The big winners get to be big winners because the government is prepared to devote substantial resources to copyright enforcement. This is crucial because if everyone could freely produce and distribute the music or movies of the biggest stars, taking full advantage of innovations in technology, they would not be getting rich off of their recorded music and movies.
The internet has made copyright hugely more difficult. The government has responded by passing new laws and increasing penalties. But this was a policy choice, it was not an outcome dictated by technology. The entertainment industry and the big "winners" used their money to influence elected officials and get them to impose laws that would restrain the use of new technology. If the technology was allowed to be used unfettered by government regulation, then we would see more music and movies available to consumers at no cost.
In other words, it is government regulation that makes a winner take all economy in this case, not technology.I think that this really is the piece of the whole puzzle that is worth discussing. The regulation of the market place creates outcomes that are going to favor some actors over others. It is the sad true of rules -- all rules will hurt some people and help others. But we cannot treat the current set of rules as if they are divinely ordained or immutable -- even if current winners would enjoy that approach.
It is also the place where a Libertarian perspective seems most at odds with the marketplace. The idea that laws need to be enacted to protect the profits of specific industries (what was once called "industrial policy") seems to be the main concern of key thinkers in the movement (consider Ayn Rand and the plot of Atlas Shrugged).
Since the argument for copyright is about the social benefits of encouraging innovation (i.e. it is an ends based argument, not a natural rights based argument), it does seem that we should consider whether these aims are being well met in the current legal environment. I am not an expert on this area, but it does seem that it is possible that we are too far on one side of the spectrum, where the rewards are more than are needed to incent innovation. After all, do we really believe Walt Disney would have abandoned Mickey Mouse as unprofitable if now, 48 years after his death in 1966, the early films left copyright?
NOTE [from Mark]:
Here are a couple of links to some previous posts that provide some background on the Mickey Mouse angle.
Alice in Lawyerland
Intellectual property and business life-cycles
Do copyright extensions drive innovation? -- Hollywood blockbuster edition