The purpose of this paper is to analyse MP3 technology, from its benefits to its limitations and explain how music is taken from a CD and ends up available to millions of internet users. The issue of piracy is also debated. It is an issue of increasing significance for record companies and copyright holders alike. The various methods in which the record industry are attempting to curb the high levels of piracy are also discussed and analysed, from the development of technology to legal issues, and from developing new business models to exploiting digital distribution for their own benefit. Also, this paper will analyse the changes in the industry that have been directly brought about by the introduction of MP3 technologies.