In a time when both consumers and artists already cite hatred of the RIAA and its policies as reason enough to share music illegally, this is possibly the worst tactic they could have chosen.
The main problem is not the legal, social or artistic ramifications (although those are not to be taken lightly). The difficulty they will create for the industry is technological in nature. The only reason the RIAA can pursue their present course of action is because of the recent ruling against Verizon ordering them to surrender the identities of two file-sharers. Verizon did not want to do this, of course, because it reveals how an ISP can identify its users at all times. But the opposite side of this revelation is that the most popular file sharing application in the world – KaZaA – contains inadequate privacy protections.
Actually, we already knew this. This was what has provided the only window of opportunity that the recording industry may have had. As long as the dominant file sharing system did not protect its users identities, the threat of legal action could drive those users away. But what would they be driven to? The RIAA thinks they will be forced to go back to pre-Napster times and buy the music in stores in CD format. Or maybe use an industry supported system like iTunes Music Store, which only gives them access to a limited library. This, of course, is ridiculous. File sharing systems are as much about convenience as they are about cost.
If the recording industry had a workable alternative in place -- say a subscription-based peer-to-peer system -- then users might be driven to that, and not even mind. But since no such system exists, the RIAA's lawsuits -- if successful in scaring users -- will drive consumers to systems like Freenet, which provide the anonymity that KaZaA lacks.
This mass migration from standard to standard is not a hypothetical. When it comes to free software downloaded from the Internet, users have little brand loyalty, extremely low switching costs, and the dominant player in any given segment can change overnight (e.g. Netscape falling to Internet Explorer, Napster users fleeing to Morpheus, then switching to KaZaA). This lifecycle is almost predictable, so long as there is a legal and technological arms race at work.
KaZaA is, in an absolute sense, a low quality system which the industry could easily improve upon if it had the will and desire. A better system, if priced properly, would rapidly gain enough acceptance that the incentive for a third-party group to create and support a free exchange competitor would be greatly diminished.
If the RIAA's user-hostile plan succeeds, then they will directly accelerate the creation of an adversary that is beyond their ability to contain.