Digital piracy has spiraled out of control in 2011 with film studios, distributors and retailers anxiously looking for a solution to stop the upward trend of illegal digital copies leaked online.

People downloading movies and music illegally are unaware that their actions are damaging the economy and in turn, inflicting harm on their own employment opportunities. In fact, when you download a song or a movie from the internet without paying for it, the revenue from selling a physical copy is lost which would have gone to the artist/ film studio, and in turn would finance other movies and albums.

Some argue that music artists earn too much, like Beyoncé, who seems to have record breaking music tours, and earning millions of dollars. Lady Gaga and Justin Bieber haven't done so bad in the downturn, topping the Forbes 100 most powerful celebrities and earning millions of dollars from tours, sponsorship and album sales.

But for independent artists, who make up the bulk of the entire industry (not those at the top), its a painful reality. How to get people to notice you when you can only get attention from viral videos on youtube? With all these viral video covers, the only people getting a real benefit are the original artists, who get additional marketing for their song. Then when an indie artist has a shot at making it big, labels will no longer pay for artist development, and will cut as many corners as possible because they themselves are losing money on their own music sales.

What is more frustrating is filmmakers are left to shoot their short, or indie features and struggle to find distributors who are also losing money from mainstream releases from piracy. So how does it affect the wider economy?

Well in India for example, the film industry lost $1 billion in revenue this past in year in a report that puts a grim milestone on the economic damage. But then what about those who make money out of selling illegal DVDs or CDs? They might be turning a profit on the bootleg distribution, but even that is heading for a downturn because no one wants to spend any money on physical products.

When I spoke with Olivier Tena, VP of Paramount, he gave a bleak assessment of piracy and its effects on the business:

"Piracy is a major issue for the entire entertainment industry. Studios and governments are working hard to address it around the world, but it clearly impacts our business."

I also asked him about film investments, and whether digital piracy would mean there are fewer films made. He replied:

"This is a possibility. Movies have to be cost effective and if piracy continues to erode profits, then it will be difficult to continue investing in as many films."

How did this happen? Napster was the first real network that took p2p sharing to a whole new game, but with bitorrents and other file sharing platforms still around, there is no end to digital copying, piracy and free movies. Websites are shut down, but days later appear back up.

In a landmark case, Hollywood is attempting to force an ISP (British Telecom) to cut off its customers from a website called 'Newzbin' that recently went into administration but appeared elsewhere under new management soon after, which revived the case. The site earns money from memberships and shows people where to download free movies and software. However it seems even shutting down sites, and suing individuals who share illegally is not enough to stop the upturn in piracy.

Is it time for government to regulate the internet when it comes to file sharing without affecting human rights? This is the biggest challenge the entertainment industry faces this decade. If it can stop digital piracy, then economies will benefit, not just the industry itself. After all, making a movie is not just about shooting the film itself, it encompasses many skills, industries and communities.