Your Boston music scene friends are making a fundamental attribution error. They're blaming file sharing for the "scene" changing from factors entirely unrelated to file sharing.
1) In the 90s "record" sales were anomalously high. Record companies not only published new music CDs but republished fifty years of back catalogs either in compilations or CD reissues of albums that had long been out of print.
2) Movie soundtrack albums became big business. The 90s saw dozens of movie soundtracks go multi-platinum and many many more go gold. That was mostly unheard of in decades past.
3) Retail chains leaned into CD sales, some like Best Buy selling them near cost at times to pull in halo sales of other products. Specialty retail chains also grew during this time.
4) Malls as retail hubs also exploded during this time putting record stores in easy reach of more people.
5) Consolidation in FM radio and "format" stations massively increased the reach of label promoters. No longer did they need to deal with thousands of individual DJs, they could just don't-call-it-Payola-but-it-still-was promote stuff to programming directors and it would get on the air in a hundred markets.
6) CDs being much cheaper to manufacture allowed more independent labels to actually manufacture records for sale. Smaller labels serving niche genres were able to get in more records manufactured for sale.
7) Music got much cheaper to actually record and produce DAWs that just got cheaper and more capable. By the end of the decade you could record an album in a living room or garage and it could sound really good.
8) CD players became incredibly cheap and omnipresent. Every PC, portable stereo, car, and most game consoles (save Nintendo) ended up with built-in CD players.
All of these factors combined to form a massive sales bubble around CDs. It peaked around 2000 mostly because the anomalous sales of back catalog stuff reached a saturation point. It didn't totally burst because there was still a long tail of niche music being sold alongside megahits.
The sales of CDs dropped as sales through services like iTunes increased. Then further with streaming services.
While file sharing got a lot of attention it actually had a very small effect on music industry financials. Music buyers still bought music. The CD bubble burst because the back catalog sales had reached saturation.
The music scene changing in Boston or elsewhere after 2000 is more related to economic trends. Record chains overextended themselves and went out of business, they thought CD sales would continue forever. Chains like Best Buy, Walmart, and B&N ate their lunch because they could sell CDs cheaper. They could price CDs lower because they made their nut on other products. Music was just another thing to get people in the door. Apple and Amazon put the hurt on those chains with online sales.
Pretending every downloaded track on Napster was a "lost" CD sale is record label propaganda. They sell it to musicians so they blame evil pirates for picking their pockets so they don't notice the label's hands in there.