Academic research done by Harvard, MIT and other schools on downloading suggests that it has had little detrimental effect on record sales, and in some cases may actually help sales rather than hinder them - this paper for example sums this up nicely:
http://ocw.mit.edu/NR/rdonlyres/Ele...4323-ACB0-D99937779637/0/online_fileshrng.pdf
The music industry got greedy. Radio got homogenized. Music production values went out the window and the industry failed to legitimize the new format their customers were using. Imagine if CDs had been outlawed in the 1990s so the majors could keep shotting tapes?
I think what happened to the music industry is going to happen to pretty much every other industry we have. Movies and video games are already suffering because of piracy, there are open source alternatives to lawyers (lawunderground.org) and education (MIT's OpenCourseWare) and lots of other things we used to pay for. Academics working with 3-D printers are saying that within the next decade or so kids are going to be able to download Jordans like they download music.
The real problem here is that information doesn't work like other goods and services. But it's not really a problem at all, it just requires a change of business model. There is no scarcity with information, "information wants to be free" right? But as Stewart Brand of the Whole Earth Catalog once pointed out - customized information wants to be expensive.
Live music is customized information, and the market is in rude health. So is the bottled water market. Linux and Mozilla make millions by doing bespoke stuff for the companies that use their free stuff. I think society is going to be much, much better off because of this huge transition taking place. (Although I'm not a huge fan of bottled water.)
Information should be free, long term it's better for all of us. You can read all about this in my new book
The Pirates Dilemma coming out in January.
Amazon product ASIN 1416532188
Make sure you buy the hardcover, no discount. AND DON"T YOU DARE FUCKING DOWNLOAD IT OR I"LL HIRE A LAWYER MEANER THAN A JUNKYARD DOG TO COME DOWN ON YOU LIKE A TON OF FUCKING BRICKS.