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The whole drop in sales is more due to the fact that the record labels have decided to only turn out rap artists and Justin Timberlake carbon copies. When the sales drop it must be due to file sharing beacause no one will EVER get sick of 500 identical Britney Spears and Snoop Dogg type artists.
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I think that is a great deal of it. But you're forgeting other factors. When you pay 14 dollar per cd, with, i don't know, 12 songs, it is little more than a buck per song. Compare that with the prices on the online stores (except itms): First, You have to pay a fee; second, they have a limited number of songs, so it may be possible you do not find what you want, but you've already paid the fee; third, the per song price is almost identical to the per song price when you buy a cd.
That is outrageous: you are always getting a lower quality product at the same price. People forgot that mp3, aac, wma, are lossy compression, so some data is always lost, even more if the encoding is at a low bitrate, as 128. It should be at least 256, to even compare to the quality of a cd (if you use good speakers). Also, you're not getting the artwork, lyrics, etc, and they put restrictions on the use, so you are forced to listen to it only where they want to you to listen
And if you don't think thats enough to make you not to buy digital music, there is always the possibility of getting the same song, at a better bitrate for free. I would gladly pay a fair price for digital music, when the RIAA allows that. For now, i still d/l the music from kazaa, soulseek (great for rare mp3), and if i like it, bought the cd. audio quality is extremely relevant for me.