And it's totally a coincidence that the bottom has fallen out of the record industry since Napster.
The big recording companies provide a few main services to artists: production, distribution, and promotion. For years they kept CD prices artificially high because there weren't alternatives for most people (for artists to create albums or for consumers to obtain music).
Once everyone could record and burn CDs expensive production studios became much less valuable, and broadband Internet makes distribution nearly free (relatively, at least). Simultaneously, radio has become a much less important means of promotion, so the connections that the recording companies had in that arena become much less valuable.
In other words, the big record companies just don't offer the value they used to - either to artists or to consumers. And once the value your company offers disappears, so should your company (unfortunately this usually happens very slowly, with the company(/ies) trying everything to avoid extinction).
So was it a coincidence that this all happened at around the time that Napster took off? I don't think so, I think there were just common causes that led to both results.
If the copyright holders still had the ability to enforce copyright, the fact that internet distribution is cheap wouldn't mean anything, except that they would be able to charge less and still turn a profit. The real problem with the internet for them is that it made piracy on a massive scale easily accessible. You don't have to respect their copyright anymore.
I'm kinda old now and don't follow pop music that closely anymore, but as far as I know the masses still want their top 40 pop music recorded by heavily marketed stars, not some dude on an indie label or no label at all who used his laptop as a recording studio. So the fact that said dude has an easier time now is irrelevant, except to the minority of people who are interested in hearing/recording that kind of thing.
If the major-label hegemony was truly broken, we wouldn't see these mass-market pop stars on major labels get the publicity and record sales (compared to indie artists) that they do, nor would the top touring bands by major revenue continue to be major-label acts. On the contrary, major labels continue to be successful at choosing and promoting which acts achieve popularity and success--they are just less able to share in that success themselves.
I think a key difference is that each newspaper has something slightly different to offer, the same stories are written different in each. Whereas people are only interested in a song by one artist generally not the same song sung by many different artists. The point being that you would think that music subscription services would be even less successful than written content ones because written content on the same thing can come from many different angles and styles, music doesn't share that trait so it's easy for a pirate bay ect to provide everything a subscription service would.
There's more supply out there. Demand for a specific commodity goes down because if it. It's really basic, and only peripherally related to piracy.
Ask around: I'll bet you find close to 100% of your peers say if their TV watching habits have changed in the past ten years, hours in front of the set have only gone down. Extrapolate.
More generally, all businesses rely on legislation to keep their property from being stolen, whether that property is intellectual or physical. If those laws were widely ignored, it would be hard to do any kind of business.
Also, you should really read up on copyright infringement legislation—it's absolutely nothing like theft. It's a completely separate legal notion.