What they are really doing here is asking the other side of the partnership to participate in the loss leader effort. Apple provides the platform development + storage and delivery infrastructure, the artists provide the content.
When you consider it as a partnership it doesn't seem so reprehensible, they are both forgoing income to secure future recurring income.
I think what people are upset about is the fact Apple has a big war chest when many artists do not. Fundamentally this isn't really Apple's fault though, likely this deal was brokered by their biggest partners - huge record labels. Huge record labels also have big war chests and are probably fine with the arrangement.
It makes good business sense if you are a record label or Apple, less so if you are an independent artist but maybe not no sense at all, I don't know what exposure is worth.
Unfortunately Apple can't create a 2 tier system where they have the big record labels foot the cost of the indie artists nor can their ignore the obvious good business sense of the loss leader approach.