That's an excellent conversation here, I've been very concerned about this matter lately, as anyone else who has even a small place in the music industry. It's obvious that everyone here is talking from their own perspective, and I don't see, in the responses to Immersion, a wilingness to understand the way of thinking that is the current, especially for the young generations, who are more accustomed to "music piracy" than anyone else.
I believe art, thought, and intellectual property in general is something which is too much important to be treated like a simple commodity. Obtaining the essence of a work (the actual music of a cd, the text of an e-book) does not constitute theft according to my ethics, and that comes from someone that is a musician and a label owner at the same time (I have financed about 7 releases in total, some mine, some of other people). While all the arguments made in favour of the intellectual property holders are no doubt correct - one should not produce something without receiving back something, again) I believe the cultural benefits attainted by the "liberation" of art and information are way more important. I've been a part of the generation that grew up with music piracy (I'm 25 years old) and I just own a 10% percent of all the music I have ever listened; being totally honest with myself, I have to say that I could never have enough money in my life to attain the same amount of musical knowledge. And I own about 800 cds, Lps, and cassettes altogether... I have also produced a great part of my music with the help of pirated music software (I know talking about these things in a public forum is a taboo, but I feel it's very important for this conversation). I would never have made the music I've made or have the knowledge I have without internet and file sharing. And exactly the same happens with most people in my generation, who I noticed have became people with quite high knowledge, character and artistic thought because of this situation.
It's also very important to be realistic; it's not music piracy that financially kills musicians, it's that people don't buy cds anymore. I would have bought exactly the same amount of music hadn't piracy existed, because the amount of money I spend in music has more or less stayed the same throughout these years, listening to a much wider amount of music has only allowed me to select much more carefully and attain only the pieces or art that are the most important to me, which I want to experience in the best audial and visual quality available. This, need to have a physical representation of something I love, and the knowledge that this system can only continue to function if the music producers receive back financial support, is what drives me to still buy music to this day, and this is exactly what I believe we, as the "music industry", should propagate to the music listeners and the world. Not the stern, conversative approach that considers downloading some music a theft, and will do everything it can in order to punish it, as all corporate labels do at this moment. The problem, of course, is that very few people think in the way that I have described, essentially because the majority's approach to art is much more superficial comparing to people in this forum, for example. The again, this is a bonus for small, specialized labels and genres. In any way, the tide has definitely changed and, independently of everyone's opinion, it doesn't seem to be going back in the immidiate future.
Musicians and labels got to find new ways in order to survive. I have personally given for free all albums of mine (as a musician, I mean) as a download to everyone that asked me; mainly because I believe that art is personal communication and this is what I was seeking at the time; however, I also provided the link to some mp3 blogs, and in result, while my work was practically unknown at that time, I recieved an influx or orders for some cassettes and cd-r I had released then. This proves that, unless the music is actually heard first, it can't be expected to sell, and that more and more people are buying music nowadays in the way that I have described: not as to listen to the music, they have already done so, but in order to attain it in the best quality available, and as a physical object which by "owning" represents their adoration towards it. Of course, it doesn't always work that way: there's a fine line between availability that helps and hurts an album. It's a very complex issue, but just think of the following: some blogs have more hits per day than a medium size ambient/drone/experimental label's website...
Finally, musicians and labels should always try to provide to the public new things that can't be reproduced. It really hurts when I see some cheap jewelcase releases with a 4-page booklet and mediocre layout: why would anyone want to own that? Also, live performances: that seems to be the only certain source of income for musicians at this time: the experience of a performance can never be really reproduced. I'd love to see performances of ambient artists but there are so few, especially of the Hypnos type, not the drone bands that are all over nowadays. And the list should definitely go on...