Good discussion folks, I've enjoyed reading it.
My thought process behind this question really isn't so much art vs capitalism (that's part of it) as it is how does the system we operate in is effecting gifted artists and what they create. I wrote in the OP, somewhat tongue in cheek, that our most gifted musicians are writing pop songs but sadly there is some of truth to it. Successfully writing a top 40 hit or a commercial jingle more often then not will yield an artist significantly more money then writing an an opera or symphony (of course that depends on weather or not you feel a great musical work has any value beyond entertainment then it probably doesn't matter), its easier to do and you can produce a lot more work. There are musicians out there right now who have attended the best musical schools in the world sitting at a piano trying to come up with a hook for the next teen pop star rather then trying to perfect an aria.
How many times have you gotten into a great underground band only to watch them sign to a major label and suddenly their dynamic, interesting sound has been replaced with mediocre, streamlined, radio friendly tunes? A record label will expect a band they sign to yield a profit and to do so the artist will have to either temper his sound for wider appeal or risk getting dropped and going back to work at Burger King. The band initially had that sound because it was made up of talented musicians and songwriters capable of creating something significant and influential yet to make a real living that talent is instead being used to create something more designed for mass consumption then any other reason. Whatever statement or impact they wanted to make has long since been lost by the time the final product finds its way to the public possibly rendering from being something great to just mildly interesting.
Now I'm focusing on music here because I'm more familiar with it but I can't imagine its much different for other art genres. But are brilliant visual artists spending their best years at a computer creating graphics for car ads? Sculptors creating corporate art to sit in the lobby of a new skyscraper, playwrights having to work with in the confines of what sells on Broadway...ect ect
Anyway it does depend on how you define art or what you actually do consider to be art, certainly beauty is in the eye of the beholder. But I have wondered if the overall quality and abundance of great works has suffered in the process. I'm not entirely sure myself, which is why I thought it might make for an interesting discussion and it has.
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