On the one hand, Bloomsbury — publisher of Joanne Rowling's Harry Potter books — had a substantially down year last year. The reason is pretty obvious: No Harry Potter book was published in 2006. Since the last volume will be published this year, what does that say for future years about Bloomsbury? The optimistic view is that something else will come along. Rowling will start a new series and stick with Bloomsbury (as she probably will, since she's expressed a great deal of satisfaction with her dealings with Bloomsbury); some other unknown will come along with a blockbuster; whatever. The key, though, appears to be having a blockbuster to support everything else.
On the other hand, the music industry is already showing signs of what happens when that's your strategy. In particular, classical recorded music is shrinking dramatically, at least in terms of putting out new recordings. Some of this, of course, might be because the oeuvre of classical music simply isn't expanding very rapidly; it's not like Beethoven is expected to publish a completed Tenth Symphony in July!
More to the point, the distribution system and method will continue to be the real barrier. Leaving aside the obvious antitrust implications that US regulators are ignoring, there's the question of how music companies will get paid. On the one hand, the iTunes model of "pay per piece" has obvious advantages of simplicity... depending, of course, on the technical qualities of what one purchases. I'm anti-DRM on principle, as I remember CopyIIPC all too well (and know far too much about "encryption" and "software locks" to believe that they'll hold up, despite DMCA Title II). On the other hand, the get paid through advertising model has something to be said for it, too... as long as I can skip the commercials on whatever device I'm using. And that's what worries me about this last item: That Sony will take whatever lessons it learns from this effort and apply them to its Sony e-book reader in a way that makes it impossible for me to avoid offensive ads.
Putting all of this together has worrisome implications, both economically and legally, for authors. It's not just their livelihoods — such as they are — that might be on the line; it's involuntary creation of derivative works, and inappropriate advertising based on computer algorithm ad selection that undermines the accompanying work(s), among other concerns. And then there's that pesky antitrust issue.