Even legal single download sales hurt CD's sales. If you can buy a favorite track; why buy the whole CD? Just ask Daniel Powter whose single "Dad Day" went #1 at radio and is the top digital download so far this year. But the CD has yet to go Gold and languishes at #94 on the Billboard Top 2200 after 14 weeks.
Record labels can not survive on 99 cents vs. $18.98.
What can labels do? Make CD purchases more attractive with lower prices and bonus content. Bundle downloads in three song $3 packages or add additional content. Concentrate more on promoting artists rather than just songs.
Most of all: EXPERIMENT. Take risks. Fail. Somewhere out there are solutions.
Additional reading on Daniel Powter @ New York Daily News.