<devil's advocate>
I highly recommend a visit to www.mp3.com for a real reason why the music
industry might be scared. This site contains thousands of "legal" music
samples, most of which are from obscure local bands throughout the world.
Like the rest of the net, you need persistence to wade through the dross to
find the good stuff, but there is quality music there.
For me, the really interesting part is the fact that you have a channel for
the distribution of music which is almost entirely divorced from the
promotional hype produced by mainstream music companies. In other words, the
selection of music is no longer based on the promotional _image_ of the
artist, rather the music they produce. And it is the production of image,
and all other associated marketing factors where the music industry adds
value (such as it is :).
The point is that MPEG layer 3, HTTP and so on are enabling technologies for
artists to entirely bypass the established music publishing and distribution
industry.
I'm no expert, but it seems that the music industry spends a lot of money
justifying it's existence to the general public to the basis that it
promotes "unknown" local artists, thereby enriching our culture. (I happen
to think it does the exact opposite, but that's beside the point.) This sort
of argument was put forward when the federal government decided to change
copyright laws to allow grey-marketing of CDs. The same argument is used in
the US (and also here?) to justify the music industry receiving a cut from
the sale of blank recording media.
MP3 is a technology which can do far more to promote these "unknown"
musicians than the mainstream music industry ever will.
</devil's advocate>