I worked in the marketing department of one of the 5 'major' record companies for 4 years up until about 2 years ago, and still a lot of my good friends are music industry people. This by the way is here in Australia. At these companies you have to remember that 95% of the employees are like you and I: massive music junkies. They just get to live a dream and spend their lives around music. The orders for clamping down on downloads etc come right from the top and have little genuine support. I know here in Australia the orders come from the US (take legal action, campaign against it at every opportunity etc) and while the local heads comply with the orders (if they didn't, they'd get the boot obviously) they don't agree with it.
Sales of cd's are only down by a minor amount. The difference though is in two areas: Singles are dead and buried, and the sales are spread across a wider range of titles. Lets say in 1994 110 CD's were sold on June 8th. In 2004, 100 CD's were sold. Slightly lower %. In 1994, 10 CD's sold would have made you #1 for that day and only 30 titles were bought. In 2004, only 4 CD's sold makes you #1 but 80 titles were bought that day. Make sense?
It's not hurting CD sales in total, but it's killing the massive sales figures on single albums. Music downloading is broadening peoples tastes and sales are showing it. It's really about access and choice.
So why don't the CEO's in New York, LA and London like it? One is the relationship between big business entertainment and media companies. They need big selling mega-artists. From magazine covers to radio stations to tv shows, they need those (remember at the top, most of these companies are all owned by the same people - Sony music, tv, film etc, Time AOL Warner, Vivendi Universal etc). Having 5 huge artists and 100 medium size artists on the bench is what they like. Not 105 medium artists. Particularly the relationship between radio, music tv (MTV etc) and record company. The other, and it is the big one, is quite simple. Record companies like every other business now care mostly about one thing and one thing only: share price. Music downloading takes control away from the record companies, radio stations and music tv and puts it in the hands of us. What they push isn't always what we notice and buy any more. They have to at the very least show they have control. They have always had an insane amount of control, literaly picking and choosing what it is we will buy, and then hyping it to the satisfactory sales levels all on their own. They have lost that. It makes their business look bad.
I think there will be more, greater upheaval in the music industry in the future. I think it's an awesome time for young music entrepreneurs. I think it will take huge balls for the major record companies to shift their thinking to what will be succesfull in the future. I don't expect to see any of the Big 5 do it, but I think it's important that people know that it is only a small handfull of executives in a boardroom in New York who don't want it to happen. The vast majority of record company employees know better than anyone else what the way of the future is, but obviously just tow the line, and you can't blame them. They have their dream jobs and they ain't about to throw them away.
Record Companies have to become 'Music Communities'. Still be the service that brings us our music. CD's won't die for a little while, and paying for music doesn't ever have to die. A band will still need a large and powerful company behind them if they are to record, manufacture and distribute their music to record stores all over the globe. They will still need a large and powerful company behind them if they are to be known, heard and popular. And music will still always be a 'sold' product. There will always be promotion, marketing etc. There is a place for record companies. What they need to do though, instead of throwing up the walls and locking the doors and trying to fight the consumer, they should be opening up further and further. People will still buy what they like, but they expect more choice and better access. Basicaly, the consumer has taken control of the market, and they can either keep fighting it and lose (and they will), or just simply ask, what do you want now? What would be better than the p2p systems you use? What do you want, as a U2 (or whoever) fan, to get from U2? How do you want to get access to, and 'browse' new music?
Blah, it's getting late...... I could rant for pages.