This is what I mean about there always being risk when hiring people for creative work… To some extent, you don’t know what you’re buying. As @Peter_Singer said, there were probably pre-production meetings and storyboards to “sell” the concept. And there was probably a label rep present on the shoot to make sure their “money” was being well-spent.
Even with all those safety measures, it’s not uncommon for a client to be less than satisfied with completed work, and this becomes a challenge for the creative; they either have to invest more time (probably uncompensated) to reach a point where the client is happy, or live with the fact that the client is unhappy and will probably never hire you again.
But like you suggested, these film makers did a really dumb thing by putting a parody track on the video. It would have been much classier to just out the studio for not paying without ridiculing the artist.
It all reminds me of the case where an artist claimed that he was not compensated for posters he designed for the Spike Lee Oldboy remake. Spike reacted very… poorly.
I too have been screwed by clients and gallerists. When you are un-established you sometimes don’t have the luxury of demanding a contract and up-front payment. And in my case, a contract is basically just a bluff because it is unlikely that I would go to the trouble of taking legal action for many of the small jobs I might be taking.
Unfortunately this happens in virtually every industry… So much of in business is done on good-faith terms, which is why people always prefer to work with people they know.