Surely part of the problem is the 'bloat' from both the **AA's and the artists themselves not being up to scratch?
I mean, it seems that I could quite happily set up a studio for betwen $8,000 and $32,000 (http://emusician.com/tutorials/emusic_build_personal_studio/) and if you're in a band of 5 that's not really all that much money - I've spent more on buying and maintaining a track car for weekend racing.
From there, all you really need is time to write and record the music along with a modest cost for producing the CD's, or setting up your iTunes or equivalent distribution method.
I think the problem is that the artists these days are in it for the money and not the music. They're picked up by producers for their looks, not their sounds which means that a lot more post-production work is needed. Then you've got to pay the Songwriter, producer, publisher, advertiser, etc. before the artist even sees any money.
I'd gladly give the a good up-and-coming artist 90% of the total cost of their album that they've put their heart and soul into priced at £5 than spend £12 an album that we have now of which only a small percentage goes to the 'figurehead' who then complains about piracy stopping their cashflow.