U.S. Copyright law as it pertains to artistic works if very clear on what is and what is not copyright infringement. After sifting through the many pages of the US Copyright Act of 1976, the latest iteration of copyright law we can distill one central tenant behind the letter of the law: Anything that "displaces" a sale of copyrighted material or could potentially do so is illegal.
Prior to the Internet "bootlegging" and copyright infringement could only be done on a small scale. Old school copyright infringement in the days of LPs consisted of making a negative mold of the record and then pouring molten wax into the mold until it set. Once completed you had an illegal bootleg copy of the LP. After the Internet, P2P networks like Kazaa and Limewire made it easy to download many full albums and .mp3s of your favorite music for free.
This practice unfortunately signalled the downward spiral of music industry revenues from then on. Instead of paying upwards of $18.99 for a 12 track CD (plus tax), anyone with an Internet connection could download that same CD for practically nothing.
So who does this practice of illegal downloading hurt the most? Is it the artist or the record labels? The answer is complicated, to say the least. If you are a big name artist illegal downloads will hurt your bottom line, but then again, most of the money that big artists make is in touring, radio royalties, merchandise, and synchronization royalties such as getting their songs in commercials and tv shows.
If you are a major record label the practice of illegal downloading seriously changes your business model. Prior to filesharing record labels were willing to keep artists who needed development and took time to produce albums. After filesharing the record labels knew that they needed to make money even more so they ended up dropping lesser known and developing artists in order to focus their resources on the few but popular artists. The end result is homogeneity in the music you hear coming out of your radio and from the major labels.
The music industry needs a new business model that is able to monetize the practice of getting music from the Internet. It is naive to think that consumers who are now used to getting music for free will go back to paying for it. Possible solutions would be ad-based Internet radio such as Pandora or Last.FM.
The essential question is are you hurting your beloved music artists by downloading their songs for free? Yes and no. Artists usually only get $0.09 per song on an album sold anyway. The rest of the money that you pay for that CD goes to the record label. So the primary loser in this scenario is the recording industry. However, having more of the artists' music out there and being played increases the artist's popularity, and thus increases their ticket sales at live shows.
In my opinion, I don't see filesharing or illegal downloading of copyrighted material to stop. The music industry needs to figure out a way to monetize the act of getting music on the Internet. Possible solutions are ad-based Internet radio and merchandising.
