Record companies don't understand it and are not up with "today," so what they don't understand is that the greed play will never work. People will continue to find ways to get their music. The industry has changed and is never going back and major labels refuse to evolve along with it. CD sales are in the toilet because people are obtaining their content online, both legally and illegally. Few people want 12-16 tracks from an album when they know that 75% of them are filler. They want the hottest 2-4 songs from an album and yet record companies continue to push CD's.
Because of this, you've already began to see a dumping of artists. Majors are simply corporate entities and bottom line is all that matters. If you can't sell 500K plus, you probably won't get a second chance - and it's almost thank goodness for the hard working artist. I just opened the Chicago office of an independent label and as bad as the industry seems to be right now, as in indie, I'm ecstatic about the talent that we are going to be able to work with. No one is selling tonnage anymore because the majors have created a vaccuous system where no one can obtain staying power. They've pushed acts into arenas that should be playing 1,000 seat houses. As an indie, I'm happy to take an artist that sells 200K consistently and let them grow and develop organically, with more control of what they produce and a fan base that is consistent and die-hard.
Read anything by Bob Lefsetz and you'll see the trends.