I don't think the qualitty of sound in a MP3 affect CD sale. Most people don't even realise the difference, unless it's a really bad MP3.
The popularity of music copying is purely economical - You can pay 20$ for a CD with one or two good songs in it, or download them for free. People aren't dumb... And they aren't rich.
I'd say that if the music industry dropped its price to a more realistic level, sales would go back up. But I'm no expert in the matter.
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