I recently saw an article that said that the problem is that record labels nowadays sell songs, rather than acts. They'll produce a single hit song, put it on an album with 10 other songs which are crap, and then are surprised when people don't buy them. Furthermore, these bands rarely last longer than one album.
In the past, you'd have bands like Pink Floyd or U2 or the Rolling Stones where you were a fan of the band, not a particular song. You could invest in them, build a collection. You'd buy every album not because you liked every single song, but you just wanted to have the complete collection. Bands like those are still selling huge numbers even today.
Bands nowadays don't have any staying power, and as such you don't get invested in them. You don't want to build up a catalog and visit shows etc. for a band that has only one or two good songs.
I think there's a lot of truth to that. It might not be the only reason the music industry is facing dwindling sales, but I can certainly believe it could be one of the reasons.