The recording industry is evolving rather quickly due to the internet and audio file compression technology. Because of that, the "labels" are seeing their usefulness dwindle away and for good reason.
Bands are able to advertise their product without the help of record companies and with satellite radio becoming more prominent, bands need the record companies even less. I mention satellite radio because it is a medium which bases its music channel revenues on subscribers rather than on advertisers. This allows them to offer myriad different types and genres of music without fear of losing revenue because they might play an unknown band, a song with "offensive" lyrics or something that isn't currently popular.
On a side note.. popular music isn't just pop music. If you've listened to a terrestrial classic rock station lately, you'll find their play lists to be about two or three hours long, only to be repeated almost verbatim. How many times a day do we need to hear Stairway to Heaven, China Grove, Bad Company and Bad to the Bone??? Obviously, these stations are playing "pop classics". Or, are they laying down in front of their advertisers and only playing music that offends almost no one? In reality, with all the great music that was written in the few decades we now call classic rock years, there are literally hundreds of hours of great music to be played with no redundancy.
Getting back on track.. there are many ways for artists to market their wares and in today's world, FM radio is about the only thing that record companies can offer them. The sad part is, that isn't likely to change so long as advertisers fear losing customers over seemingly offensive content or the occasional new or not popular band's song being played.
In short, I don't blame these guys for being scared, however I do blame them for being resistant to change. I also don't support copyright violation. What I do support is these businesses evolving with the changes in their industry, rather than fighting that change to the bitter end. Artists are seeing it and capitalizing on it, yet these labels fight to maintain the status quo.