Pistons and Windmills
The conveyor belt that the record labels relied on to bring money from the customers to them (and ultimately to the artists) was abandoned. This didn't mean that entertainment was dead. Hardly. People have always been willing to part with cash for entertainment and the people who do the entertaining have always needed that cash to eat and pay their bills so that they can make that entertainment. This has been going on as long as civilization. The problem was simply that the method everyone had relied on for the past 50 years was breaking.
Now there are plenty of ways for cash to move from consumer to artist. Humans figured them out eons ago; After all "writer", "artist" and "musician" were careers long before recording technology. And the Wild West that was the internet was teeming with new and varied attempts to move money away from consumers. But the music industry was dying and it was dyeing because it held to this outdated paradigm. It was outdated because it relied on users being contained and forced into it and with computers that was not the case. Up until now all music transfer had to occur on the shelves of a music store or across a fixed number of radio stations. There were contained paths of distribution and the labels were able to fix dollar sales to them. But with computers and the internet there were new ways out and around the contained distribution channels, but the people who had fixed the music sales there myopic. They saw the forces that were opening up their paths and letting sales leave, but they didn't see the opportunities for sales that these same forces were opening up.
The entertainment industry was experiencing a shift to a paradigm of complete abundance. Economists have to have a better term for this-- It's the kind of thing that I'm sure appears as a vocabulary word on a spelling test your first semester of any accredited MBA program. But I don't have an MBA, just a lot of philosophy books and a stint as a bookkeeper at a punk rock record label.
The paradigm that I saw was broad and it pops up in many disciplines, not just economics. In fact I think it can best be illustrated be a non-economics example: a windmill and a piston.
Both a windmill and a piston are machines built to capture force and convert it into torque; that is to say, turn a rod. A windmill uses the force of moving air to turn the shaft of a wheat mill as does a piston use the force of exploding gasoline vapors to turn a drive shaft. The difference is that a piston is built to contain and squeeze the energy out of the thrusting motion by containing it inside the cylinder, while a windmill does not try to contain the thrust but merely collect as much as it can. The difference is that one is dealing with a source that is contained and finite and the other is dealing with a source that is uncontained and infinite.
Again these 2 paradigms can be seen in many disciplines. In marine biology you could compare a shark to a whale. The shark has to go after a single fish, chase it and eat it. A giant blue whale does not bother chasing individual krill. It merely opens it's mouth and tries to collect as much as it can; it isn't designed to be concerned with what it may be missing. A shark can't do that, it has to worry about missing what it is trying to eat. In fact I once watched a documentary where they made the point that small fish school together as a way to prevent large predatory fish (like sharks) from honing in on any individual member. This makes it nearly impossible for predators to be able to catch them.