I understand your agrument, and it is one commonly made, but I disagree. My disagreement goes to the core of your argument. You are arguing that given the option between downloading music illegally and downloading it legally that a significant population of the industries target market will choose to download illegally. This returns to the premise of "if someone is pretty sure they won't get caught that they will commit a crime."
I think that belief is fundamentally flawed. I believe that people are, for the most part, good and, given the ability to do so, will follow socially accepted laws. Given the financial capability to do so, and a perception that the price is fair, a reasonable individual would choose to pay someone for the work they have done.
There are many arguments as to why college students are the biggest group of offenders. These include, but are not limited to: lack of money, first generation that was internet savvy enough, first generation with immediate access to digital media from the get go, etc. As such, it is really impossible to tell what will happen as they mature. Will they, as their parents do, elect to pay for music and movies or will they get stuck into the habit of downloading music.
I made no recommendation that the music industry adapt a business model with zero revenue in it though. Price is not everything. There are two strategic marketting plans out there: Cost and Differentiation. The RIAA cannot compete on Price, that's not possible, so they must compete based on differentiation. What are some ways they can differentiate their product? These are off the cuff ideas and are by no means complete or intended for debate, just some possible examples.
What I did suggest, however, is that the industry embrace their customer's demand: "We want music electronically." They've made the first set of steps into that market. But they haven't, from what I can tell, really taken advantage of the market yet. They are treating it like they treat their CDs, and they need to understand and act upon the fact that this is a different product all together.
Oh yeah, here's another idea for a way to help their revenue. For the first month, or even two, after a CD is released, what if you could only buy a full album. After 1-2 months they make the mp3s sold individually. What if the "big hits" cost 1.50 each, as those are the ones that people are going to buy more than others, and then the rest of the songs were 89-99 cents a piece?
I've gone back and reformatted the comment for readability, again, my apologies
I'm sure this will be flamed, but I'm so very happy to see this happen.
Suing their customers was one of the stupidest moves in the world. They alienated their customer base. They initially chose to fight the market instead of working with it and the long term consequences will probably be dire. When the market started to demand a digital format they should have immediately reacted (or perhaps should have seen the writing on the wall and been proactive) and begun selling online, as they do now.
Consider this: College students, on the whole, have low disposable income. The "goal" of college is to increase your earnings potential and have more disposable income. If you sue a college student there is a good chance that you will force them to leave school for lack of time, energy and funds to finish college. The earnings potential of that college student lowers to near zero.
Most people don't steal or commit crimes, even if they know they won't get caught, if they have a choice. Once these college students become professionals and increase their disposable income the time/cost of "stealing" music becomes not worth it and they'll start to pay for their music (assuming a good product, of course). Most industries work with law enforcement and law creation to mold the system into what they want. Although I agree that lobbying will make it harder to download in the long run, that's the point and that is their goal. They will try to take a mile and other groups will have to fight against them to limit how much they take. That is the system that we live in, and that is acceptable and accepted behavior from an industry.
Music Piracy, in a way, is a new entrant into the Music industry's marketplace. A competitor as it were and should be treated as such. I'm glad to see that is finally happening. Now they have new challenges to face. Album sales, and total sales, are declining. If the average album has 11 songs and they sold 840 million singles, then they sold about 80 million albums worth of music, plus the 500 million albums, bringing them to 580, about a 12% drop from 650 million.
They have a product set, they have a set of target markets, now it is time to go back to the drawing board and create a new strategic marketing plan. Product, Place, Price and Promotion. Cost vs Differentiation. Leadership vs Adequacy.
That's just a few ideas that come to mind immediately on ways that they might consider improving their marketing, more research is obviously needed.
No problem is so large it can't be fit in somewhere.