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Media critics may be right: If record companies had spent as much effort building a digital distribution network as they have fighting digital piracy, they might actually be making money online instead of complaining about it. This is the conclusion of a new report from KPMG and the Economist Intelligence Unit.

According to the study, "companies are wasting too many resources fighting digital piracy while overlooking potential opportunities the technology offers." KPMG says the report was conducted to gauge the media industry's progress in managing and delivering digital content.

A survey conducted in July of 2002, which was used to form KPMG's conclusions, posed questions to 38 high-ranking executives representing 33 of the world's largest media organizations, including six of the 10 largest global media companies in the United States, United Kingdom, Germany, Netherlands, Japan, and Australia.

While the study found that media executives are "upbeat" about their revenue prospects for digital content, KPMG says that the data reveal that relatively few are putting their energies into actions. Only 14% indicate that their content is available exclusively in digital format. "Another major roadblock for industry leaders is defining and taking stock of their intellectual property and the opportunity their digital content holds. More than half (57%) of the media executives surveyed had to admit to not having a formal content-review process in place."

"The value of the opportunities missed is, in fact, significant," says KPMG which estimates a loss of potential revenues of between $8 billion and $10 billion annually. "Despite the lagging progress, some are moving to innovate. Many artists have set up their own websites offering 'free samples' to promote their work. Others have begun to offer additional perks to those legally purchasing the music." As an example, the report cites several recent CD releases that offer customers who legally buy a disc a unique serial number which can be used to receive prioritized concert ticket purchases and unreleased music.

The study also reveals how media companies devote resources to piracy. The most popular approach is encryption, which is relied upon by more than 80% of respondents. KPMG says companies also rely heavily on law enforcement and the judicial system, with nearly 75% of survey respondents saying they actually take violators to court. The reports adds that "about one in 10 firms seem to have given up in despair."