But you know what? Forget everything I just said. (About subscriptions, governments, etc.)
In the end, I think a market-based approach would probably work best. But what is a market based approach? NO, IT DOESN'T F**KING MEAN LETTING EVERYONE DO WHATEVER THE F**K THEY WANT. As Adam Smith pointed out in the very first book to present the principles of capitalism, a market economy is one ruled by competition. A phenomenon which steers individual players so beautifully and benevolently that he likened it to an animate being, an invisible hand.
What he forgot to mention is that it is also in every player's interest to destroy competition. And the _free market left to its own devices will do just that. With mergers, oligopolies, cartels, and price-fixing.
We've remedied that a tiny bit with antitrust laws, but if we go further and just split up the big 4 music publishers and the similar cartel of book publishers into a hundred smaller firms we will restore the invisible hand and create a true market system. With all its benefits. Prices will plummet, quality will rise, and we would not be hearing a single mention of DRM or ridiculous figures such as having to pay $10,000 to fill an iPod.
I would not have to argue for any alternatives to just buying content piece by piece.
And because individual publishers won't have so much power (in marketing, sales channels, etc.), authors will end up getting bigger cuts and make plenty of money.
Competition, not laissez-faire, is the nature and cause of the wealth of nations.
BREAK UP THE HUGE PUBLISHERS INTO SMALL COMPANIES.
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Under the banner of "trusted platform" the new CPUs and operating systems such as Vista are large DRM schemes that provide others with control of your computer to say what you may and may not do with it but cannot keep your kids from hard core porn for that would not be "right."
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That's because pornographers don't use DRM. You know why? Because there are so many of them that there is an incredible amount of competition. This competition drives down prices to such an extent that so much content is given away as freebies that many people can get by just fine with neither paying nor stealing. And the quality of this free (or cheap) content is FAR higher than that of the content that gets sold through the older channels (eg PPV or DVD) which haven't yet been influenced as much by competition.
Competition is incredibly powerful. Of course you don't need to tell any economist that. What you do have to do is get it through their thick skulls how little true competition exists in the present markets. (They've been in denial about it for hundreds of years because assuming prevalent competition means vastly simplifying economic theories. They're too fond of competition's elegance to dare think that's not actually the way the world works.)
The solution, however, is straightforward. Force competition manually. (And simply braking up large companies is one strategy.)