Personally, I think music will never die. Its been around thousands of years and will continue to be around till the end of the world (and even after that). Alot of peoples perceptions about the current music "industry" is biased by where they are looking for bands.
If you look to TV, radio, and movies to find new music you are definatly going to get a different picture than if you go to local shows, scout on the internet, and read Zine's. Not saying all mainstream is bad, but it just takes a certain kind of "sound" (usually generic) to make it to the major markets.
I know with our band, alot of the stuff we have played in the past has been generic (we got rid of the bad seeds that desired this), but from this point on, we are trying to be unique as possible. Things are getting alot more progressive and unique (need to get a new recording up!).
Newer bands tend to follow the generic sound of whatever genre the band they idolize sounds like. They want to play and/or be in the band that they love so much. I know, I used to be this way. It also offers them an easy fan base built on the bands that pioneered the sound. This cycle seems to lead to trends that most people either love or hate (nu-emo for example). Once the trend reaches the saturation point, the bubble pops and people look for a new trend to follow. It happens with clothing styles, hair styles, music, movies, video games, etc. Thats just life when money and marketing is involved.
As mentioned earlier, where you look determines your outlook on the current music scene. If you go mainstream, I would agree that its looking pretty stagnate, as I feel alot of the current trends are reaching their bursting point. A new set of cycles is about to begin soon. If you look to the "underground" you will find a wealth of music and upcoming trends that you can get in on early (so you look that much cooler)
That scene isan't, and never will be, stagnate.