I'm probably going to get flamed, but I think in these times, it doesn't hurt to be wrong sometimes. I think everyone involved in music making should be thinking about the business model and coming up with ideas because there is no other way to find a way out of the mess we're currently in, so please bear with me.
I've done some calculations lately and I've found some rather interesting stuff which I'd like to share in the unbelievably cynical ecosystem that is GS.

The answer to the music industry crisis has long been suspected to lie in ISPs, that give (and control) access to all internet content in the whole of the UK, whether illegal or not. Still, a good model is still not in place.

First, some numbers. I'll be succinct here, but I have calculations which I can present if needed.
National Statistics Online - Internet Access
There will be an approximate average of 20 million households with internet access in the UK for the next 5 years, meaning about 65% of total households.
BPI | Recorded Music Sales Revenue Stabilise In 2009
The UK recording industry has been making less than £1 billion on record sales since 2007.
RESOURCES - IFPI publishes Digital Music Report 2009
The 2009 Digital Music Report indicates 95% of music downloading is illegal.
A completely hypothetical, gigantic database (that we'll name MusicBase), that would contain the whole of the UK musical products sold in both digital and physical formats in several versions of varying quality, added to a multi-platform piece of software for download and optional playback would cost about £1 million per year to develop and maintain (This figure took a bit longer to calculate and is an approximation based on hosting costs, software development, digital transfers, et cetera, and doesn't take into account the media campaigns that would probably cost several times that amount.)

This database would have to be managed by an organisation with a royal charter, like the BBC, or (why not?) managed by the BBC itself.
It would be a mixture between the iTunes Store, with playlist streaming like spotify or deeper, but with a higher sound quality than all three of these, and with complete, unlimited DRM-free song downloads in both lossy and lossless codecs. You want the highest quality? Download the Super Audio version in 24/96k, in stereo or even surround sound. Do you want it on your iPod? Download the MP3 version. Do you want both? You can. And it would be a fixed rate subscription. £10 plus VAT per month.
Such an unlimited, highest-possible quality, high convenience option for music listeners would eventually mostly supersede physical music sales, meaning the end of retail outlets with their rent and shipping and taxes and returns policy and unsold stock and analog master storage, amongst other costs.
Most importantly, this would mean the complete transition to the digital world, with all of the advantages this can bring. The disadvantages of current digital technology are mostly related to getting the artists paid. Current digital offers from Amazon, HMV, Tesco and even Apple do not offer the sound quality, amount of choice, paying system, and overall convenience for most users to stop downloading illegally.

And the government can arrest illegal downloaders, but it can't technically make them buy music. How do you force them, then? Well, with the age-old stick and carrot system, how else.

ISPs have the technology to know when music is being downloaded illegally. They acknowledge it openly. They can control internet traffic if they have to. But they don't care what users do, and the internet is thus a free-for-all. However, they can be made to care what their users do, if they are being paid to do so.

Imagine this.
MusicBase is online, but blocked to anyone without paid access.
Any household that is caught downloading more than 20 songs by their ISP receives a written warning. Another infringement, and they disconnect their house for a year. However, at the bottom of the warning there is an offer to pay for unlimited access to MusicBase.
£10 plus 20% VAT, so £12 total a month, for completely unlimited music. Roughly the same price of the 20 songs they illegally downloaded and less than a TV licence.
This fee would be an "add-on" to the ISP fee, meaning their client would just have to go to the ISP website and order it in a few seconds. This add-on would be offered on every new contract and £1 would go straight to the ISP, pushing them to look for illegal downloaders and to enforce the law.
To top it all, a large media campaign. "A new era for Music." One database to rule them all. From early classical music to minimal techno, from Brahms to Led Zeppelin, from dead musicians to brand new bands.
A good percentage of the population would jump right on such an offer. I would predict at least 10% of UK households in the first year of their own would, and after word of mouth and ISP warnings this number could go beyond the 50% mark.*Such a service would be cool enough for people to say they are paying for it to their friends, which is an important point.

Now, if we do the maths, £11 a month (£12-1 ISP bribe) for 50% of households means £1.32 billion per year.

Let me repeat that.

1.32 BILLION extra pounds for an industry currently worth 1 billion, with a maintenance cost of under £1 million per year. This is, of course, to be added to current CD and vinyl sales which shouldn't totally disappear, at least in the short term, and with only half of households paying for it. What's the percentage of them paying a TV licence? I suspect in a few years it would be a lot higher than 50%, thus raising that figure even more.

This is also discounting all forms of revenue that do not relate strictly to music sales. Extra money could be made by advertising on MusicBase, and by selling premium licences for commercial use, etc. or extra content like videos or tickets.
As a label or musician, you'd have to pay a minimum fee to keep your own songs on MusicBase, let's say £2 to per song a month (£4 if a hi-def version is added, £6 for a surround version), a bit more than the price for tunecore (iTunes). That would ensure hobbyists with really low click rates and lots of **** songs are giving money rather than taking from the industry. Then you add these fees to the money pool from music download.
Then, you and divide the earnings between labels and self-produced acts by song downloads. Obviously, only 1 song download per IP address. You could even add a small multiplier like 0.8x for compilations and 1.2 for rare material, or 1.5 for native UK music.

This method of purchasing would ensure:

that more artists in the system would still mean more money per artist because of the upload fee which would cancel out growing numbers of hopefuls, although most hobbyists would lose a bit of money, which I think is fair enough.
a democratising of music genres and an opening up of the market. People would be a LOT more adventurous about downloading unknown music if downloads were unlimited, so less well-known bands would make more money, proportionally. Small label running would become less expensive and the gap between unknown artists and superstars would decrease.
that the customer could choose to download (or stream even!!) music on 3 different format downloads and re-download if they want, stream the mp3 version, create favourite playlists, you name it. This would also mean the gap between lossy and lossless codecs would be elegantly closed as soon as people are willing to have big enough hard drives and we wouldn't have to keep buying our music all over again like it happened in the 80s with vinyl, cassette and then CD formats.
the freeing of the digital market from the claws of Apple.
the destruction of online music piracy in the UK, taking with it the myriads of low quality files with poor naming and no artwork and a stop to the money flow into sites like Rapidshare and such.
the opportunity for a complete streamlining of the whole music business model. Labels would completely change their way of thinking and behaving towards artists. That experimental blip-jazz-techno band might not be an instant hit (sic) but their label would stop not drop them since the price to keep the file in the servers would be so low. As long as that artist made more than £2 per song per month, or even less if the artist himself paid the fee, the label would be making money; there wouldn't be any additional overhead. Actually, the label would make even more money by having lots of small artists than having a few ones. This is what everyone has been hoping for.

I realise this would be a massive undertaking, since it would involve heavy negotiations between the government, music labels and ISPs.
But it can be done. I don't see any major drawbacks for the end user.
What do you think? Is this completely ridiculous or a rather good idea?