Smokey,
I have never understood why tape copies are allowed but not digital. At least from a legal point of view.
In theory, if not in fact, tape copies are (would be) illegal too because the artist and producer get no royalties, but there's a big difference between analog and digital copies and copying. Analog copies were of mediocre to poor quality compared to the original, but digital copies are indistinguishable from the original. If you recall, some year ago, the big music companies raised the same stink about a new technology called DAT (Digital Audio Tape) recorders, saying that they should be prevented from making copies of music and function as playback units only. Fortunately for them, they never caught on partly because of the high cost of the units and partly due to the advancement of CD recording. DAT's became moot point, and CD recorders were going for $500-600 initially, but dropped in price rapidly. Now they were worried because the average Joe Schmuck could make perfect duplicates. They can't develop encoding schemes for analog recordings because analog could care less about them and what's more, only a small percentage of people would be happy with an analog copy anyway. Digital is a whole other story.
Years ago, people bought 78's and 45's which had two sides. You bought it for the "hit" side and didn't really care too much what was on the back. Then came 33 1/3 LP's which had an average of 9 cuts on it, but you bought it anyway because you liked the general theme of the whole album. Record producers (and I use the term loosely to include tapes and CD's) latched on to a good thing and produced tapes and CD's with one (maybe two) hits; and the rest was garbage thrown in to fill it up, and then charged an outrageous price for them. IMHO, they brought this problem upon themselves. People are not willing to pay for junk, so Napster and others provided an alternative: pick the tunes you want, and ignore the rest. Don't even ask me if I think it's right or wrong; I won't make a value or legal or moral judgement about those who use those services.
The solution is quite simple and is being implemented as we speak - offer the consumer the tunes they want at a reasonable price and you have eliminated the problem for the most part. Sure, there will always be those who want something but don't want to pay for it, but to try to legislate morality and technological advancement is just plain wrong. You can't punish the many for the wrongs of the few.