I wonder if maybe DRM hasn't been a big part of the problem. The shiny discs that we used to know as "CDs" back in the day, actually had a standard format on them, and they would carry the "Compact Disc" logo as trademarked by Philips. Now, a few years ago, EMI and others started with their "Digital Restriction Management" which meant that the discs no longer were allowed to carry the good old "Compact Disc" logo. Instead the logo was just quietly removed, sometimes replaced with a different, publisher-defined one, signifying the hardware-enforcement of the standard admonition against unauthorised copying or broadcasting.
Even though this has been reversed in the last few years; the few CDs I have from 2007 and 2008 actually have the "Compact Disc" logo again.
The point is, the DRM train seems to have left and gone for good. It isn't just a matter of closing the barn door after the horse has bolted, it is more like closing the barn door after the barn has burned down. Pull the weeds, start over...
An even easier and more obvious explanation is that there is hardly any new music worth listening to in the quantities provided by a disc. What might be OK for three minutes is not the same as will work for an hour, and the push is ever faster and ever onwards. There's just not the attention span there anymore it seems.
What might work would be to bring back the concept albums, but you need artists that can sing and play -- not just sound like some soft-porn star faking an orgams -- for more than three minutes in a row for that.