So how did we get here?
You all know digital distribution can save you a lot of money. The marginal cost of production is almost zero. I think the public has rumbled it, too.
You make money in three ways; you charge for physical product, you grant licenses so people can hear the music, and you sell a lot of stuff associated with music. Only one of these may pose a problem in the future: there's still a lot of stuff to sell.
Your problem has been that you've allowed yourselves to be swindled by the Internet lobby and the PC lobby. The Internet was a distraction. Compared to the Internet, where everyone has a number, it's really hard preventing file sharing on networks that are created ad hoc, like the n-squared networks that last for the duration of a bus journey: one to one, one to many, many to many. This is the world of file sharing we're talking about.
You've been dealing with a lot of self-interested parties. I'm arguing that you need to think about technology on your terms, not theirs. You've been seduced by locks and keys companies who promise you the content is safe. But such a technology hasn't been invented yet. Locked-down songs are available on the P2P networks within minutes of appearing on iTunes.
You can make life awkward for your users, but I'm not going to bet that it's enough to protect your business. Technology succeeds when it gives people something they didn't have before.
If you take stuff away from people, the chances are it won't succeed. I'll sketch the future, briefly.