while i have a love for physical media, especially vinyl, i do think it is doomed. it just doesn't make sense anymore when someone can have their entire 300-album collection on a tiny hard drive the size of a deck of cards. i don't however for a second believe that mp3's/aac's are the be all end all of music formatting, but i think the future of music media is strictly in data. new codecs will be developed which sound better and better (and can take advantage of 96khz and 192khz and or surround sound, etc.) and bandwidth will increase and i think physical media will for the most part die. i think there will always be a nostaligic collector market for it, comprised largely of people like us, i know i will continue buying vinyl as long as people keep bothering to press it, but yea it's hard to beat the convinience and ease of use of just having music as straight data instead of a shitload of plastic disks lying around taking up space. plus it's hard to beat the distribution model, you never press more than you sell, you can instantly sell to the entire world from one central server, and there's virtually no manufacturing costs, anyone can start a "net label" and give artists global distribution, charge for downloads, and potentially make a ton of money. of course we're not quite there yet, but i can't really see it going any other way. even in this day and age i'd definately say mp3's are the dominant musical format that people listen to, yes they still buy cd's, but for the most part just to rip them to mp3 and listen to them on their computers or their ipods/in their cars/etc., i think it's only a matter of time until they basically say "screw cd's" altogether and just buy the already ripped mp3 files.
i think the answer to the future of music commerce not sucking is to have more audio companies develop more reasonable GOOD sounding components for computers, i mean if you can develop a good reciever/cd player/etc. which at their core are just components like computer components anyway why not develop them as modular components FOR computers so people can use them. otherwise i see the stereo market heading south as well.