The Music Industry can not keep fighting to preserve their status quo. Internet, mp3 and iPods have changed the way we ingest music. DVD/CDs are doomed to disappear. The music and film industry will need to adapt to survive.
A wonderful extensive article has been published by Wired: David Byrne’s Survival Strategies for Emerging Artists — and Megastars. This is the best informed article I have recently read on this topic.
This chart from the article shows the trend for the Music Industry both in size and in formats.
With the costs of recording, manufacturing and distribution going down to almost zero thanks to Internet and new technologies, the role of the music labels becomes very thin, and many will disappear. At the same time, live performances are not part of promotion any more, but a business in itself generating revenues for artists. Similar to the music model before the 20th century, where artist made money mainly with performances. Only that today there is merchandising, advertisement rights, and publishing royalties (for adding the song to an ad or a movie) to add to the money inflow of artists.
Internet help artists to have their works popular to a wider audience. Artists have only to adapt to the new business models. Labels will need some painful restructuring, just as other industries had before.