If you asked a record executive right now what the greatest threat to their industry was, they would answer with two words: File sharing. According to the powers that be, this evil act can only be ranked along with genocide, conning little old ladies out of their fortunes, and double dipping a tortilla chip at parties. While the labels scramble to put a stop to it, the consumers have of course embraced it whole heartedly. Free is a very powerful price point. Love it or hate it, nothing has changed the face of the recording industry faster or more deeply than file sharing.

    According to Forrester Research, the record industry is worth less than half of what it was only ten years ago. Its value was $6.3 billion in 2009, down from a net worth of $14.6 billion in 1999. If you adjust for inflation, you end up with a difference of nearly $10 billion dollars. Suffice to say the industry is hurting, but is file sharing to blame or is it merely becoming the scape goat? Yes, the industry is losing revenue, but in the shift to the digital age, it was their money to lose. In 1999, when Napster debuted, the industry was so concerned with cracking down on the free distribution of its product, they never stopped to think about how they might be able to take advantage of the digital medium and make money from this new and unexpected turn. The word free has always made capitalists reach for their Metamucil, but once a consumer market can get something for free, good luck getting them to pay for it again. By the time that iTunes showed up, it was too late. Attempting to remonetize the system has never truly worked. According to Big Champagne Media, free downloads and file sharing continue to account for 90% of digital music.

    So what can the industry gain by allowing the free sharing of its product without countless lawsuits and government interference? First of all, massive exposure for every artist and genre of music imaginable. Just think of the record store circa 1995. The shelf space was limited only to what sold the most and so was dedicated to the biggest names and the most desired music. The digital domain allows for unlimited shelf space, and therefore unlimited options. But can you expect consumers to pay for experimentation? How does Joe Everybody know if some artist he's never heard of is any good? With the freedom that comes with file sharing, he can decide based on what he gets for free if he wishes to make a purchase or go out to the show and support the artist directly. The industry is beginning to embrace this unlimited access. Its seeking new ways to garner revenue based on the increased exposure of the music, such as song licensing through internet radio like Pandora. Licensing reached $84 million in 2009 and is expected to have risen substantially when the figures come out for 2010. 

    How does this effect the artist? They are certainly losing revenue as well with every song that slips into the digital ether for free, but what do they stand to gain? Again, more exposure is never a bad thing. The bigger stars are putting a greater emphasis on touring, with less attention to record sales. The more exposure their music receives, the higher their ticket sales and the more money they make off their tour. Record contracts are coming into an era of negotiation that is more tour heavy. Not that album's weren't supported with tours before, but artists are willing to give more on the album sales side in order to keep more from the concert ticket sales. Touring is quickly becoming the new salvation for working artists. The same could be said of the less well known musicians. With unlimited choice comes unlimited niches. Artists are beginning to discover they can live quite comfortably within these nooks. Gone are the days when the record deal was the holy grail of the professional musician. Many artists are declaring their independence proudly and relying on digital distribution to draw attention to their niche and drive up their ticket sales while grabbing them more tour dates. Many of these artists are discovering while they may not get rich, they can make a very, very good living from touring.

    There is little hope that the industry will find a way to put a stop to digital file sharing completely. Right now there is pressure on the ISP's (internet service providers) to limit and stop file sharing, essentially making them the peer to peer police. Is it their job to tattle on those that share files or is it the industry's job to monitor where their product is going? The outcome remains to be seen. Either way, there is little chance that file sharing and peer to peer downloads will ever truly be stopped.  Maybe everyone should just relax and embrace the change.