I said :
"In your calculations you neglected to consider that the number of people who will be at least 1 single is greater than the number of people who will buy an album."
You said :
"That seems quite possible, especially if marketing changes to be focused on selling singles rather than albums."
Quite Possible? Please!
It is a basic law of economics! Cheaper smaller stuff sells to more customers than bigger expensive stuff.. this is pretty basic to any business from selling lemonade to PC's.
"In my scenarios I assumed that interest in an album marketed at this level would be roughly equal to interest in the single(s) from that album, since most marketing is currently focused on selling albums, not singles."
Marketing is not directly related to sales - price and availability inevitably are. This is key. Why do you think you can buy pizza by the slice and ice cream by the scoop?
"Also, the explosion of content made possible by the lowered cost of entry seems likely to dilute the market for any individual single. So even if more people are willing to buy a 99 cent single than a $9.90 album, it might still be hard to make good money."
Yes - this is better for the Indies who can play on a more level playing field than traditionally - particularly as filesharing and internet radio allows people to try before they buy.
Market forces will dictate that those who can manage their cash flow and provide a supply of good music will benefit, those who can't will suffer. This is a good thing. If you can't manage your cashflow and produce decent music then the world is better off when you go back to work on the till at HMV.