In 2008, 95 percent of downloaded music was obtained illegally. This is leading some within the music industry to believe they must accept the P2P model, a discussion which took center stage this week at MIDEM, the world’s largest music industry trade fair, in Cannes, France. Knowing that file sharing is not going to go away, the music industry is now looking for ways to monetize that model. "There is innovation happening but it's coming from the dark side of the Internet, from pirates, from the underground. And that is showing where the industry is going to be,” said Michael Robertson, head of MP3Tunes. "You have to look underground, to see what people are doing and then give them commercial outlets that mirror that," Robertson continued. One proposed solution is to make file sharing part of the service charge. Geoff Taylor, of the British Phonographic Institute, advocates a small broadband tax that would cover music sharing.

So far, music companies have chosen to deal with music pirates through litigation. But Fergal Sharkey, CEO of UK music, believes that government intervention "has the potential to do a lot of damage not only to the music industry but also to technology companies themselves.”

"When you sue a new technology, you lose the opportunity to channel that into a positive direction," said Robertson.

Digital music grew for the sixth straight year in 2008, generating $3.7 billion in trade revenue. It now represents one-fifth of all music sales.

A study commissioned by the Dutch government, released this week, has found that music piracy can in fact be beneficial to the economy.

By Mark Alvarez