I have very little pity for big record labels facing the MP3 and Napster onslaught. Big artists regularly sell 1 million units or more, where the per-unit cost is significantly lower. The artist is required to pay back all production and promotional expenses to the record label, so his or her small cut of the CD sale is immediately swallowed up. Only after an artist becomes a superstar can better terms be won from record companies that almost always have the upper hand.
Artists generally make their money from concert appearances and song royalties.
If all this sounds like the artist is getting screwed, you are correct. The record labels have enjoyed a steady windfall since the end of the LP record format, since CDs are so cheap to produce and the retail price has stayed artificially high. Which explains why many relatively well-known artists aren't complaining about Napster. It's a great and long-awaited comeuppance for the Evil Empire. At Internet speed, MP3 and Napster have quickly threatened the overlordship of the labels.