It is extremely rare -- the exception, not the rule -- for a writer, musical artist, or any actual creative talent to make money in the distribution of their work. By the time it gets to distribution, they no longer own the work. (Note: this is where one of the fundamental flaws in the current model exists.)
Where do they make money? Typically, public appearances and public performances. Remember, artists aren't like suits. They are compelled by the need to create, and the need for recognition. They will often work multiple second jobs just to sustain their ability to create (and to pay back their debt to some RIAA mafia company for the privilege of signing over their work for distribution).
That is not to say that money is not being made off of distribution (pardon the double-negative). Someone most definitely is making money off of the distribution. Those "someones" are represented by the RIAA, and they disingenuously invoke the name of "the artist" in their campaigns. Making money off of distributing a work, without properly compensating the artist, is what piracy actually is. One can begin to guess why the RIAA mafia is working so hard to create a new definition of piracy.
So why would artists put up with this? Simple. Exposure. Signing over their work, and oftentimes placing themselves into great debt to an RIAA mafia company just to get distributed, used to be the only way of getting their names out there.
Now, there's a way of doing it that reaches a bigger audience, and doesn't require the artist to go into debt. It doesn't make any money for the mafia, though. But if you look at the numbers of what's actually happening, it sure does seem to be working for the artist.
Don't mistake "artist" for "distribution company." The RIAA mafia works very hard to confuse the two. They are distinct, and separate.
Mass, global distribution that doesn't place the artist in debt -- this is not only a good thing in theory. It has empirically been shown to correlate with greater ticket (and even album) sales.
The RIAA mafia, incidentally, isn't claiming that their profits are going down. They are claiming that there is a decrease in the rate of increase. Think about what that really means, for a second. This is pure, irrational greed -- based on the insane notion that the rate of growth should always increase. They don't just want growth... they aren't content to continue to grow bigger and bigger. They cry foul, sue people en masse, and try to have the laws re-written... because the *rate* of positive growth is diminishing. They are angry because they aren't getting richer faster.
RIAA != artist.