You are excluding the middle - replacement of the legacy business model of the record companies and movie studios with one which compensates artists and just doesn't create as many gazillionaire executives.
There was an article a few years back in which a music industry insider revealed what we all knew about their business model (I think it was linked from Barry Ritholtz's blog): they are only focused on creating the next Britney Spears or U2. Meaning, an artist who gets a lot of radio play and media attention with maybe one or two catchy tunes, so they can sell tons of CDs at $18.99, even though the other 8 songs on the CD are shit.
Similarly, movie studios are always after the blockbuster - the $120M movie which brings in $500M - and everything they do is designed to funnel cash to and from a blockbuster.
Absolutely people want some stuff free - because they've been paying ridiculous amounts for things for so long. What we are seeing is a shift to a new business model (one that predates Rock-N-Roll, actually), where musicians make a very comfortable living actually performing their work, and selling t-shirts, stickers, etc.
I admit that I will not lose sleep if the next U2 or Britney Spears "only" pulls in a few hundred thousand a year and has to keep making new material and touring to do it.
Media companies have ALWAYS been nothing but middlemen - which was a necessity when the distribution of the media required a lot of capital. But now the cost of distribution is approaching zero, and the media companies are struggling to keep their business model alive.
Don't let Lars Ulrich fool you - the campaigns against "piracy" have nothing to do with ensuring artists get compensated for their work - they always have and they always will - but preserving the role of the media companies as arbiters of what is produced, and as who controls how it is distributed.
Matt
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