I'm late to this discussion, but still wish to join in.
I co-own a free netlabel which releases ambient and near-ambient music. I support Creative Commons releases of material under BY and BY NC licenses, and release almost all of my material, if not all, under a Creative Commons license.
Although I favor releases which are more "open source", that does not mean I condone or approve of things done by people who take it upon themselves to release copyrighted material without a permissive license or direct permission. I disapprove of the practice of making other peoples' intellectual property available on other than a fair use basis.
I consider that this is a key issue not only to a small traditional label owner, but also to someone who, like me, believes that labels must inevitably completely reshape themselves to adjust to the new technological/cultural realities of virtual digital media. This is because I think it is important that any in-roads in traditional record labels be accomplished through permissive licensing rather than through piracy. This is because a coherent rights regime
for intellectual property, including permissive licenses, is far better than a "pirate bay" approach.
I believe that a rights holder such as an artist or small label must utilize appropriate firmness about removal of unauthorized material on other websites. The fair use of excerpts for review purposes, if judicious, would be one thing. "Download this release here in 320 mp3" is another thing. "What should a small record label do?". Alert each such site to take that work down.
At the same time, the key weapon Hypnos has is its fan loyalty. I take inspiration from what Issa (formerly Jane Siberry) and Kristin Hersh are doing. Issa pioneered the self-directed pricing download plan. Kristin Hersh has self-directed or prescription pricing, and posts not only mp3s but also FLAC and even remix stems. I believe that this kind of read/write interaction between audience and creator is essential. I shy away from buying material which lacks Creative Commons features, with limited exceptions.
I buy less Hypnos now than before, though I would never listen to any pirated Hypnos material. This is because Hypnos does not offer digital downloads yet. I would never argue with the point of view that CDs are better sound quality. That's really beside the point. For me, digital downloads and use of my mp3 player is my main mode of
listening. Although I make enough mp3s of my own work to have the requisite conversion softwares, I rarely want to buy the CD to rip the mp3s myself.
CD pricing irks me, because the artificial inflation at the pricing at its outset was never adjusted downward when the mode got popular. This has been an unmitigated disaster for the recording industry, both major and independent. The classical music recording industry suffered massive sales declines, although the classical market is not an illegal downloading contingent. The culprit was not piracy, but a pricing structure that drove away its purchasers. The exception? Budget label Naxos, whose per-CD cost was dramatically less than major-label standard.
When I buy an album from magnatune.com, I can get high-quality Mp3 downloads, CD quality files, the right to re-download if I lose my mp3s, the right to remix the tracks for non-commercial purposes, and even the right to preview all the music on an XPSF player before I buy. I can find great ambient music on that label, including many "name" artists. Why would I buy from a label which offers me only CDs at a much higher price?
The people who are pirating your label's artists are in the wrong. I believe that a small label demands their compliance in ceasing the practice, and takes such steps to secure compliance as your lawyer and IT professionals suggest.
I have no kind words for piracy, because my thesis is that (a) pirating big label works perpetuates material that should not be perpetuated; (b) pirating small label works often is a matter of taking from the worthy little buy for no good reason; and (c) piracy removes the market pressure to reform the industry that a meaningful consumer insistence upon read/write products would create.
I hope that people do not pirate hypnos works. it's not only wrong, it's banal to engage in such piracy.
But I do want to see the day when hypnos, one of my favorite ambient labels, offers the features I have come to expect in the small labels I patronize.