Because I'm only too happy to make some attempt at solving all the world's problems, let's start with protecting rock stars–
Eventually the record companies will prevail in their litigation against Napster and it's ilk. But that doesn't mean they will have ultimately resolved the situation in their favor. The record industry has misjudged the issue that the online exchange of music files presents. Underlying the very real notion of copyright infringement is a perception that provokes the public to participate in this illegal distribution.
First and foremost, teen age fans, who are by far the greatest participants in this activity, will never be convinced by a corporate behemoth that he or she doesn't have a right, and indeed obligation, to trade and exchange their favorite music among their peers.
Secondly, among fans (the ire against the rock group Metallica notwithstanding), the general perception is that the record companies are exploiting the artists themselves by trapping them in unfair contractual arrangements. It may only a perception, but it would still be appropriate to call it circumstantial fact. So, it goes to reason that if the very people who distribute the music are taking advantage of the recording artists, and this perceived exploitation appears sanctioned by the government and the trade, then fans logging onto Napster look less like pirates and more like rebels with a cause. People are trading mp3 files because they love the artists. Not because their trying to steal from them. Can the same be said of an industry where nightmarish stories of exploitation surface on a regular basis?
The final point to consider is the price of compact discs. Technological advances generally drive prices down based on newfound conveniences in manufacturing and production. But record companies haveignored this economic fact. Consumers understand that what was already a luxury item in 1979 should now translate into a modestly priced compact disc. Instead prices have escalated towards the dizzying nearly twenty dollars CD's fetch in many retailers today. When the means of distribution are limited this cost can be explained as 'what the market will bear'. But now the consumer has a weapon and it's called the Internet. If the artists were smart, they'd understand this weapon is also theirs to use to their advantage.
The bottom line for record companies? Repair their relationships with the artists, and the public perception of those relationships as well. Next, lower the price of this expensive product. Or alternately, they can continue to chase the technological demons that will never cease to look like a consumer's saving grace.