Is it even possible?

I wouldn't worry too much here, the reality of it is is that what he is proposing just isn't feasible. How do you successfully decide whether a file is legal or illegal? The first problem is that trying to produce a "register" of illegal files is very hard. You could try downloading loads of files from various file sharing servers and assuming they are all illegal. But in reality one person probably has the legal version of that floating around since they ripped it from CD originally. Let's ignore those problems and assume that you can successfully do that. You then have to try and detect which files are played that are illegal. You can't do a detailed comparison, or some 99.9% correlation comparison, because that would involve downloading/uploading the whole file every time you play it. So instead you would hash the file and compare hash with something up on the server. Ok, I'll "fix" that in a number of ways:

1) Only play my music on non-online boxes - move the data with external HDD or flash-key or iPod equivalent.

2) Produce some software that after downloading and during decryption of your "illegal" files does some random bit-flips in unimportant parts of the file - there are plenty of things that you wouldn't notice if they got changed - especially in the tags etc.

3) Add a 0.01s silence to the start or end of every song. Randomise the bit length of the silence to make it really hard to strip out - also make it "almost" silence so it sounds like silence but actually has really quiet white noise.

4) Re-encode your files on receipt.

Now the simple fact of the matter is the RIAA isn't protecting artists its protecting its own corrupt business models. If you look at a platinum album from an artist in the UK, they have sold 300,000 albums. The band has probably taken performance royalties of 8-10% of which there manager has taken a cut. The writers royalties are about 8-12%. Assume the band didn't write their own song, and the manager is on about 20%, and the album sells for £14; the band get to share out about £270k. That's probably for the best part of a years' work making the album. And that's assuming the thing goes platinum. A hell of a lot of albums don't sell anywhere near that number. With 4 people in the band, they get paid less than £70k each per annum for being really successful. That's about the same as being an electrician on the Heathrow T5 site. Now compare that to the music industry. The remaining 80% of the cost of the album gets split with about 50% going to the supply chain, and the rest to the record company. So expect the record company to make £1.26M from the same album. From that they have to put up a few adverts on the tube, and a couple of adverts on TV. Don't forget though, once a band has made it, a lot of the advertising comes for free by appearing on radio and MTV etc.

Where do bands make their money. From anything except selling albums usually. Ok there are exceptions. Pink Floyd have shifted 40 million copies of Dark Side of the Moon probably making them a good £15M each. But most bands make their money from touring. Putting 10,000 paying customers into an auditorium at £20-£50 a ticket where the band take 1/2 the proceeds for a night's work is far more profitable. So long as you don't blow all your money on a huge stage-show like Pink Floyd's The Wall of course.