When adapting from the current physical value chain, based on sales of CDs, to one including digital music distribution there are redundant steps, and a restructuring and streamlining of the value chain is necessary in the new environment. There is also the possibility to tap information from various stages of the physical value chain and take advantage of it to create new revenue sources.

Disintermediation of steps in the physical value chain can benefit creators by bringing more independence from the industry and by creating new possibilities for distribution of their music, although this is dependent on how established the artist is. New artists will still need third parties, but need not necessarily be as dependent on the industry as today.

The main conclusions:

1) Even a conservative estimate of consumers' annual investment in acquiring music from the Internet results in figures which are far greater than the annual net revenue (income - costs) of the Record industry from selling "legal" CDs.

The heavily publicised rhetoric regarding "free music" has deflected the spotlight from the actual costs of file sharing. One of the few estimates made public up to now came from the MD of the UK-based "legal" downloading service, OD2 in 2002; this concluded that every download in the UK, on average costs 60 Euro cents.

KTH research estimates that Swedish consumers spent 117 million US dollars on such activities during 2002, and that the global figure, after a sudden fall-off with the closing of Napster, has risen from 6 billion dollars to over 11 billion dollars annually. The latter is the result of the explosive growth of programmes such as Kazaa (with over 190 million downloads of its software). These figures can be compared to estimates of the annual net revenue of the recording industry in Sweden (82 million US dollars) and globally (3.8 billion dollars per annum).

2) The Music Industry's rhetoric a) pronounces similar accusations of criminality against both owners of illegal CD factories and teenagers using file sharing techniques to acquire music and b) maintains that Internet music is "free". This coupled with a legal strategy which led to the closing of services such as Napster has probably been counter-productive.

3) Not every part of the music industry is suffering. Concert revenues and attendance increased 20% last year in the USA - similar trends can be seen in Sweden. Concert promoters suggest that this is largely due to the access to a wide range of music over the Internet - music in the virtual form triggers of a consumer desire to experience a physical equivalent/experience. Mainstream radio is becoming more and more streamlined (with the concentration of ownership), and listener figures have been falling since an all-time high around 1998/99. Particularly teenagers are shifting to the Internet where diversity and range of choice is the most compelling attraction.

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