that a couple of the music production companies had a hand in the development of file sharing. They were interested in finding ways to distribute music over the internet, but gave it up once they realized it would be difficult to control. I read this in an article that appeared during the downfall of Napster, unfortunately I lost the link when I had to reformat my computer (I doubt the article would still be up anyway).
Anyone else remember the promises of the recording companies that CD's would end up being cheaper than cassettes? CD's were supposedly much cheaper to produce, a fraction of the cost of tapes. Of course, that never happened.
IMO, the true cost of the CD's is based upon the new business model of the industry... shoving a performer or group into our faces until we get so darn used to them that we end up buying their CD. Instead of creating music, they're creating icons, and that requires a lot of money. Add to that the fact that many of the "icons" are transient (boy bands, Spice Girls are perfect examples), and they continually have to reinvest in the next big thing.
The other thing is that the internet market would put a HUGE dent into the CD market. Broadband internet connection and CD burners would allow even more people to give up on CD's. A significant portion of the industry is sunk into the production and packaging of the CD's themselves, and that portion of the industry would be hurt significantly.
Overall, I think profits would decrease, simply due to the a la carte nature of internet distribution (unless they only offered whole CDs). A lot of the trash out there would simply not be bought, consumers would buy the singles they choose and not a lot of extraneous songs they might not care about.
So, rather than trying to compete in the new medium, the industry is applying the scorched earth policy to the internet by destroying any and all file sharing capacity, good or bad, through prohibitive legislation.