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Of course, then you would say, $50/year is outrageous, and you're not going to pay

So in REALITY, the site would have 0 customers, and would be shutdown

Really? I'm paying $50/year subscription to Orson Scott Cards e-zine. I'm doing it for a second year already, and... yes... it is still there, haven't been shutdown.

How's that as the single counterexample necessary to show the falsity of your statement?

DRM is a joke

Definitely a not funny one.

Thanks for the Baen reference. In return: Scott Card's IGMS (e-periodic)

Orson Scott Card's Intergalactic Medicine Show has some enjoyable science fiction in it now and then.

Interesting. I didn't know that you could get the three digest-format magazines electronically.

But even without including those, there are quite a few electronic-only magazines that pay professional rates of $.05/word or more. The Science Fiction Writers of America maintains a list of approved pro markets. The main criterion is that they have to pay 5 cents a word, but they also won't list them unless they have a regular publication schedule and a decent circulation. The following is a list of pro markets for SF (not fantasy or horror) short stories, omitting publications whose main focus isn't fiction:

1. Asimov's (print)
2. Analog (print)
3. F&SF (print)
4. Baen's Universe (electronic only)
5. Strange Horizons (electronic only)
6. Orson Scott Card's Intergalactic Medicine Show (electronic only)
7. Chizine (electronic only)
8. Subterranean Magazine (electronic only)

I don't think there's any big difference in quality between the electronic and print markets. I write SF, and the list of magazines that I've managed to sell to is about evenly distributed between the print and electronic markets. The main differences aren't differences between electronic and print, they're differences in style. JBU specializes in action-adventure and military SF. Asimov's does mostly character-based SF. Strange Horizons publishes a lot of fiction that isn't as commercially oriented. There are also lots of differences in terms of business model. JBU is electronic, with a subscription model; they let you read the first half of each story without a subscription, but you have to pony up to read the rest. Strange Horizons is a nonprofit foundation, free to read online. Card's won't let you read anything without a subscription.

Orson Scott Card publishes a great, DRM-free, electronic-only magazine called Intergalactic Medicine Show. They don't publish on a set schedule, so you can't buy a subscription, but you can sign up (for free) to have them email you every time a new issue comes out.

One of the nice things about their lack of schedule is that they don't have any pressure to "fill" an issue and get it to press on time: they collect good stories as they come along, until an issue is truly ready.

Another aspect of this medium which is a bit of a mixed blessing: no page limits. They don't have to cut stories down to size to get them to "fit," which means that they don't have to sacrifice any part of the story. Unfortunately, it also means that they can be less disciplined about their wordiness.

Musicians can sell direct, Authors can't, at least not that I know of.

Sure they can! It's called self-publishing, and depending upon the expected circulation of your work, you might find it a viable alternative. To give you an example of an (admittedly already well-known) author that is doing just that, check out the Intergalactic Medicine Show. As it happens, Card is one of my favorite authors and I subscribed years ago.

In any event, I'm not a lawyer, but I'd strongly suggest you talk to a good attorney with experience in the field before you make any decisions regarding the disposition of your manuscript. Publishing houses know copyright law forwards and backwards, and will use it to exploit you to their advantage. That's what they do. The only way to go into a situation like that is if you've got some of the other guy's tools on your side. Don't make the same mistake that many first-time authors (and musicians, for that matter) do, by walking into a legal shooting gallery without proper representation.

http://www.intergalacticmedicineshow.com/ = Orson Scott Card's new on-line sf e-zine.
$2.50 an issue, with an OSC story in every issue and a bunch of stories by newbies.

so, yeah OSC is a publisher.

Orson Scott Card is doing something along those lines at the Intergalactic Medicine Show. His subscription fees are reasonable and the site has good content. Hopefully he's making a good buck with it.