The record labels did it themselves
One former music store owner has written a piece in the NYTimes about how the record industry killed itself, not the downloads. The underlying problem is the fact that the big labels are more interested in what their pocketbook is like now, and pay no attention to the future. Their decisions are in no way based on consumers. From the article:
In the late '90s, our business, and the music retail business in general, was booming. Enter Napster, the granddaddy of illegal download sites. How did the major record labels react? By continuing their campaign to eliminate the comparatively unprofitable CD single, raising list prices on album-length CDs to $18 or $19 and promoting artists like the Backstreet Boys and Britney Spears — whose strength was single songs, not albums. The result was a lot of unhappy customers, who blamed retailers like us for the dearth of singles and the high prices.What the record labels did was increase prices to compensate for the dip in profits, but in the long run, they made more of an incentive to download. With such high prices, it practically encourages people to download. Even with online sales legal, music companies are focusing on albums, which has been proven to be wrong. The only way they can continue to exist is to create high-quality songs, not albums.
