The Internet has all but destroyed the market for films, music and newspapers

What's happened isn't a destruction of a market.

There's a high interest in various forms of information and entertainment. This is going nowhere.

What's been removed are the tollgates we've grown accustomed to over the past 20 - 600 years.

Market econmics are predicated on producers, consumers, goods, utility derived from those goods, and a pricing and revenue collection model.

Market failures occur where any of these elements can't be satisfied: where production isn't possible, where consumers are disenfranchised (through poverty, discrimination, or other means), where large positive or negative externalities exist (an externality is a consequence of production or consumption whose cost or benefit isn't fully captured: pollution, traffic congestion, and free-riders are all externalities). Or where a price or revenue collection scheme can't be created.

Traditional tollgates include, well, toll gates, box offices, storefronts, circulation departments, service subscriptions, and the like.

If a good is deemed significantly important to produced by individuals, governments, or groups, it may be provided on other bases: public goods (paid through taxation), charities (paid through voluntary donations), patronage works (bought for prestige or other purposes by the wealthy but not for their exclusive consumption).

The existing "information economy" is very much a creature of technology and society since the printing press, prior to which mass production of informational works wasn't posisble. All information and music was bespoke.

Absent mass production, we had: town criers, wandering minstrels and acting troupes, church and court-sponsored works of art (much of classical music and art). Most information was scarce. Libraries were (by modern standards) small and highly valued. A given person, if literate, might have access to a iven book once in a lifetime.

The printing press, phonograph, telegraphy, film, broadcast radio, broadcast television, electrically amplified instruments, telephony, cable, and the Internet not only changed the market for information and entertainment works, but changed the works themselves.

Broadsheet newspapers were a function of early printing presses. Film displaced live theater performance, as did recorded music (Sydney Australia saw a rise in "discos" vs. live-music venues along with gaming due in part to tax and cost structures). Big-band gave way to 3 and 4 piece quartets with amplification. "Singer-songwriters" and "recording artists" are two different responses to copyright laws and payment requirements (songwriters receive mechanical royalties, RAs are much cheaper for recording labels to produce and promote). Weekly "magazines" were an answer to the news, information, and distribution technologies of the time.

Broadcast media necessitated a radical revisiting of previous revenue models, which ultimately resulted in a royalty collection scheem largely based on mechanical means (there are few restrictions on public performance of a work, but a set fee must be paid), with compliance based on a mix of audits and recordkeeping (small live-performance venues work roughly similarly). The system is hardly perfect (payola has been a huge problem for over half a century), but monies get paid, if not always to the artists.

The Internet, its distribution mechanisms, cost structures, and the priority on lifting restrictions on most forms of mass media, make traditional "paywalls" problematic at best.

At the same time, there have been very strong tendencies to consolidation in the basic backbone and search spaces particularly. There is a service and revenue relationship generally at the ISP / service-provider level. A sampling/audit based mechanical system tied to this with revenues being distributed to artists and publsihers is likely the ultimate outcome, for the large case, with smaller one-off solutions attempted elsewhere (specific subscriptions). One benefit of such an Internet Royalty Audit Syndicate (IRAS) would be that the online source of a work wouldn't matter so long as attribution of authorship/ownership could be reasonably established, and such an element should be a design goal of any such system.

"Pirate sites" would simply become additional legitimate distribution channels. As well they should be.

It's also highly probable that the price point of works created will shift down the cost curve. When distribution channels are few, outlets are many, and marketing/promotion costs are high, it makes sense to focus on a small number of blockbuster works. When channels are many, control is diffuse, and entry barriers are low, individual works can and will be produced at lower costs. Marketing will remain a major expense, though community/viral methods can compete with more conventional institutional/mass means.

Looking at the iOS App Store & Netflix model I can't help but feel that Apple has found the way for both the consumer and content creators to be happy. Price it low and go for volume. Yes, there will always be pirates but I get the impression it is a very small minority that would continue to do so.

Content creators are going to have to get over the fear that reducing the price of your content doesn't devalue it.