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Most independent studies I've seen seem to support the idea that the downturn in the music industry is structural rather than being the result of file sharing. As Harry pointed out, the general consensus has been that taping an LP you already own is fair use. It is this same principle that has led by extension to the consensus that ripping the songs on a CD one owns to mp3 so they can be enjoyed on a computer or mp3 player is also fair use.
Currently, in the US it's not spelled out explicitly by statute either way. It's considered legal under fair use but no one has specifically ruled whether it is or not. The music industry would obviously prefer that it be ruled illegal, citing the precedent that people had to re-buy music when they converted their collections from LP to CD. However, the counter-argument to that is that people were able to convert from LP or CD to tape without re-buying their music and that home copying to tape has been historically considered non-infringing.
Personally, I consider that ruling it infringement would be disastrous for the RIAA. In one stroke they would alienate most of the few supporters they have left. Their big problem right now is that they are treating their customers as enemies, which is not a way to build support. Many people see the RIAA as an essentially parasitic body that does nothing but sue people and artificially inflate the price of CDs. Among other things they have never let anyone be exonerated, not even those people sued by mistake who neither owned nor had ever used a computer. They would only drop the charges with prejudice.
This is an extremely important case for a number of reasons. As I said earlier both the defendant and the plaintiff are on trial and precedent will be set.
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