Few saw the potential of Napster in 1999, said Mr Taylor.
The music industry would be in better shape now if it had engaged with Napster rather than fought it.
So says Geoff Taylor, head of music industry body BPI, in a column written for the BBC.
In the column, Mr Taylor expressed "regret" that the music industry did not move faster to work out how to use the net to promote and sell records.
But, he said, many sites that have come in the wake of Napster pose a threat because they are populated by pirates.
Mr Taylor said it was "probably true" that the music industry would be better prepared in 2009 if it had worked with Napster instead of taking the service to the courts.
"I, for one, regret that we weren't faster in figuring out how to create a sustainable model for music on the internet," wrote Mr Taylor.
He added that the music industry in 1999, when Napster debuted, would have struggled to create that business model because of rights issues, a lack of good copyright protection software and an inability to track downloads so that royalties were properly awarded.
The invention of Napster and all that has followed may soon deliver its greatest legacy - a renaissance in artistic creativity for the digital age
The music industry took on Napster, said Mr Taylor, because the file-sharing system had no interest in developing the elements needed to turn it into a business.
"In 1999 Napster developed a great digital service, but did so at the expense of music, while the music business protected music at the expense of progressing online digital services," he wrote.
Ten years on, said Mr Taylor, the music industry has got to grips with digital music, but added that file-sharing sites and technologies that have since emerged are doing damage to the music industry.
Innovation and investment, he said, was being undermined by piracy.
"There is simply no getting around the fact that billions of illegal free downloads of music every year in the UK mean that significantly less money is coming into the music ecosystem," wrote Mr Taylor.
Finally, he said, Napster's impact would be on more than just technology.
"The invention of Napster and all that has followed may soon deliver its greatest legacy - a renaissance in artistic creativity for the digital age," he said.
In response, Jim Killock, head of the Open Rights Group, said: "It's great that the BPI are willing to apologise for their past mistakes with Napster, but they are busy trying to make the same mistake again by 'clamping down' on illicit P2P.
"By trying to get the government to clamp down on users, they risk alienating music's greatest fans, and bringing copyright into disrepute," he said.