amortization, stealing. (Score 1)

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?

Amortizing the cost of producing and distributing the product, including of course the payment to the artist, over the useful life of the product (read: total cost / estimated sales per year, with the sales per year brought back into present dollars versus future dollars).

How do all companies factor in R&D? How do drug companies who spend billions developing a drug and then pennies making the actual drug come to prices? Same thing.

The other side of the music scene though is that people are stealing it. So your options are:
  a. turn those folks into buyers [DRM is an idea for that, but causes trouble for the current buyers]
  b. they're not sales unless you make money, so just reduce the number of sales and hence raise prices [read: downward spiral]
  c. let the market forces work themselves out [accepting that some people will not buy at any price]

I'd argue that 'stealing' the music is not what the market INTENDS to do, but the end effect. The key is to ask why. un-DRMd music is no worse than folks copying tapes using high-speed dubbing. What the music industry ignores is that (a) music WANTS to be shared. If you hear a song from your buddy's car- you want it for your car... right away, (b) people want a song and not an artist's collection of songs, (c) the price needs to be reasonable. People will do what is convinient. If you can get a song in 2 minutes from the comfort of your home for free or cheap versus pay too much, going to a mall, being restricted on how you use it, and so on, you'll do it. Renting/sharing songs between friends is a good first start and a good sign from the industry.

-M