Agree in principle that the Recording Industry (Saleable Copyright model) is not working, but the "pay for creative work up-front" seems to have major drawbacks - principly that you have no idea if a creative person is any good until they've delivered the goods, creating chicken and egg.
I think you're missing a trick though: live performances.
I've read up on the subject as a former MP3.com artist myself, from talking to upcoming bands like Silverman and from the widespread public writings of established artists. All say that recording artists rarely make any money from sales though their record company; in fact they normally end up heavily in debt (the famous record label "tab").
Let me say that again: most artists do not profit from music sales. Only the record labels (and industry quangos like the RIAA) profit from music sales. Instead, most current artists make their money from live gigs, merchandise, appearance fees, etc - the good old fashioned "goods/services for cash" model.
As soon as you appreciate this, you realise you can ditch the record label altogether, "open source" your music (allow to be freely distributed on a non-profit basis, with distribution channels allowed to charge a small fee to cover their costs if they wish) and make money from gigs, etc, instead as your popularity grows.
This is not a new idea: numerous bug names in music are advocating the idea. Here's a quote from an excellent 2007 Wired feature by former label boss David Byrne:
"What is called the music business today, however, is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over. But that's not bad news for music, and it's certainly not bad news for musicians. Indeed, with all the ways to reach an audience, there have never been more opportunities for artists."
"The fact that Radiohead debuted its latest album online and Madonna defected from Warner Bros. to Live Nation, a concert promoter, is held to signal the end of the music business as we know it. Actually, these are just two examples of how musicians are increasingly able to work outside of the traditional label relationship. There is no one single way of doing business these days. There are, in fact, six viable models by my count. That variety is good for artists; it gives them more ways to get paid and make a living. And it's good for audiences, too, who will have more - and more interesting - music to listen to. Let's step back and get some perspective."
Wise words. Full article (well worth a read):
http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne
If that's not enough for you, plenty of similar reading at:
http://entertainment.howstuffworks.com/record-label.htm/printable
http://www.sourban.net/The-Future-Of-Music-How-Real-Artists-Will-Save-Music-From-The-Music-Industry
http://www.magnatune.com/info/musicians
http://www.wired.com/entertainment/music/magazine/16-01/ff_yorke
http://www.google.co.uk/search?hl=en&q=music+artists+make+money+live+performances+record+label
Cheers, Ben