All the industry seems to care about is protecting the middleman [label, publisher, etc.]. Where is the content supposed to come from? Midnight elves??

Here you hit the crux of the problem, which I would rephrase as:

Creators have no suitable, cost-efficient way to market and sell their stuff. They simply cannot (very easily) put it in front of the people who want it enough to pay for it.

Guys like Neil Gaiman claim the Net has changed all that -- that now, creators only need to make something good and stick it on the Web. He evidently believes consumers on the Net will then automatically find such content, promote it, and thus create de facto careers for the creators...

...although I note that Mr. Gaiman himself has no use whatsoever for that business model, even though he has a strong enough brand to make it work. He continues to work through traditional publishers and retail outlets instead.

It's the same tale in music, I think. You can do that sort of thing -- direct over the Net -- if you are Radiohead or Nine Inch Nails, because you already built your brand and got your following via the traditional model. But for new bands, that is absurdly unlikely to work and I can think of no example in which it ever has.

So the middlemen continue to be the focus on this topic, as you correctly point out.