Here's a great article from Prospect Magazine on the rise and fall of the most popular multimedia format in history.
Arriving on the market in 1982, just after record sales began to revive following a three-year downturn, the compact disc ushered in the biggest boom in profits the record companies had known since 7" singles gave way to 12" LPs in the late 1960s. The CD persuaded many music fans to replace their vinyl collection with digital copies of music they had already paid for. And the rise of the CD permitted record companies to double the price of their basic product without incurring a huge uplift in costs. Even allowing for the royalty paid to the joint inventors of the CD—Philips and Sony—the discs were soon being manufactured for little more than it cost to crank out vinyl records on ancient presses.
Initial anxieties that consumers might be resistant to the more expensive format proved unfounded. Research revealed that music fans were more worried about the cost of acquiring a CD player than by the price of the discs. Paying £12 (£30 in today's money) for an album that, nearly everybody agreed, sounded better and was easier to manipulate than a vinyl LP, didn't feel steep in the mid-1980s. In 1994, the CD supplanted the cassette as the most popular platform for recorded music in western markets.
Yet in some ways the CD contained the seeds of its own destruction. One of the few industry moguls to raise his voice against the digital format in its early days was the late Maurice Oberstein, an American who was latterly head of the Polygram UK (later Universal) label. "Do you realise we are giving away our master tapes here?" he asked at an industry event. At the time, everybody was too busy counting the cash to listen. But as the advent of recordable CDs kickstarted a black economy in counterfeits in the 1990s, Oberstein was proved right.