Music downloads should cost about 10¢ per track.
An estimated 5 billion tracks are traded on peer-to-peer networks such as Kazaa every month.
In the course of the year, the industry posted revenues of $14.2 billion, down nearly 2 percent from 1999. Contributing to the decline were also drops in the numbers of vinyl records and singles, cassettes albums, music videos, and an almost total disappearance of the cassette single.
60 billion tracks @ 10¢ = $6 billion dollars per year
So, at 10¢ per track traded, the value of the online music market is already nearly half that of the music industry's whole worldwide revenue stream.
Online services are much less costly than selling physical media. The profit margins are much much higher.
The online file trading market has enormous upside. Penetration of broadband internet is still very low. In 5 years the potential market will have grown several times larger. The current music industry only need capture (say) half of this market to maintain and even increase their profits.
Current file trading solutions suck big time. The range of available music is limited and unpredictable. If I want something released in the 60s or 70s I'm usually out of luck. The quality is variable. And it's illegal - a fact that surely has a dampening effect on the market.
Put all these things together and you should see a rosy future for the music industry. A cheap service that gives customers easy access to the music industry's entire back catalogue would make file sharing obsolete overnight.