Anyway, the issue at stake is how these file-sharing programs have affected the music industry, and the cold, hard fact is that music sales are down worldwide. Album sales have fallen, and singles have absolutely plummeted to a point where they have become almost unviable in some markets. This is true all over the world, but especially true in the US, where the RIAA (Record Industry Association of America) is renowned for touting its massive losses, and aggressively pursuing pirates. In America alone, 2002 saw a fall of around 7% in sales, 2003 saw the trend being arrested somewhat, with total sales dropping by only 4%.

The RIAA, and the music industry worldwide, has been panicking for the last few years about what to do, and the wider public reaction is that initially, they haven't been doing a good job. One of the first things they did was to sue the owners of the file-sharing programs. This worked for a while, until the programs were set up overseas, in countries with much less stringent laws - or at least much less stringent enforcement of laws. They also tried to used advanced anti-copy technology to protect their CDs, however this resulted in the CD's simply not working with certain players, including many of the older CD players. They then made what most people consider to be their biggest mistake - they started going after the pirates themselves. Now, in some cases, it was a good move. Some of the biggest music pirates were college students who used the massive bandwidth and storage capacity of their institutions' servers to store and transfer huge amounts of music. These people were arrested and charged. However, in early 2004, the RIAA started suing random "small fishes" - basically ordinary home users - and making an example of them. The problem was that they weren't very thorough in seeing who they were charging - some of the people they charged included an eight year old girl, and a seventy-two year old woman. This turned into a public relations nightmare for them, and it was all swept under the rug rather quickly.

However, as per usual, the numbers don't tell the real story. There are several factors to consider, especially with regards to the US information. The first issue is that the US economy has had a bad run over the past few years, and this has obviously had a dampening effect on consumers, which means that luxury goods - like CDs - are less likely to be purchased as consumers get pessimistic about the future, and so save instead of spending. The second aspect is the fact that these figures include cassette sales - which are still around, but have been steadily declining, and dwindled to a tiny percentage of overall sales. Now, this doesn't entirely account for the drop in sales, but this mitigates the fact, and it also shows that piracy has not been the end of the music industry.

In fact, whether or not internet piracy is all bad is a controversial issue itself. Firstly, varying surveys attribute between 10 and 60% of the drop in the music sales to be due to internet piracy, showing that there are clearly other factors. And furthermore, studies have also revealed mixed messages as to the underlying reasons - some people do it because its free, but there is also a significant proportion of people who use file-sharing to make better decisions when they do buy their music. The problem seems to be that the music industry has basically had it too good for too long. Their basic business model was not entirely what consumers wanted, and the file sharing revolution provided the consumer with a way of rebelling. Consumers simply weren't willing to shell out AU$5 for what was, in effect, one song. Consumers were no longer willing to pay upwards of $20 when all they wanted was a few songs from an album. Now, the record industry has been forced to act.

So what are some of the more positive effects? Well, the file-sharing revolution forced a complete rethink in terms of how the music industry operated. They had to respond to the changing demands of the consumer, and they have done so with some success. The music industry has enhanced the nature of the content they provide. Examples include adding in music videos or interviews with the artist, adding in extra interactivity or games and web links that will only work with a computer. By adding this level of depth and enriching the product that they provide, the music industry has been able to provide a better product to consumers, and the internet is partly to thank for that. Also, the advent of the DVD has provided the music industry with a whole new source of revenue, as this is an aspect of technology that is often overlooked, and is not usually included in most calculations of the music industry's revenue.

One other aspect that is often not considered is the smaller music industry - the independent labels and bands, who don't have a massive following, or a massive exposure, and tend to operate on a more local level. For these people, the internet has been a great benefit - bands are able to keep in touch with their fans much more easily using email and their website, and they are also able to get wider exposure over the internet, and reach more people. The internet also allows these smaller bands and companies to conduct most of their business online, cutting costs even further, and allowing them to be more efficient.

Indeed, the wider music industry has in fact embraced the internet as the way of the future. Much like the saga between Sony and the original inventors of the VHS (Sony and other industry giants claimed that the VHS tape would kill the movie industry - instead, the VHS tape became one of the biggest revenue sources for the movie industry through rentals and sales), the music industry has accepted that the internet can actually work to their advantage. Universal and EMI have both set up online music stores, as has Apple, with its iTunes website, and even Telstra. These stores, and many others, allow people to buy tracks online for a small cost - usually around a dollar each - and the consumer can then effectively do with the track as they like. They are able to download it to an iPod, or keep it on their computer, or even burn them to a CD. This allows consumers to download tracks from different artists, and make their own CDs with their own songs. It's this kind of flexibility and ease-of-use that has brought many consumers back to the music industry through the internet.