Yeah, there are a ton of nonsensical answers here, so how about some real assistance?
The following is taken from the book Free Culture, by Lawrence Lessig. The book itself is free and can be read/downloaded in its entirety here.
I recommend it for anyone who gives more than half a shit about copyright stuff. I've reproduced a helpful chunk below.
"File sharers share different kinds of content. We can divide these
different kinds into four types.
A. There are some who use sharing networks as substitutes for purchasing
content. Thus, when a new Madonna CD is released,
rather than buying the CD, these users simply take it.We might
quibble about whether everyone who takes it would actually
have bought it if sharing didn’t make it available for free. Most
probably wouldn’t have, but clearly there are some who would.
The latter are the target of category A: users who download instead
B. There are some who use sharing networks to sample music before
purchasing it. Thus, a friend sends another friend an MP3 of an
artist he’s not heard of. The other friend then buys CDs by that
artist. This is a kind of targeted advertising, quite likely to succeed.
If the friend recommending the album gains nothing from
a bad recommendation, then one could expect that the recommendations
will actually be quite good. The net effect of this
sharing could increase the quantity of music purchased.
C. There are many who use sharing networks to get access to copyrighted
content that is no longer sold or that they would not
have purchased because the transaction costs off the Net are too
high. This use of sharing networks is among the most rewarding
for many. Songs that were part of your childhood but have
long vanished from the marketplace magically appear again on
the network. (One friend told me that when she discovered
Napster, she spent a solid weekend “recalling” old songs. She
was astonished at the range and mix of content that was available.)
For content not sold, this is still technically a violation of
copyright, though because the copyright owner is not selling the
content anymore, the economic harm is zero—the same harm
that occurs when I sell my collection of 1960s 45-rpm records to
a local collector.
D. Finally, there are many who use sharing networks to get access
to content that is not copyrighted or that the copyright owner
wants to give away.
How do these different types of sharing balance out?
Let’s start with some simple but important points. From the perspective
of the law, only type D sharing is clearly legal. From the
perspective of economics, only type A sharing is clearly harmful.9
Type B sharing is illegal but plainly beneficial. Type C sharing is illegal,
yet good for society (since more exposure to music is good) and
harmless to the artist (since the work is not otherwise available). So
how sharing matters on balance is a hard question to answer—and certainly
much more difficult than the current rhetoric around the issue
Whether on balance sharing is harmful depends importantly on
how harmful type A sharing is. Just as Edison complained about Hollywood,
composers complained about piano rolls, recording artists
complained about radio, and broadcasters complained about cable TV,
the music industry complains that type A sharing is a kind of “theft”
that is “devastating” the industry.
While the numbers do suggest that sharing is harmful, how harmful
is harder to reckon. It has long been the recording industry’s practice
to blame technology for any drop in sales. The history of cassette
recording is a good example. As a study by Cap Gemini Ernst &
Young put it, “Rather than exploiting this new, popular technology, the
labels fought it.”10 The labels claimed that every album taped was an
album unsold, and when record sales fell by 11.4 percent in 1981, the
industry claimed that its point was proved. Technology was the problem,
and banning or regulating technology was the answer.
Yet soon thereafter, and before Congress was given an opportunity
to enact regulation,MTV was launched, and the industry had a record
turnaround. “In the end,” Cap Gemini concludes, “the ‘crisis’ . . . was
not the fault of the tapers—who did not [stop after MTV came into
being]—but had to a large extent resulted from stagnation in musical
innovation at the major labels.”11
But just because the industry was wrong before does not mean it is
wrong today. To evaluate the real threat that p2p sharing presents to
the industry in particular, and society in general—or at least the society
that inherits the tradition that gave us the film industry, the record
industry, the radio industry, cable TV, and the VCR—the question is
not simply whether type A sharing is harmful. The question is also how
harmful type A sharing is, and how beneficial the other types of sharing
We start to answer this question by focusing on the net harm, from
the standpoint of the industry as a whole, that sharing networks cause.
The “net harm” to the industry as a whole is the amount by which type
A sharing exceeds type B. If the record companies sold more records
through sampling than they lost through substitution, then sharing
networks would actually benefit music companies on balance. They
would therefore have little static reason to resist them.
Could that be true? Could the industry as a whole be gaining because
of file sharing? Odd as that might sound, the data about CD
sales actually suggest it might be close.
In 2002, the RIAA reported that CD sales had fallen by 8.9 percent,
from 882 million to 803 million units; revenues fell 6.7 percent.12
This confirms a trend over the past few years. The RIAA blames Internet
piracy for the trend, though there are many other causes that
could account for this drop. SoundScan, for example, reports a more
than 20 percent drop in the number of CDs released since 1999. That
no doubt accounts for some of the decrease in sales. Rising prices could
account for at least some of the loss. “From 1999 to 2001, the average
price of a CD rose 7.2 percent, from $13.04 to $14.19.”13 Competition
from other forms of media could also account for some of the decline.
As Jane Black of BusinessWeek notes, “The soundtrack to the film High
Fidelity has a list price of $18.98. You could get the whole movie [on
DVD] for $19.99.”14
But let’s assume the RIAA is right, and all of the decline in CD
sales is because of Internet sharing. Here’s the rub: In the same period
that the RIAA estimates that 803 million CDs were sold, the RIAA
estimates that 2.1 billion CDs were downloaded for free. Thus, although
2.6 times the total number of CDs sold were downloaded for
free, sales revenue fell by just 6.7 percent.
There are too many different things happening at the same time to
explain these numbers definitively, but one conclusion is unavoidable:
The recording industry constantly asks, “What’s the difference between
downloading a song and stealing a CD?”—but their own numbers
reveal the difference. If I steal a CD, then there is one less CD to
sell. Every taking is a lost sale. But on the basis of the numbers the
RIAA provides, it is absolutely clear that the same is not true of
downloads. If every download were a lost sale—if every use of Kazaa
“rob[bed] the author of [his] profit”—then the industry would have
suffered a 100 percent drop in sales last year, not a 7 percent drop. If 2.6
times the number of CDs sold were downloaded for free, and yet sales
revenue dropped by just 6.7 percent, then there is a huge difference between
“downloading a song and stealing a CD.”