The music industry may finally be winning its game of music piracy whack-a-mole, thanks to the use of increasingly effective technological hammers.

According to an Internet research firm, Forrester Research, illegal downloads have cost the music industry $697 million a year since 2000. But after years of declining sales of 7% or more, CD orders jumped 10.2% in the first half of 2004 compared to last year, according to the Recording Industry Association of America.

And while the RIAA has been smacking down loaders with lawsuits, individual record labels have contracted technological mercenaries to make using the peer-to-peer networks where people go to illegally download music more difficult.

“The whole idea is to increase the frustration and take away the fun quotient of these networks,” said an executive from one company that provides such services, Marc Morgenstern.

His company, Overpeer, protects 70,000 music, video, and software titles from piracy by flooding the most popular networks – Kazaa, Grokster, and eDonkey, among others – with thousands of garbage data files bearing the titles of popular songs.

The decoys appear at the top of user searches for the title. On searches for the most popular songs, fake files sometimes constitute 95% of the results.

The files are designed to appear to come from many different servers, and they’re large enough to require the appropriate amount of storage.

But when users listen to the fakes they may hear a few seconds of the song before it cuts off, or it might contain just static. Or the user might be directed to a Web site where they could legitimately purchase the song. Though Mr. Morgenstern would not name his clients, Overpeer is paid to increase traffic at certain music Web sites.

Combined with the every-day potential for downloading an incomplete or virus-laden file, some users are giving up on the process.

A quarter of self-reported music pirates said they stopped downloading because they found the process frustrating, according to a 2003 survey by Internet research firm NPD Music and Movies. In the same survey, 38% said they liked online music stores because they were safe from viruses and assured a no-hassle experience.

“If you’re someone who’s 25 years old with a job, you have more money and less time than you did in college,” said a senior analyst for Forrester Research, Josh Bernoff.

Those people are more likely to get frustrated with the wrong files and begin downloading music legally. Both Forrester Research and another firm, Jupiter Research, have conducted surveys with similar results as NPD.

An RIAA spokesman, Jonathan Lamy, said individual music labels contract with companies like Overpeer. But Mr. Morgenstern guarantees all his clients anonymity, and no music labels would comment on whether they use these tactics.

“I don’t think it’s unreasonable to say it’s having some effect, but it remains a pervasive problem,” said one record company executive.

Some people believe the industry brought its woes upon itself, producing bad music for too much money, or that people are spending money on other entertainment.

“I don’t think piracy is the main thing forcing music sales down, ” said a senior analyst for Jupiter Research, David Card. “A bigger problem is money is going to video games and movies. The RIAA is blaming an easy target on the overall ills of the industry.”

The average CD price from the top 50 CD sellers dropped 3.1%, to $13.29 this year from $13.79 in 2003, according to a survey by NPD.

Another change during the last year is the advent of legitimate online music purchasing. Jupiter forecasts $270 million in revenues from sales of digital music by the end of 2004, triple last year.

“Still, music consumers are going back to buying CDs,” Mr. Bernoff said. “You can’t stop piracy, but they have managed to slow it down.”