Well for one, free music affects the music industry in many ways than just not "generating enough revenue". Labels want to spend as little money as possible during the recording phase because they aren't as rich as they used to be, so they just hire quick and easy producers to come up with "beats" on Logic Pro/Pro Tools. Real instruments will continue to die out not because they're not "trendy", but because they cost more to use in production, usually because you have to pay someone to play them. So, if your favorite genre is one that tends to utilize tangible instruments (rock, country, etc.) you're gonna find a lot less artists in this genre because it's cheaper to manufacture artists that sing cheap and more cost-friendly music, like electro/synth pop, trap, hip-hop/rap. The main reason why these three genres are more popular than ever is because they don't require a lot of $$ to make. You can produce a song like "Teenage Dream", "Work", or "In da Club" in your bedroom if you really wanted to, all you need is a midi keyboard and software.
If people actually paid for music, the quality of albums would definitely be a lot better. The amount of filler and "bonus tracks" that are clear afterthoughts that are stuffed onto an album just for the sake of calling it in "album" is so frustrating and as a consumer, it's obvious to me why so many people have stopped buying them. It's not just the price, it's the fact that most of the time, most albums, especially in pop, only contain 3-5 decent songs, if that. Also, a digital album should not be $12.99

You're not actually owning anything but a file on your computer, which many have already discovered by now, you can easily pirate for via various methods. I think the price of the physical albums are fair though, they haven't really gone up in price compared to 15 years ago. Also, a digital song should cost no more than 50 cents.... Again, it's just a file on your computer.
But all in all, music is art, and most recording artists are usually not the best songwriters, so they have to rely on people who are experienced in writing/producing to give them material. There's nothing wrong with that, but the problem with music being free is that the songwriters/engineers/producers aren't going to be making money off the songs/albums, which is their only source of income. That doesn't look very appealing to those who might be thinking of pursuing those jobs, what's the incentive for them?
If music is free, all in all, it pretty much means less professionally promoted music, which we've already started to experience. Sure, there's a lot of independent stuff out there you can discover on the internet, but think of all the material that mainstream, label-backed music had even 10 years ago compared to now. We wonder why the Grammy's start to look more like the Billboard Music Awards each year, there's just a whole lot less to pick from.
Hope this helped
