The only way legal services could be introduced was to create a panic in the illegal file sharing world. The RIAA sued first, did a little education and as you say propaganda campaign, then the DRM boys showed up shortly after to save the day. :Z
Yes, the artists are being paid for each track. Even the blank space on the album is being sold now and again if you can believe that! You can read this article by SeÃ¡n Byrne to see the pathetic breakdown. Guess who gets the lions share?