Great job. I am probably biased since this is nearly exactly how I see things going (and want them to go) as well, but your explanation and the historical examples chosen make a great argument.

If you are demanding I take a shot then I have a nitpick: First paragraph has the Traditionalists, Incrementalists, Apologists, and Defeatists. What about the school of thought that the widespread ability to freely share music is inevitable and artists, as they always have, will find a way to make money because people love music? What school of thought are you and I in?

Do you think this model will turn the music industry into even more of a hits based business (like the app store model has done to software) or less of one?

I can see books moving to this model as well, but movies seem a bit more problematic unless budgets fall drastically.