The music piracy debate has intensified once again, following controversial court decisions and a report released last week by Harvard Business School, and industry trends suggest the music business may eventually be forced to change.

The Harvard report disputes record industry claims that file-sharing has impacted against sales; calling the impact of file sharing "statistically insignificant". It suggests that competing entertainment formats; economic worries; limited breadth of music releases and the end of the vinyl to CD upgrade cycle have had more impact against music sales than file sharing.

The Canadian high court last week declared that music fans downloading songs using peer-to-peer services are not breaking local copyright law; and a Florida court also last week denied music labels attempt to extract personal information about file sharers from a local ISP. The Canadian decision is subject to change.

These revelations arrive as the music business prepares to extend its legal action against file-sharers internationally.

Commenting on the Harvard report, International Federation of Phonographic Industries (IFPI) chairman and CEO Jay Berman told The Guardian: "If I listened to that study my business would have improved."

It appears the music industry remains blinkered to the Harvard researchers’ alternative explanations for falling music sales, preferring to continue its tactic of demonizing file sharers as the business attempts to maintain its grip on the means of music production and distribution.

P2P United chair Wayne Rosso counters: "The recording industry is so completely misguided in its use of fear tactics that it can only engender even more contempt from fans. And what's even more ridiculous is that they're all profitable and their business is up, in part due to the free marketing they get from P2P networks. They should be paying us!"

Europe is ripe for digital music sales. Online music service OD2 sold one million tracks in Europe in the first quarter of this year. Support for licensed music-download services are an essential element to the music labels' strategic plan for dealing with digital music – litigation without a viable legal alternative can only be counter-productive. Berman observed: "I want iTunes, Real and Napster here as soon as possible. I'm trying more than ever for a licence on behalf of all these services."

Leave me alone

However, artists and music fans are increasingly vexed by the music label's litigious tactics. And this is creating an interesting phenomenon. Artists are going it alone online.

Blur drummer Dave Rowntree is furious at music industry plans to litigate music fans, telling New Media Age: "It's preposterous". And the professional musician is not convinced that file-sharing music fans buy fewer records. "How do they know?" he asked.

Musicians are turning to the Internet in an attempt to create an alternative ways to make a living than working with the established music business, and since that business is built on artists' talent, it appears that its control of the means of production may be under attack.

George Michael last month announced plans to dump the music business, promising never to make another album for retail sale. Michael will instead make future releases available online to fans in exchange for charitable donations.

Explaining this decision, he said it would take him out of the music industry mechanism, which requires artists create new song collections every "so many" years, "which nearly killed me," he said.

Music-business contracts commit artists to certain release cycles. For example, a musician can have created a collection of songs across many years before winning a record deal. They then find themselves committed to a gruelling touring cycle, and to a record release every year.

This creates the phenomenon of the difficult second album, as artists attempt to manage more fame and commitments while struggling to find the inspiration to create new music in order to fulfill their contract. Commercial realities can arguably transform artists into musical battery hens, and dampen the quality of their art.

Thank you for the music

In recent weeks, both Metallica – renowned for their litigation against Napster – and The Bare Naked Ladies have begun their own experiments with digital distribution – experiments that could lead musicians toward more-autonomous futures.

While both remain committed to their existing labels, the acts are making MP3s of their live shows available from their Web sites for sale to fans.

Metallica's unedited soundboard recordings cost $9.95 as MP3s and are available here. The band is also making FLAC (an alternative higher-quality digital music file format) downloads available for $12.95. Downloadable CD labels – including tray and front cover inserts are also supplied, along with special booklets. The band is currently engaged on a mammoth North American tour, and each gig is made available within days of its taking place.

Bare Naked Ladies are offering recordings from up to 80 per cent of their shows for download, as MP3s with cover art ($13.99), or on CD ($20). The band sold over 35,000 songs in the first week of the experiment, with downloads outselling physical CDs by two-to-one, reports claim. While existing label Warner takes a slice of those sales, the band gets three times the royalties it accrues from studio albums.

These actions show that established musicians are already in position to make a profit online.

BPI representative Steve Redmond said the Metallica and Bare Naked Ladies actions show what can be done using the Internet for copyright holders: "This is bands profiting from their own copyrighted music."

He added: "Some people have come up with the idea that the music business is against the Internet. That's absolutely not true. But artists still need to be paid for what they do."

Culture shock at the power exchange

Other recent innovations from the creative community hint at future developments in music. The recent story of the Grey Album shows how the Internet fundamentally changes music distribution and control.

The Grey Album in brief: DJ Danger Mouse remixed the vocals from Jay-Z's The Black Album and the Beatles' White Album and called his creation The Grey Album. He sent about 3,000 promos out, until EMI told him to stop. However, Internet activists continue to make the Grey Album available online.

The Beatles and Metallica pop-up once again in another recent online happening, Beatallica, a pair of anonymous musicians who play Beatles songs in the style of Metallica.

The songs are made available free, and the musicians concerned hope to avoid legal action from Metallica or Beatles lawyers by remaining anonymous. It appears popular – since the release of the second album last week the official site has run out of bandwidth.

Break on through

Is it possible we are seeing the creation of a 'third estate' for music, opening the doors to new creative expression accompanied by a need to create new economic models. EMI's move to axe 1,500 jobs last week shows change is in the air. The company intends further focusing itself on a smaller roster of large artists.

Existing legal music download services are experimenting with the new territory. Apple's iTunes Music Store, for instance, has begun selling exclusive live shows – some recorded at Apple's own retail stores. The company is also offering pre-release tracks, for example from popular US novelty act William Hung.

The music business is reluctantly going through growing pains, as artists, consumers and the business itself renegotiate its business proposition, and the labels attempt to cling to control.

As Karl Marx once wrote: "Wherever a part of society possesses a monopoly of the means of production, the labourer must add to the working-time necessary for his own maintenance an extra working-time in order to produce the means of subsistence for the owners of the means of production."