It's an extremely tricky reality of a capitalist economy. Digital media has essentially entered a post-scarcity economy in the Internet age. Music, movies, tv shows, images, books, etc. can be copied and downloaded in seconds from inside someone's home. The only limits are download speed and storage space. It's hard to dissuade someone from using that kind of power when their money also needs to go toward food, electricity, rent, etc. They may understand the importance of art and the need to keep artists well funded, but other concerns will keep them saving their earnings when they can if they know they can consume the art and entertain themselves freely. Is there a solution to this in a free-market, capitalistic society? I don't know. Strict DRM seems to be badly implemented a lot of the time, often limiting or inconveniencing the consumer. The new world where digital works are licensed and not owned is strange to me as well. Streaming services have found success, but they seem to be less profitable for artists. I just don't know whether spreading the value of art and reminding people that artists are workers, too, is enough. Maybe the idea of a federal program could work, though. Problem is getting people to support that.
Not only are we post-scarcity in terms of reproduction of music, but in the initial production in the first place. The tools of production have been removed from the hands of the record industry and placed into the hands of the musician. And this dilutes the music listener base into very stratified groups of people, which may even be too small to support a musician's livelihood. We have a certain group of people: the listeners of music who as a group are large and hear music everywhere be it in commercials or on the radio, but they don't all buy music. The group that buys music mostly buy hugely popular music that they either heard on the radio, or in a commercial. This group can sustain artists because they spend so much on small groups of people. These artists become millionaires because of these buyers, and the record industry can pick these artists more reliably than not or they wouldn't exist. They front them money to make high quality ventures which have guest artists that are well known and lend credence to a new artist. Did you know that Ke$ha is singing the female chorus vocal on FloRida's "Right Round". Then she exploded a few weeks later. Synergy baby. Paring down to those who buy more music than the top hits, you have even fewer people. It used to be that these people had fewer choices after the top hits because there still weren't that many other labels leveraging heavy investments on smaller talent. It used to cost a lot to make records and investors want their money back plus some more. So you'd have a small subset of other known bands who might not get as much radio play, but still offered a very high quality and commercial product. Then you decentralize the talent search by giving the tools to the musicians and everyone can decide that they are good enough to record. It doesn't cost much at all to make a record anymore. So little that people don't even bother recording whole records anymore, since people can buy a single song and the band can still make a profit on their recording time. This sudden flood of musicians who no longer have a barrier to entry increases supply to the point that not only does demand get completely satisfied and price drop, but demands can change into more and more specific demands. This is where we are now. It's given rise to the 'hipster' because the hipster has been allowed by the market to pick and choose very obscure niche bands that don't have a sustainable market presence, but can still find fans in a large enough market. This is good for the consumer because they have more choice and are paying lower prices. This is good for the artist who otherwise would not have been heard and is contributing to the greater artistic ether of the world. This is very, very bad for someone who wants to make a living off of playing music.