The recording industry is worried that they will lose control over their lucrative business. The same thing happened with VCRs and audio tapes. The respective associations feared that great revenue would be lost from bootlegged versions of the media. As anyone can see, both the music and movie industries are thriving. Instead, the industry should adapt.
Business is about adapting to changes.
Those that adapt, survive and thrive. There is the point of copyright though. Technically, downloading an MP3 of a song that you haven't purchased before is breaking copyright. This aspect must be dealt with, but could easily be incorporated into Napster. An ad window could be added into Napster and the revenue from these ads be used to pay a small copyright fee to the owners.