The trouble is that piracy can run halfway around the world while the legitimate distribution networks are just getting their shoes on. Around that same time frame -- summer of 1996 -- is when I saw an item on the Damaged Cybernetics (remember them?) web site that read: "We are investigating the use of MPEG Layer III compression for music piracy." Those investigations bore major fruit, because by the tine Napster emerged, distribution networks of MP3s (and sometimes other formats like VQF) on IRC channels modelled after warez swapping channels were well entrenched. Napster started off as a search engine for material on such channels.
Pirates thus shaped the early years of music distribution and exert significant influence today. Consider for example, the fact that people bristled so much at DRM on music that Apple was forced to remove it from iTunes purchases, whereas DRM is normal and even expected for digitally distributed movies and books. (I was there for the early ebook scene too; readers celebrated DRM as it allowed their favorite authors to be compensated and helped prevent them from being scared off the platform entirely.)
I would say that the music industry has only recovered in the last two decades. Not done well. Internet piracy famously cut the legs out from physical album sales in the early 2000's and the music industry was not prepared for that shift. Sales and budgets for physical music is now a shadow of it's former self. Not to mention how artists are often the worst off financially today because of the crummy payouts of streaming music, which has largely replaced the purchasing of records.
> I would say that the music industry has only recovered in the last two decades.
Do you have revenue numbers? (I don't.)
> Internet piracy famously cut the legs out from physical album sales in the early 2000's
No way. The Internet destroyed physical album sales. Are you suggesting that if it wasn't for piracy, people would still be buying CDs? The Internet also destroyed print newpapers, software sales on CD, locally installed software generally, brick-and-mortar sales of anything that can be shipped, and lots more. Is that all due to file sharing?
> artists are often the worst off financially today because of the crummy payouts of streaming music
People online say piracy isn't a big deal because "the artist/band makes their money from live shows and merch anyway". But that wasn't always true. Before internet piracy, selling music actually was a viable business. Only when anything and everything became downloadable all at once did the bottom fall out of music sales as a viable way to make money. If piracy hadn't beat legitimate distribution to the punch, physical album sales would still be a niche thing but a musician could live on digital sales.
This is why opposition to DRM is such a techbro take. If you care about art, like at all, you want DRM built into the fabric of the network itself so that those who hold the rights to downloaded material get paid for others' access to it. We had such an opportunity to use the internet as a distribution network such that creators could get directly paid for their work and not the middlemen. Ted Nelson, coiner of the term "hypertext", explicitly included DRM in its conceptualization. Creatives are now paying the price for lack of followthrough on Nelson's complete vision.
> If piracy hadn't beat legitimate distribution to the punch, physical album sales would still be a niche thing but a musician could live on digital sales.
How would current economics be any different? Would Spotify increase artist payout - why would they stop squeezing artists for every dime?
Pirates thus shaped the early years of music distribution and exert significant influence today. Consider for example, the fact that people bristled so much at DRM on music that Apple was forced to remove it from iTunes purchases, whereas DRM is normal and even expected for digitally distributed movies and books. (I was there for the early ebook scene too; readers celebrated DRM as it allowed their favorite authors to be compensated and helped prevent them from being scared off the platform entirely.)