I don't think it's a matter of abandoning the old system for a new one. I think that will happen gradually. It's happening with music already (though books have some obvious differences). I can download live performances (audio and video) of many of my favourite bands for free and it's 100% legal. My favourite band gave away an album 9 years ago for free (and it's a great album). Of course I also paid close to $100 to see that band live last year and bought a t-shirt.
Some ideas for authors:
Subscriptions: pay to get the next chapter or sequel, or pay upfront for x number of stories or books over a year (x dependant on whether the author needs a day job
)
Provide physical items as an incentive to pay for ebooks - autograph, personalised message, etc, a meaningful 'prop' from the book's contents, ticket to a reading
Advertising - product placement (distasteful, I know), ads every 10 pages or before every chapter (this chapter brought to you by ______ ). Hey, it works for TV...
Companies could 'sponsor' authors
Authors could sell a limited number of hard copies to collectors at premium prices - musicians are doing this with fancy box sets already.
Donations - 'click here to donate $2 to support the author'
Exisiting streams, such as film rights, etc.
That's just a few ideas. I think the reality will be a combination of many income streams, perhaps combined with some traditional payment.
I think the author that considers direct payment for copies of his books a primary income stream is going to be in trouble.
Think about how much money Tiger Woods earns from golf compared to his total income. What about past US presidents? My understanding is that they earn a relatively modest salary as President, yet earn millions upon millions in consulting roles and as speakers after their term.
Each of the ideas above has benefits and drawbacks, of course. And of course, someone far more savvy than me will no doubt come up with much better ways.
This may all change the way authors work. I think it's wrong to assume that the current ways are perfect and should stay (and that new technology should be moulded to fit those ways). Maybe the novel will become a less important format, maybe authors will need to participate more in promoting their work to be successful. Maybe authors will need to be part-time businesspeople who spend as much time generating income streams as they do writing.