What is needed are new ways for creative people to get paid. Suppose a musician simply released his music for free, and each file contained a link allowing the listener to donate to the artist directly? This way, each copy of the file is a potential revenue-generator; the more copies, the better. Or, perhaps artists could hold listeners hostage: "We've got a great new album ready, and we're going to release it free forever to the world - but not until we get $3 million worth of PayPal donations at u2.com!
Record companies need to realize that the revenue they are losing from reduced CD sales can easily be replaced with online sales. There are billions of songs downloaded every month...even at a few cents per song, that's hundreds of millions of dollars in potential revenue per month.