Well like I said, the way I see it is that music at its purest is a form of personal artistic expression. Something that can (and perhaps should) exist separately altogether from whether or not someone can make a living (or even earn a few bucks on the side) off it. Even if the entire music industry would vanish tomorrow it isn't going to stop talented and driven people from making great music. And people will find new ways to promote, and distribute/sell that music. With the internet that is possible now moreso than ever.
Producing music on a semi-professional level is also something that is now more easily done than ever before. There are loads of audio editing suites for the PC and Mac that come with features that used to be exclusive to expensive recording/mixing studios. Up until the early 90's there was literally no way for a band to record, mix and then distribute or sell their own music independently and worldwide (not necessarily for free, but at a cost level that is not impossible to deal with for an amateur band). It just couldn't be done. Now you can, and many people do so successfully.
To illustrate, just a few days ago I ordered the new CD by
Phil Western (someone loosely affiliated with Skinny Puppy if that means anything to anyone here). It's a CD-R album with handmade packaging limited to 250 copies. You e-mail him directly, ask if he has any copies left, and if he does you Paypal him the money ($15 including shipping anywhere). Is he going to make loads of money this way? Not really, obviously. But then that isn't his goal to begin with. He is getting his music to people that otherwise would never have been able to get their hands on it and all the money made from it goes directly to him. Another example is
When Day Descends, a band by forum member
YaYo (I don't know if he ever posted on this particular UM forum though). Basically the same thing.
Being able to actually live off your music is a luxury at best and I'm not even sure it's a healthy one. And it often involves having to make artistic concessions at one point or another to be able to maintain that lifestyle. No matter how much artistic integrity you have, if you get used to the music being your actual livelihood you can't convince me that it at no point affects your approach to writing and producing music.
So is this a dire situation? Maybe for the people you talk to, people working in the industry and for bands that are used to being able to comfortably live off their music (since by doing so they rely directly on the wealth of the labels that are currently going under). But for music lovers, not really. The only reason why the situation in the music industry is constantly portrayed as disastrous is because it is constantly presupposed that the status quo
must be maintained (coincidentally this is always done by industry people and almost never by music fans), and yet reality dictates that it simply can't be.