Send lawyers, guns and money

On the flip side, file-sharing activity on the leading peer-to-peer music-trading network Kazaa is up this year. According to BigChampagne, a company that tracks file-sharing, last year on average 2.5 million people worldwide at any given moment were logged on to Kazaa. Today, that number has ballooned to 4 million.

So does that mean the RIAA lawsuits had no impact? Not necessarily, says BigChampagne's CEO Eric Garland. He says of course Kazaa's numbers are up, since "file-sharing is not a static activity; it's been snowballing for three years now." The question is, "Would Kazaa's trajectory this fall have been more aggressive without the threat of litigation?" In other words, is file-sharing activity up less than it would have been if the RIAA had done nothing?

"That's a great question that cannot be answered," says Don Van Cleve, president of the Coalition of Independent Music Stores, who reports that after suffering through some of their worst years ever, several member stores are now reporting robust sales again.

The debate about what effect file-sharing is having on CD sales has raged for years. Today, most people in the music business assume that online piracy, and specifically the mainstream file-sharing revolution ushered in by the old Napster, triggered the unprecedented downturn in CD sales. But many in the tech and online community reject the correlation. Instead, they argue the CD recession was due to overpriced titles, weak product and a slumping economy. Some even suggest that file-sharing actually spurs sales, because music fans are exposed to new acts online, and if they like what they hear they'll go out and buy the better-sounding authorized disc.

"It's too early to say that lawsuits are responsible for the increased sales, but it's probably a factor," says Billboard's Mayfield. Other factors include the recent surge in consumer confidence and spending. Also driving foot traffic at record stores was the announcement by the industry's largest label, Universal Music, that it was slashing prices on its top releases across the board. The unprecedented move effectively cut the sticker price for new superstar CDs from $17 or $18 down to $14, and, at many discount outlets, as low as $9.99.

It's clear that Universal's price slashing has helped fuel business in recent weeks. But it's also worth noting that the move did not kick-start sales; Universal's cheaper CD prices didn't go into effect until nearly halfway through the seven-week sales boom.

The other key factor pushing sales is easier to explain: a bushel of hit records. Led by rappers (Outkast, Ludacris, DMX), rockers (Dave Matthews, John Mayer, A Perfect Circle) and crooners (Rod Stewart, Barbara Streisand, "American Idol's" Clay Aiken), a parade of marquee names has posted impressive numbers. "I think the onslaught of bigger, better new releases has everything to do with" the mini-sales boom, says indie retailer Van Cleve.

But again, it's not that simple. Since the industry does nearly twice as much business in the make-or-break fourth quarter as it does during any other, record company release schedules this time of year are always stacked with superstars. Last year was no different; Jay-Z, Shania Twain, and Eminem CDs all arrived on shelves early in the 2002 holiday shopping season. Yet as Mayfield at Billboard notes, year-to-date sales actually declined in last year's final quarter. What's different this year is the threat of legal action looming over file-swappers.

It should not come as a surprise that the 261 suits may have worked as a deterrent. Several recent surveys have made it plain that if file-sharers thought illicit downloading might lead to a stiff penalty, they would cease and desist. "We did a survey of young consumers online," says Bernoff. "We asked if fear of jail or fines would stop them from downloading, and 68 percent said yes." In the wake of the RIAA lawsuits, a majority of respondents told Newsweek's pollster the crackdown would make them less likely to continue swapping songs.

Despite the fresh CD sales rebound, nobody inside the music business thinks it has solved the file-sharing riddle. But industry executives may take comfort in the idea that at least some consumers can be scared straight.

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