WARNING: nothing in this article is revolutionary or even evolutionary. This article is simply a statement of common sense, which should be well known and understood.

Why does the music industry simpifly the loss associated with pirated music by multiplying the number of pirated copies by the retail value of the physical media. This is absurb beyond any reasonable amount of greed.

In physical retail, items go on sale all the time and generally the lower the price is dropped, the more units they sell. Why? It's because every consumer has a different value associated with any product. For example, there may be 20,000 consumers willing to pay $15 for an album, but if the price drops to $10, there may now be 100,000 consumers willing to pay that lower price. This example might go further and say that there may be 500,000 consumers willing to pay $1 for the same item. However, some consumers wouldn't want the product even if it were free, so there is a huge range of associated value with any given product.

There are two important points to take away from these numbers:

(a) Every individual has a different value associated with any product that is completely out of an artist's control once the track is finish and released.

(b) To maximize profits, one sometimes has to do the unintuitive step of lowering the price. For example, you may only sell 1 album priced at $100, but priced at $10 you may sell 1,000 copies, thereby increasing profits by $9,900. But if you further lower the price to $1, you may only sell 2,000 copies, which would be a loss of $8,000. Therefore, finding the right price is key for any product. A price set too high or too low will result in failure to maximize your profits.

It's absurd then for the music industry to use the retail price that they have set for a physical product as the amount lost on each pirated copy of the song, especially considering that there is no loss in money associated with production and distribution of the physical media. Why not use the lowest sale price or bargin bin price? There is no way that if that album wasn't pirated, they would make anything close to the amount that they are claiming for the reasons given above.

The only way to accurately determine the value of a product is to offer it at various prices and then interpolate the numbers to determine the price that would generate the maximum revenue.

In physical retail, anytime there is a limited supply of any product, the economics of supply and demand determine the price of that product. However, on the internet, supply can be and is typically infinite, so the demand will always be less than the supply. If supply/demand economics are used online, then it will always drive the price down to zero.

Therefore, the internet needs a different economic model other than supply and demand, perhaps value and moral obligation. If a consumer sees value in a digital product and would like to consume more of the same, they must support the creator or else further products won't be possible.

Regardless of the model that works, the price of digital media will always be less than the current price of the physical version. This is only fair since the costs of creating the digital media and distributing it is practically zero online. This is good for the consumer and should lead to further sales if the right (modern) pricing model used, rather than the old traditional models for physical goods.