You are confusing "distribution" with "supply". Having lots of people making music is a different issue from having music freely available via youtube. Music has been pretty darn cheap to reproduce for decades.

Yes, availability of substitutes can diminish bargaining power of music rights holders, but I'm not convinced that's at all how we should interpret these numbers. I think this is more about market power and network effects of the middlemen (google, pandora, the labels, etc...)

I would be interested in the revenue split between rights holders and YouTube.