If you think the amount of covers of songs has that dramatically reduced, you haven;t been listening to http://www.coverville.com as I have. Or spent time watching Pomplamoose on Youtuber. However, there is one minor thing in play there to reduce cover song generation: The advent of Hip-hop music, so frequently filled with personal lyrics mentioning a band or performer name, are not very coverable. maybe every tenth Jay-Z song could be covered, opposed to nine out of ten from the average 1950's-2000's top 40.

Also a factor in this is the use of sampling and/or mashups as a way of changing a song without changing the song's original sound and timbre.