Rolling Stone has a fantastic piece summarizing all the major developments over the last decade or so that have contributed to the Recording Industry's decline. The critical moment the RIAA could have stopped this entire ordeal is identified very clearly in the article:
"The record companies have created this situation themselves," says Simon Wright, CEO of Virgin Entertainment Group, which operates Virgin Megastores. While there are factors outside of the labels' control -- from the rise of the Internet to the popularity of video games and DVDs -- many in the industry see the last seven years as a series of botched opportunities. And among the biggest, they say, was the labels' failure to address online piracy at the beginning by making peace with the first file-sharing service, Napster. "They left billions and billions of dollars on the table by suing Napster -- that was the moment that the labels killed themselves," says Jeff Kwatinetz, CEO of management company the Firm.Overall, the article is a cautionary tale about survival of the fittest and failure to adapt.
The article is especially interesting in light of Universal's recent tussle with Apple about iTunes pricing. One thing that's proven true time and time again: From suing Napster to suing their own (poorest and innocent and dead) customers, the recording industry has shown that they know how to destroy good things when they see them.