HI Guys,
I agree with most of what has been said. I think the main reason the hifi industry is dying is because of the way people listen to music.
Most people listen to it casually or in the background. I often tell my friends: if you listen to music in the background, get a compact system. But if you like to sit down and lose yourself in the music, if how a cello sounds and a piano sounds and a trombone sounds matters to you, then you get started on a real good system.
Mastering engineers pretty much follow the trend: so if most folks listen to stuff in the background on cheapie systems, they will compress accordingly.
For the hifi industry to pick up, people need to be educated into listening to music and the joys it can bring. Really listening.