Ok, one of the things I am working on is a music startup so I'd like to challenge this:
"The answer for the music industry, for example, is probably to give up insisting on payment for recorded music and focus on licensing and live shows."
This is almost blogosphere orthodoxy now. If anything the wild success of allofmp3 shows that people will pay if the price is right. The price point is wrong, not the model. High volume + lower price = Increased total revenue. This is the point we make when we meet with the labels.
"But what happens to movies? Do they morph into games?"
No they don't. Which is more popular the new Batman film or the new Batman game? There’s plenty of room for both.