The classical recording industry isn't dying out. Most of the big record companies are giving up on classical, it's true, but there are plenty of excellent recordings being released by independent labels, orchestra's own private labels, and so on. If anything I think there are more good classical recordings being released now than in the "CD boom" of the early '90s, when the big labels were releasing zillions of classical recordings, but most of them were anonymous-sounding, hastily-assembled projects that have been justly forgotten (who remembers most of the recordings that Sony Classical released in its ill-fated attempt to be the new "German" label on the block?).
However, the one thing that does seem to be on its way out is the complete opera recording. The major labels aren't making them any more -- EMI, which had been the only big company recording complete operas on a regular basis, recently announced that it's giving up on them -- and the independent labels, as I mentioned in a previous post, can't afford to make them for the most part. (There are some exceptions; Harmonia Mundi's Rene Jacobs still records an opera every couple of years, the most recent being a fine Figaro .) So even the biggest opera stars today make mostly recital albums rather than complete operas.
What we are getting instead of opera on CD is opera on DVD. This makes sense: DVDs don't compete directly with audio recordings (and thus don't face competition from the great recordings of the '50s and '60s), they provide the visual element that opera needs and that audio recordings obviously lack, and they generally cost less. Right now most opera DVDs are of productions originally taped for TV broadcast; it's the usual process of setting up video cameras in the theatre, taping the production on several nights, and editing it all together with perhaps some "patch sessions" to cover mistakes. (There are some DVDs, like Pioneer's Met broadcasts from the '80s, that make a special point of being taken entirely from one performance with no editing or corrections, though I can't really see why this is an advantage -- maybe it's an advantage as an archival study of How It Was on a particular night, but it's not necessarily better entertainment.)
What I would like to see more of is "studio" DVD operas -- by which I mean not actually taping in a television studio, nor making a movie to a pre-recorded soundtrack. What I'm talking about is taping a stage production without the audience (some of this is already done to fix mistakes and so on). In other words, instead of setting up the cameras during the actual evening's performance, set them up and have a performance for the cameras alone. This would allow more freedom in where to put the cameras and the microphones, and allow the singers to play to the camera, just like in an audio recording they play to the microphone. I'd like to see more opera DVDs that are specifically conceived for the format, rather than just being souvenirs of a night in the theatre.
This is what the great studio audio recordings are like; the singers do not change everything for the microphone -- they still sing loudly, because they've been projecting to the back of the theatre and they're not about to stop now -- but they do do some things differently, and some singers and conductors will in fact choose certain inflections, dynamics, etc. that might not work in the theatre but do work in conveying the point of the piece for the listener at home. The potentially bad effect of this is blandness, of performers refusing to take chances in the studio that they would take in live performance. But the good effects shouldn't be underrated; a performer like Maria Callas knew how to throw in subtleties of inflection and phrasing that might be lost in a big theatre but work wonderfully on a recording. And of course a studio recording allows an imaginative producer like John Culshaw to create a sonic effect that you can't get in the theatre (I'm not talking about radio-style sound effects, but of the fact that the orchestra in the Culshaw-produced Solti Ring is recorded with an impact that it couldn't have in most orchestra pits).
It's often complained that studio recordings have given us all an expectation of polished prettiness and sterile perfection. But my desire for non-live DVD recordings has nothing to do with "polished perfection" -- indeed, so-called "live" recordings are often just as polished and smoothed-over as "studio" recordings (since "live" recordings tend to use snippets of other performances, rehearsals, etc. to correct mistakes -- and rightly so, because a mistake that is tolerable in live performance can be intolerable on repeated viewing). It's just that what works in the theatre might be subtly different from what works on DVD or CD, and I want to get the work re-thought for the different medium.
For an intriguing and infuriating take on live performance vs. recording and live recording vs. studio recording, you can read this High Fidelity essay by the intriguing and infuriating Glenn Gould. It also includes snippets of various opinions by the likes of Culshaw, Leopold Stokowski, Goddard Lieberson, B.H. Haggin, and others.