Radio is not a partner in the industry. I think that the music industry has continued to depend upon radio, but has ended up pandering to a medium that doesn't care.
Downloading is definitely on the rise, but not because it's free - that's probably third on the list - but because it's immediate and the selection is virtually unlimited.
The Industry's at war. I think it's about control. You can make all of the financial arguments that the industry has been shooting itself in the foot, but it is an industry built on a foundation of ownership and exploitation of intellectual property rights.