According to a BBC article, a 31% decline in music sales between 1999 and 2002 was primarily due to piracy. Many consumers are turned to online peer-to-peer file-sharing programs for music.
The problem is that pirates are flourishing in peer-to-peer clients, downloading and transforming copyrighted material into the form that is used to consume music.
The US film industry is also threatened by rampant Internet piracy.
This has been made worse by the increased availability of broadband and the imminent removal of technical barriers to moving and storing massive amounts of content, said Dara MacGreevy of the Motion Picture Association of America.
In 2003, Hollywood lost $3.5bn from hard goods piracy alone, while Internet piracy losses are harder to quantify, he added.
But despite piracy fears, analysts believe the future of the music industry lies in online digital downloads.
Since the files can be easily transported and stored on a range of devices, they have transformed the way people consume music.
By 2008, one-third of music sales in the US and nearly 20% in Europe will come in the form of downloads and streaming music over the internet, building a multi-billion dollar business, according to a recent study by consultancy Forrester Research.