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Of course Rhapsody has to pay a fee for their subscription services. Any commercial outfit has to pay royalties when it uses copyrighted material. In fact, the increase in royalty rates caused a big stink: (from USA Today http://www.usatoday.com/tech/news/techpolicy/2002-07-21-radio_x.htm)
On June 20, a copyright appeals board set a rate of seven-hundredths of a cent per song, per listener. For many stations, run by music fans for music fans, that works out to thousands of dollars more than they make.
That's in addition to royalties paid to publishing houses - i.e. the artists. But there is also the overhead of running a subscription that is more than that for a store front. I expect that bandwidth costs are higher for a subscription service and the DRM management is tougher particularly when transfering subscription tracks to a player (the mechanism for making tracks expire with membership without accidentally causing legit tracks to expire is more tricky than a sale). Even if the subscriptions completely subsidized the track purchase prices, that says less about the record companies trying to screw Apple than it does about Apple's business model for iTunes vs. a subscription-subsidized service.
My dig about Apple's cut vs. the artists' cut was to point out that someone provided figures showing that Apple wasn't getting as much per sale as the record companies, but the data showed that Apple is making more per sale than the artists, a common complaint about the recording industry. If the record companies are screwing the artists because they take a bigger cut than the artists on sales, Apple is screwing them too. It's just a fight between who gets to do the lion's share of screwing the artist. On who gets the lions share, Apple is a distributor while the record company is the producer who incurs costs for scouting, signing, recording, touring, and legally representing artists - costs Apple does not incur directly.
