Now, I love that; I am old school, in that I still buy CDs - and rip them onto my iTunes library, and then, onto my iPod. For what it is worth, I have never bought music from iTunes and I have never used the Cloud to store or access music or other content. It is not that I dislike 'progress'; it is that I have huge 'issues' of trust re storage (and access to same).
This isn't a disagreement with your analysis or opinion, but I wanted to add something (that's admittedly getting pretty far afield of what the topic is about), since you brought this up.
I like CDs and owning my music, too. I still buy some--usually from Japan--although they always get ripped directly into iTunes and never touched again. I've only played music from iCloud maybe two or three times.
That said, the iTunes store, as it exists currently, gives you DRM-free downloads of tracks to back up, copy, move around, and do with as you please, so I am not offended by it as a distribution medium. (Amazon MP3 store is the same.) If you're not interested in the cloud features--and I'm not--you buy a track or album, download it once, keep it on your computer and backups, and copy it to whatever iDevices (or non-iDevices that play AAC audio) you want to play it on. I have no obligation to continue to use the iTunes store, to maintain any sort of cloud presence with Apple, or to have any network connection on any of my devices--it all works as if I had purchased a CD apart from slight lossy compression and no booklet, and the fact that I can't sell the "used" music to someone else if I want to at a later date as I could with a physical CD.
(It's also cheaper to back up, since it goes along with my other backups rather than needing to periodically burn copies or maintain a lossless digital copy of a CD to protect against physical media degradation; it's as secure as any of the rest of the data in my digital lifestyle, which is more secure than any of my physical belongings due to a stringent backup regimen.)
There is a notable advantage to this digital storefront, though: For someone like me, who is a fan of fairly obscure foreign music that is simply not available on CD in the US, usually costs $25 or more on disc in Japan and nearly twice that as an import if I can get my hands on it at all, and in many cases has been out of print for years, buying CDs isn't even a realistic option. If I could even find the used disc and get someone to buy it and import it for me (things I in fact do regularly) it could cost me literally a hundred dollars.
I could just pirate the music, of course, but if I want to legitimately own it, I have only one realistic option, and it is shockingly convenient for the increasing number of tracks available on the US store (some obviously the artist just checked the "sell in the US box"--they don't even have metadata in English). I pay $10 or so for an album, don't wait, and get a legitimate copy of the music I want.
It's literally changed the way I look at shopping for music--it's gone from being an expensive, once-a-year-when-someone-I-know-is-going-to-Japan thing, to reasonably priced, convenient, and any time I feel like it.
Singles are also back--there are now lots of singles available and affordable, where before such things were rare and almost always wildly overpriced.
Better yet, and an additional advantage, if I really only want one track on a disc--say, the one that got the radio play from a one-hit wonder, or the theme song on a soundtrack that I don't care for the instrumental backgrounds on, or just the vocal tracks on a single that also includes karaoke versions--I no longer have to buy the entire album to get it. I can only pay for what I'm interested in, which both saves me money and gives the artist support proportional to the value they're providing me, rather than disproportionately weighted by diluting "good" material with "filler" (to me) that raises the price.
Now, if we're talking about streaming-only services, it's a different ballgame entirely, since it's a wildly different model. And if we're talking about DRM'd media, which requires ongoing licensing to use, and I cannot re-compress or move around as I see fit, then that's similarly a different game.
But as-executed, right now, the iTunes store is actually very good as a supplement to physical CDs for those of us who like music that is either not easy or virtually impossible to get on CD.
(On an unrelated aside, I'll add that in my personal case my 32GB hand-me-down iPod Touch in the car is enough to provide plenty of driving music, while a 128GB iPhone is more than enough for my whole music library, plenty of apps, and room to spare.)