First of all, I'm pretty sure this is what the Mayans predicted.
Secondly, it only took DVD a mere three weeks to kill off VHS. And, by comparison, 12 years before killing off the CD seems like a long time. Almost as if it'd never happen. But even though it may have gotten off to a rocky start, nowadays all anybody ever buys is DVD-Audio. The only people left buying CDs are old ladies who pick up the latest Greyson Chance album at the local JCPenney checkout counter. The CD was good, but it's time to put it out to pasture now that we've got something better.
In 2010 the total music revenue in North America was:
$6,850M = All music revenue from consumers
$2,238M = All digital download sales to consumers
$3,518M = All physical media sales to consumers
$250M = Subscriptions (mobile and streaming) to consumers
So, while the industry is struggling with lower sales, it isn't as bad as you guys make it out to be above. The consumer is shifting buying habits away from physical media to downloaded digital content. Since digital overhead and costs are much lower for labels, the lower revenue numbers do not inherently mean lower profits for digital downloads.
Despite the fact that LP sales are at about $$87M in 2010 the labels did not completely give up on LPs. Sure, you have a limited selection of vinyl albums to choose from, but the artists can offer LPs if they want. You may see certain short term pop artists start abandoning CDs, but that isn't very likely yet. However, when making a recording, the label agent may ask the artists if they really want a CD or not - making it a choice to offer CDs rather than just assuming there will always be a CD.
What I fear, more than the death of the format, is the death of the long-form album format. In 2010 there were 1,162M singles sold for download but only 83M albums sold for download. If consumers abandon album purchases, why would the great artists even offer full, complete, and engaging song cycles in the album format. Imagine if operas were sold and performed by song rather than in 3 to 5 acts? Or books were sold as chapters or paragraphs?
If you want to know why music labels are necessary...
$5 billion – the estimated Global amount record companies invested in artists in 2009
$6.8 Billion - Total music sales in 2010 in North America
You see, the labels really do invest heavily in artists in order to ensure their success. When people think steal music is justified because the label is making too much money, they need to realize the investment it takes to get a punk kid with a guitar and a good idea to turn into a well versed performer with a hit record and an engaging show.
Below is an excellent research paper on the global digital music market, including real sales, revenues, costs, and such of working in the online digital music business. It takes into account piracy, lost jobs, the economy and everything. If you want a realistic perspective on what is really happening, this is one of the best single sources I have seen that covers online fairly.
I just tried to post a ton of stats I have on the US music industry so everyone can learn where the growth is, the decline is, and how pirating is still effecting the industry. But the site crashed and I lost 30 minutes of work. I am not inclined to repeat the effort.