The issue is a bit more murky then a simple: "Should it be illegal". It is a matter of violation of copyright, but it gets more muddled due to the recording industry "middleman".
What you've got to remember is that industries (like the RIAA) grow as a result of a need. In this case, there was this new technology (phonographs) that allowed for music to be recorded and replayed later. However, it cost a lot of money to make the recordings and the equipment was prohibitively expensive. Thus, the "industry" of making recordings is born. It pays the overhead cost of purchasing the materials to make the recordings and allows the artist and the customer to do business through them.
That was all well and good while making and distributing recordings of music was too expensive. With the advent of digital media and CDs, the costs per unit dropped to nearly nothing and the RIAA made a killing since they were still using the same distribution/advertising methods. They just decreased their costs while everything else stayed the same. Unfortunately for them, this was short lived. Digital media quickly passed to purely digital recordings on computers. Combine that with the rise of the internet, and suddenly anyone could record music, anyone would produce music, and anyone could distribute the recordings of said music. Oops! The RIAA has basically been squeezed out of business. There is no longer a "need" for them.
Much of the legal wrangling going on is really the thrashings of that dying industry. They're trying desperately to put the lid back on the Digital Media genie bottle, and failing pretty miserably.
Having said all that, artists still expect to make some money for their art. I do think that the era of the "superbands" is past though. There just wont be the concentrations of cash in a small area in the music industry in the future. What's going to happen is that sites will appear (already are really) that will charge for downloads. Artists can upload their music to the site and set up a fee on a per-song, or per-album setting. The site gets a chunk and the artist gets the rest. The idea being that a lot of folks will pay a quarter for a song, or a couple bucks for a whole album. Since this is about what the artists actually get off their record sales already (recording company gets the rest), this is a very good deal for them. All we've done is cut out the middleman.
It's going to take awhile to get there though. The RIAA is going to try really really hard to keep the old method of copies of music on a disk shipped to retail stores as the primary method that people get their music. That's why there's so much piracy going on though. If you are given a choice of buying a CD for $20+, or just going on some site and downloading it for free, which will you do? Yup. Alot of folks will just download it. You change that to a much cheaper "pay for download", perhaps with some goodies thrown in (autoformating for a CD burner if you buy the album, perhaps with downloadable silkscreen cover art), lots of people will not bother "stealing" music just to save themselves a buck or two.
So yeah. It's a copyright violation for sites to provide those works for free on the internet. It's a real grey area whether it's a violation to simply download something though. You can't necessarily know if something is copyrighted material or not. Only someone who purchases the original, and then chooses to make copies available to others via mass distribution can with 100% certainty be accused of copyright infringement. Of course, it is a civil issue, so you can sue someone for anything. Right now, the RIAA has the legal clout and money to do this. I think that'll change really soon though.
The "right answer" is to push for a real, workable, digital music distribution system on the internet that reflects the real costs to the distributer. Clearly, if all these sites are willing to host this data "for free", then it just can't cost that much to distribute this stuff, right? There's a very good business model in there. The only reason it's not being taken is because the RIAA are dragging their feet because they know they'll lose their cash cow once that happens. I don't think stronger legistlation is needed. I think that artists need to step up to the plate and start dealing with internet distributers instead of the "traditional" recording businesses. I also think that other media businesses need to take heed of this change as well. Radio stations should not have their play lists dictated to them by the RIAA. That's one of the final artificial strangleholds that's allowing that industry to keep music in the dark ages. As long as they control the playlists, they control what people hear about. Thus, they can make sure that only their artists are the ones that get the most play, and that their artists are only available via the "old fashioned" method of buying a CD for 20 bucks in a record store. Remove that blockage and their whole system falls, artists can get their music played and purchased, and internet distribution of the recorded media becomes viable.
But that's just my opinion...
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