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There's absolutely a percentage of people who refuse to pay for music when they can get it for free, but they're the types who wouldn't have bought many albums before the Internet either.
Had they been quicker to adopt the practice of giving away a few songs (streaming or downloading) for free for previewing, and gotten into an iTunes-type of setup much earlier, the business would be in much better shape. Fewer people would have resorted to slower, virus filled file sharing if there had been a cheap, quick and easy way to get new music.
Oh, and, of course, not screwing over both the artists and fans for their own financial gain. That would have helped.