I may regret posting this as it might turn into something huge, but I wouldn't say the economy is to blame here. CD sales were plummeting way before the economy got hit hard. Sure, some of it affects the bottom line, but I think overall physical cd sales are just not as enticing to people as they once were. Technology is changing. I don't personally have any problems against people going the itunes way though, even though I would never do it.
No question. CDs are going to become more of a niche market. If you're a dedicated fan of an album, you'll want a physical copy with all the liner notes and whatnot. If you just sorta like it, you'll download it, hopefully legally.
There's also the "now" factor. I remember checking the mail box every day when I ordered CDs. With Itunes or Amazon, I can download right now, legally, and have it.
Of course, if the CD is out of print or no longer available for legal download, screw 'em. I'm going to a torrent site. if they wanted to make money off it, they'd offer it for sale.