People who download more spend more on music, that was the result of research performed on behalf of one of those companies that enforce copyright for the music companies. They kept it quiet and it leaked out (along with lots of other stuff, it was a story that amused me greatly at the time),
Since I found napster at uni my CD collection has expanded exponentially and I go to lots more gigs etc.
As to downloading music v movies, in the long term they would both be as bad as each other - the less money the companies make the less they will spend on new music/movies.
Whereas the "knock off nigel" campaign may stigmatise children against purchasing fake DVDs (a practice I find abhorrent, making money from stealing other's work) will they really complain against a downloaded movie? A fake DVD is an inferior physical product... a movie is a movie - especially when loaded onto the kid's media centre PC.
The problem for the music industry is that the cat is already out of the bag. They can make it illegal but they will have a very hard time enforcing it - they can detect it at the minute but people are already working on making technology to stop that, and there are already lots of ways around that (pay a small amount for a seed box in a downloading friendly country, use that as your torrent box (24hr uptime and fast uploads will give you a great ratio!) then download over a VPN at your leisure. If you're really paranoid use something like truecrypt to encrypt the contents of your hard drive with plausable deniability (important as you can get jailtime for not handing over your encryption keys)). There will also be artists who will be using alternate business models that make the traditional record labels products seem the rip off they are - I can point to Nine Inch Nails here:
36 track album
Download $5 (choice of format, all DRM free, choice of MP3, Apple lossless, FLAC (Free Lossless Audio Compression) (potential for better than CD quality), with 40 page PDF of album art etc.
2 x CD + download - $10
Deluxe edition - $75
Super Deluxe - $300
I gladly paid the $5 and downloaded the FLAC despite not really being a fan of Nine Inch Nails. I was also happy knowing that most of that money would be going to the artist.
You might point to Radiohead and say they tried it and it was a failure. I'd say that's because they did it really, really badly - no surprise there seeing as they were doing it as a publicity stunt rather than a serious attempt at a new business model.
What did they do wrong?
They only offered the album in 1 format - 160kbps CBR MP3s. They said this was because they wanted "to be better quality than iTunes". iTunes is 128kbps AAC, which is generally accepted as around the same as 192kbps - so they were actually offering inferior quality files (NIN went to the trouble of saying which encoder they used to create the MP3s, to some sound quality is very important (the people on the (now shutdown amidst a load of lies (and also complete misunderstanding of the technologies by the police (much like TV Links))) OiNK torrent site were complete facists when it came to sound quality - some albums were unacceptable as they had been "transcoded" on the CD release - they went to the trouble of checking the files with wave analysers to check they were OK!)). I don't generally like 160kbps MP3s but thought I would buy it as it seemed like I would be supporting a novel idea. Next up - they expected me to choose how much to pay before I'd heard the album - or a sample, how was I really meant to decide what it was worth? I decided to pay 0, give the album a listen and then go back and pay afterwards. That would have been fine if the site was fast enough to let me download it in a timely manner. It wasn't though, but I found a decent link on another site and downloaded it there.
How do they expect to be successful like that when the (albeit illegal) competition are way more convenient (faster sites, easier to use, quick more reliable downloads, in the case of OiNK it had most albums you could think of in a choice of formats (FLAC, MP3 etc) and would tend to download very very quickly).
If I'm going to pay for music I want it to be the highest quality I can get - what sounds good in small headphones may not sound good on a decent hi fi for instance (would depend on the song, some are fine low bitrate). Most music stores also have the problem of DRM, which can even screw you over if you play by the rules (several online stores have shutdown, which means you can either kiss goodbye to the music you've bought or have to burn it to CD and rip it again (which is probably illegal)).
Think I've gone off on a tangent here, should probably stop typing now... i'll leave you with a song:
(seen this guy 3 times, bought his single, his EP, his album and a tshirt from him - discovered him when a mate sent me the MP3s)