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Most phones I've used can take any mp3 and use it as a ringtone (this has been the case with every phone I've had for at least 6 years, and I'm pretty sure is standard across manufacturers).
All of them could plug into a PC to be loaded with content.
There are many free tools ranging from full on editors (like audacity) to websites that let you load, identify and clip the part of a song you want as your ringtone from any mp3 file you have available.
So to contend that ringtones are a closed system is puzzling.
Regarding downloads, I buy the music I keep, but I sample a lot of music using a selection of free services - streaming radio, youtube, blogs and podcasts, etc. If anything, new distribution methods have caused me to purchase a great deal of old content (classic records that i had missed in the past, or lost copies of in format updates) that cost record firms nothing to produce, as the investment was recouped 20 years ago. These networks have also exposed me to new artists recording now that I woul dnot have bought speculatively, and who don't get radio airplay, so I have as a direct result of the facility with which music can be obtained freely ended up spending more on legitimate music.
It has been reported several times that the people who download the most "free" music have the most "bought" music also, whether the free stuff came legally or illegally. In essence, the fraction of music that a person pays for is probably fairly constant but some people have 10 cds that they paid for and 1000 tracks they downloaded, and some have 200 cds and 20,000 tracks.
From the invention of music, to the invention of recording, musicians could only make money playing to an audience. From the birth of recording, through to the 1950s, record sales made little money and concerts paid the bills. In the 60s and 70s that switched, and through the 80s and 90s the money was in cheaply made recordings sold in vast numbers.
In the 21st century, I think that the way musicians make their money will return to the original model for most players - recordings will generate awareness and maybe fame and fortune for a small number, but playing live will be the bread and butter wages for the majority.
If anything, new technology has taken us full circle to a medieval system where travelling players became famous and rich through patronage and ticket sales.
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Overhead, the Albatross hangs motionless upon the air,
And deep beneath the rolling waves,
In labyrinths of Coral Caves,
The Echo of a distant time
Comes willowing across the sand;
And everthing is Green and Submarine
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