or home system. "The first time a record is played will be the best playback ever," one industry official points out, "and you never get anything better than your source."

Taping off of the radio, which accounts for 30 percent of home taping, is probably the most emotional part of the question. As far as Gortikov is concerned, too many stations are neglecting their financial responsibility to the industry. And the RIAA is letting them know it: Arista recently hinted at a cutoff of service and advertising to stations playing their albums whole and without commercial interruption, which most everyone accepts as an invitation to home taping. Other companies are expected to follow suit.

"We feel that it's just grossly unfair," Gortikoff says, "when a radio station, which is dependent on the recording industry and recording artists for their raw material, will turn around and play without commercial interruption a full-length album and at the same time advertise to its listeners -- whom the recordings attracted there in the first place -- that they're going to do this and get your tape recorders ready.

"That, to me and others in the industry, is absolutely, grossly unfair and a misuse of the talent and the risk money that goes into recording."

Gortikov points out that 84 percent of all albums fail to break even and that most new albums must sell a minimum of 140,000 copies to make back their costs. Royalties on Blank Tape?

The scope of the taping problem has generated talk of levies on blank tape -- or even license fees for home tapers -- to compensate artists, composers, publishers, jacket manufacturers, retailers, record companies and distributors for lost royalties.

Legal solutions are unlikely. In other countries facing problems with home taping, legislation has proved ineffective. In England, where taping is blatantly called "home piracy," the loss of revenues is estimated at $220 million a year, one third the value of the entire market. In France, where there are three times as many cassette recorders as stereos, losses are estimated at $120 million. In Europe the problem is compounded by the fact that many record and blank tape manufacturers are merely different divisions of one company.

The recent Sony-MCA court ruling -- which held that home taping constitutes fair use and not copyright infringement -- dealt with video taping, but its principles apply to audio as well. The case will probably end up becoming a landmark Supreme Court decision. But it also points up another complaint directed at the major record companies -- that not enough enphasis is being placed on audio tape technology. Critics accuse the companies of being preoccupied with developing software for videotape, videodisc and cable markets, which are expected to be the technological (and big profit potential) battlegrounds of the '80s. The Other Side of the Problem

The combination of high-speed duplication, low-to-medium-quality bulk tape and generally cheap housing units makes for an only moderately attractive package, though prerecorded tapes have nearly dougled in yearly sales from two years ago (close to 80 million units in 1979).

By contrast, blank tape offers higher fidelity and is less susceptible to damage and decay. And one can edit out weak cuts, reorder the songs on an album, compile favorite songs from various sources, adjust or personalize elements such as treble and bass, and re-use the tape with virtually no loss of quality.

"The way to compete with home taping," according to Cohen, "is simply to come out with a better quality tape, pack it in much more desirable fashion that will affect the consumer at the point of sale [40 percent of LP sales are impulse buys from people browsing through the bins], openly displaying the package so consumers can feel it and touch it without reaching through a hole in the glass, allocating more store space to it." It is also accepted that any increased costs resulting from these steps will automatically be passed on to the consumer.

With few exceptions, industry officials accept the premise that prerecorded tapes are of somewhat lower quality than tapes recorded at home. Even Gortikov admitted that "the quality of any mass-produced item cannot be the same as that of a custom-produced item. One-on-one home taping is almost the equivalent of a custom-produced high-performance tape. I can't excuse quality that's not acceptable to the consumer. And the consumer knows what kind of quality he's going to pay for."

If the record companies "would use better tapes and plastics, they'd have a better product to put out," says Peter Cain, marketing development manager for consumer products at Ampex, a major supplier at both the consumer and industry levels. An Uncertain Future

No one denies home taping is a serious problem -- not even the blank-tape manufacturers who have profited from the practice.Gortikov points out that record company profits are down extremely. CBS' 1979 profits dropped from $93.5 million to $51 million on revenues of $1.04 billion. Warner Communications Inc.'s profits on sales of $725 million dropped from $92.5 million to $81.7 million. Of course WC2's stock today is also 10 times the level it was at the end of 1974 and its earnings in 1979 were $3.94 compared to 16 cents in 1961, when it first became a public company.

CBS does project an industry growth of 5.3 percent in 1980 and 10 percent in 1981, representing sales of $4.34 and $4.78 billion dollars, provided there is no major recession.

In that situation, the issue of compensation faces an uphill battle, from the problems of collection and disbursement of revenue to unfair restrictions on non-tapers. Gortikov favors a royalty on blank tape, and possibly on tape hardward, "to be shared by those who are the losers from the practice." Cain, echoing the tape industry's opinion, says, "We sure as hell don't like the idea."

"If home taping is one of the many conditions contributing to the current market slump," says Gortikov, "it's only one of the bricks in the wall." Others include the problems of increased record prices and attendant consumer resistance, piracy and counterfeiting, parallel imports, a lack of musical excitement (particularly from the superstar strata), the technical quality of the product and misguided marketing strategies.

Product overruns, which frequently end up on the market as low-priced cutouts, are now estimated to total 500 million albums in the United States alone. The record industry is fighting back with variable pricing (mostly on older releases) and less product (3,600 LPs were released in 1979, a downturn of 15 percent from 1978; 85 percent of those albums were available on prerecorded cassette tapes, an upswing of 12 percent in one year.)

Meanwhile, sales of blank tapes and playback equipment are skyrocketing. Cassettes have recently replaced 8-tracks, which are gradually being eased out of most manufacturers' lines -- even though there are still more 8-track units in operation than cassette units. There is an increased popularity for premium blank tapes, and all the companies are stepping up their premium lines. There is now a tape equivalent to direct-disc: super quality, real-time dupes that sell for $15 to $18. There's also move to miniaturized cassettes. Most forecasts are for a continued upswing in tape and playback unit sales with no leveling off of home taping habits. And looming in the background is the predicted shrinkage of the prime record-buying age group (14-24) by 7 million in the next 10 years.

Whatever the ultimate effect of the home-taping epidemic on the industry, the record sales of 1978 (including 40 million copies worldwide for "Saturday Night Fever") won't be replayed anytime soon. Unless somebody taped it at home.