how to make money off recorded music and deal with internet downloading

So I know this guy whose dad is working on a music device that is basically an ipod that is attached to the internet. The device finds similar music based on what is playing and locates more like it. I am sure that, even with an itunes-esque pay structure, there would be a way to hack these things and circumvent payments - Not if the makers of these devices were labels themselves. Then the device, maintainence, etc., would be built into the musicians being paid - the record and the label are here becoming the same thing - do away with labels, they are middle men, let the device, since it already has a PR team and distribution team, let that device take care of band marketing and you also have a very easy way to track how much artists make since it's a download structure. Amazing.