[6stringmerc]

No, you're absolutely correct in the traditional way of doing business - just think back to AM/FM radio in the US. The songs were advertisements to go buy the record, which made the record companies a lot of money and the musician usually pennies.

Once people didn't have to pay huge mark-up to get music they rationalized that musicians weren't getting much anyway - so, let's spend our money on live shows, merchandise, fan club stuff - and there's a lot of music lovers that I believe have spent their money from recorded music on other music related things. Not sure there's data to support it, but I've always thought of recordings as kind of the throw-away element to being in the music industry: Nobody makes money on them unless you get them in a TV commercial or a movie soundtrack.