Go with the flow, man. And get crackin! Profits are down for RIAA type record companies, but hey, Smithsonian Folkways Recordings is making bank to the tune of a 33% increase in profits this year. They use recordable CD's, or CD-R's to copy their catalog, thereby ensuring that their extensive catalog never hits the dust bin. They've been doing this since 1996, creating a "just-in-time" model for delivery. (Every time they get an order, an employee makes 5 copies, one for the order and 4 for future orders.)
With 2,168 titles dating to 1948, they cover works from Pete Seeger and Phil Ochs to "Music From Western Samoa: From Conch Shell to Disco" (1984) and "Folk Songs of the Canadian North Woods" (1955). They are also trying out small runs of CDs, of which their first, "Bells & Winter Festivals of Greek Macedonia," was so popular, they put it into the regular retail catalog.
So, what are the rest of those less-than-hip record companies waiting around for? Hop to it! Make love, not war, with your (netgen, filesharing, the internet-is-an-environment-not-a-tool) customers!