First there's a lot of content which isn't produced because of the restrictions, you just don't see it. Remixes, different takes into existing content.

Secondly and this is where the current system fails the hardest is that you have to preserve culture.

Most of the older niche content is actually preserved by piracy right now and would be gone otherwise. There's no way to preserve content in the current model, content is just created and then thrown away.