The entry of new, smaller businesses will be driven by a major shift in record companies' attitudes towards the Internet as a distribution medium, combined with the increased ubiquity of hardware capable of playing music, Carosa predicts. However, consolidation will sweep the sector the following year as it matures, he said.
"Next year will be the year of music devices, other than iTunes. You'll have mobile phones that will play music... there'll just be more gadgets and in part that will drive the demand," he said. "In 2004, a whole bunch of players will jump in. In 2005, you'll see consolidation of all those players."
During a recent interview, Carosa said record companies had viewed the Internet as the "anti-Christ", a statement he still stands by. However, he says the birth of online music services would not be possible without the record companies' cooperation.
"One of the biggest things that has changed has been the record companies acceptance of online music and the Internet as a medium," he explained. "All they [had been] doing was taking legal action, that was their only defence. They're now actually being proactive about putting their catalogues online. They've finally changed their tune."
Rampant online piracy has only occurred because there has been no legal alternative for consumers if they wished to purchase music in digital formats, Carosa argues. "You can't really blame consumers for wanting music in digital format, because that's the way of the future... the record companies have been slightly slow to react," he said.
While he predicts piracy will continue, Carosa says many consumers will simply opt for the legal alternative. "If you can find a range of music that's not too expensive, why bother?" he asks.
While technologies such as digital rights management will make it harder for pirates to steal music, there are some fairly straightforward ways to circumvent protection, Carosa said. "If you want to pirate something, you'll find a way to do it," he said. "[But] if there was a hole in the bucket, it was there well before the Internet."
While some have regarded the music industry's legal onslaught on file-sharers as scare-mongering, Carosa believes it serves a purpose. "I think their core focus is education. By them taking legal action... that's educating people that downloading music through software such as Kazaa, is illegal. So in a way they're embarking on a pseudo marketing campaign," he said.
Despite the recording industry's disappointment at the Australian judiciary's decision to not throw the administrators of the mp3wmaland Web site in the slammer, Carosa says the suspended sentence the students received was sufficient. "I think they were right to be prosecuted, and I think the sentence that was handed down, which was effectively a suspended sentence, for someone who has never had a criminal record before... I think it was just, under the circumstances," he said.
