The Copyright Alert System is being put into place this week to deter pirates, but it appears that innovative business models are already doing that just fine.

A recent NPD report says that music file sharing was down 17 percent in 2012 compared to 2011. The volume of music files downloaded from P2P services was down 26 percent from last year. Other forms of sharing music – burning CDs, swapping files and downloading from digital lockers – were also down.

But wait, the music industry tells us that piracy is destroying its business, and that this must be dealt with by using anti-consumer approaches like the Copyright Alert System? Did the looming threat of the oft-delayed CAS drive piracy rates down last year? Not in the least.

The NPD reports that 40 percent of consumers who had used file-sharing services in 2011 stopped last year because they found the joys of legal streaming alternatives, like Spotify. Who would have thought that making music easier to access, and free to boot, would be a deterrent for piracy? Pretty much everybody but the music industry.

The music industry may be coming around to the idea that transformative business models is what it really needs though. The industry just posted its first revenue increase since 1999 today, and attributes most of that to digital sales and the licensing fees it gains from free streaming services like Spotify. In fact, Edgar Berger, chief executive for Sony Music Entertainment, told The New York Times that “digital is saving music.”

This tidal wave of good news isn’t going to discourage the music and movie industries from moving forward with its plans to punish its most loyal customers. What it does do, however, is give Internet proponents some more ammunition next time the music industry pushes some new restrictions on digital music downloaders while conveniently forgetting that the Internet is what’s saving its business.

In short, the music and movie industries need to embrace more digital business models like Spotify. Make things easy to obtain at a reasonable price and people will drop BitTorrent immediately. It’s not like pirates want to see these businesses die. They just want to be treated as an equal partner in the consumer/business relationship – not a slave that’s expected to buy anything and everything regardless of the stipulations.

[h/t: The Next Web]