There sure are a lot of zeroes in 5,000,000,000. Visualizing the number is important. Listening to it is even sweeter.

Apple (Nasdaq: AAPL) has now delivered more than 5 billion song downloads since the launch of its iTunes Music Store. That's a big number, especially to a struggling prerecorded-music industry that's reeling from the gradual slowdown and eventual extinction of the compact disc.

Cheers turned to jeers, however, when the International Federation of the Phonographic Industry reported that global music sales fell by 8% to $19.4 billion last year, the industry's slowest throughput in more than a decade.

The IFPI study found that while digital delivery of tracks and ringtones climbed 34% to $2.9 billion, it wasn't enough to offset the 13% drop in sales of physical products, which rang up a total of $15.9 billion.

The report points the finger at what it estimates to be 30 billion songs that were downloaded illegally last year. That number in one year is considerably more than what Apple has sold in several.

However, it always pains me to see the labels whine about the peer-to-peer file-swapping networks as a total loss. I recognize that it's a problem, but do the record companies really think that most of the tracks that teens download would have ever been purchased? That's like saying Chick-fil-A counts the chicken samples it gives out at the food court as sales, or that a restaurant offering complimentary toothpicks or after-dinner mints would move just as many if it charged for them.

Intellectual capital for dummies
The music industry's problem is not piracy. The labels would love to think so. They love suing software companies, Internet portals, and even music fans. They're all easy scapegoats. At this very moment, the labels are suing China's biggest search engines, including Baidu.com (Nasdaq: BIDU) and Sohu.com's (Nasdaq: SOHU) Sogou.com. How delusional are you when you assume that some penniless Shanghai teen who's downloading hundreds of songs at an Internet cafe would buy those tracks instead?

Yes, such acts do constitute robbery, but since the deeds don't involve physical inventory, the industry is not out of a product that it would have otherwise sold. The labels are in denial about this. They point to a practice that most can agree is wrong, but they don't see that what's happening is more of a symptom than it is the actual malady.

Why can't the music industry accept reality? Piracy didn't move its cheese. The Internet is the Muenster-moving monster.  

Yes, the Internet.

How the Web was wronged
Take yourself back to the pre-Internet days. The music labels still controlled the tunes you heard. They were the ones bankrolling artists, spending heavily on marketing their acts, and filling the few slots of airplay available on terrestrial radio.

A decade ago, the labels were the introducers. You discovered new bands by watching big-budget MTV videos or whatever made its way through the narrow playlists on the FM dial. There were the occasional "Eureka" moments as you walked into an indie record store, hit a cool club, or were handed a life-altering bootleg mixtape, but mostly, the labels were pulling the strings.

How is today treating you? When is the last time a music video or a terrestrial radio got you energized? The modern discovery process typically has you unearthing an unsigned band on News Corp.'s (NYSE: NWS) MySpace, an unheralded act on a satellite-radio niche-specific channel, or a new-music site such as Pandora or CBS's (NYSE: CBS) Last.fm. These are the new introducers.

So why point the finger at piracy? Blame social networking. Blame Sirius (Nasdaq: SIRI). Blame Apple's iPhone. The labels have revenue-generating agreements with all of these outlets, but the Internet has leveled the playing field. The equation has changed. You have the same number of eardrums on one end, but on the other, you have an exponentially growing number of musical artists being divided among those same eardrums.

Concert promoters such as Live Nation (NYSE: LYV) are doing just fine, despite the label malaise. Our appetite for music remains strong. However, with so many unsigned bands happy to give away music to build audiences, how can the labels expect to sell as many CDs of signed acts as they used to?

It's not realistic to think they will. And there's more to the matter than just iTunes. Apple has moved 5 billion tracks, but there's a world of 6 billion people out there, and the labels' grasp on them gets thinner with every connection.

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Longtime Fool contributor Rick Munarriz is not a Muenster monster. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.