it's going to be pirated until the legit use prices drop to the point where it doesn't pay to pirate anymore. I think the demand for is more elastic than the industry thinks.
Would you pay a nickel to download something? I think most folks would. A buck? No way
I've seen Wherehouse Music Stores close in my neighborhood lately, this franchise has been around as long as my chrome dome can remember. Free downloads probably have a lot to do with that, because these specialty stores catered to music lovers and mostly 15-35 crowd - which is a prime audience for kazaa, etc., also there is a huge amount of retail capacity in that space, best buy, circuit city, blockbuster all sell music for walk up customers, and then the online retailers.
I think your point is correct though, there will be some middle ground between a buck and free.
The increasingly CHEAP cost of cpu power and storage is causing a lot of pain and upheaval in a lot of industries, i'm in the printing industry and recently attended the Gutenberg show, it has been declining in size for the last decade, it's about 40% of it's size from the late 80's.
just like record buyers are looking increasingly for digital solutions, print buyers are getting cheaper solutions connected to their computer systems and bypassing the print for pay business.
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