Michael Arrington, founder of TechCrunch, published a story about a conversation he had with "a big music label executive" today:

I asked the usual question: Why are you guys so damned clueless?

The response he got was pretty damn interesting. 

It’s all part of a master plan. The labels fully understand that recorded music, streamed or downloaded, is going to be free in the future (we’ve argued this relentlessly). CD sales continue to decline by 20% per year, and the only thing that’ll stop that trend is when those sales reach zero. Nothing will replace those revenues.

By 2013 (maybe as early as 2011) it’ll make sense for the labels to finally reorganize their business models around the reality created by the Internet and person to person file sharing services. No longer will the labels be tied to revenue limited to sales of master recordings – by then most or all artists will be under 360 music contracts that give the labels a cut of virtually every revenue stream artists can tap into – fan sites, concerts, merchandise, endorsement deals, and everything else.

But until then, he says, the spreadsheets and financial models dictate that suing customers and partners just makes too much sense