They never cease to amaze.
The real problem to me seems to be that the labels/distributors/shops is having the same owners. They don't want to cut themself in the foot, and hence they are desperatly trying to maintain the same distibution chain.
At $0.65 per track one might think that it's a decent profit compared to what they get per track on a CD.
Of course there is the argument that they might only sell a couple of those tracks.
I doubt that people neccessarily buy all in all less music because they can pick and choose, they probably would buy the same amounts but be more satisfied with their purchases.
But I can see that a bulk discount is appropiate. and quite a few download sites does have album discounts for downloads as well.
From my knowledge dealing with minor labels the actual profit for the label on a CD sold in the shop is not much.
Say the label get around $8 from the distibutor.
Take away manufacturing and transport costs, costs for overstock and smaller extra runs for understock and cost of financing the pressing.
That normally would leave somewhere in the region of maybe $5.
That should go to pay production, royalties, advertising and mastering and then leave the label with some profit.
So the income would be a bit less per track than for the downloads at $0.65.
It might at a first glance seem like that is then reasonable that if they would sell on average only three tracks maybe from an album they like to get more for each download.
But of course buying a CD in the shop you are actually parting with maybe $1.50 per track. If only $0.50 get to the label in the end is not of so much importance when the distributor and even maybe the shop and CD factory is owned by the same owners.
Thats the underlying factor I think.
Not only in the music industry this is a issue that impedes the development of the internet as a marketplace.
To make distribution chains more efficient by cutting away parts of them is not welcome by everyone.
Although it might seem good for the producer and the customers, it's not favourable for the people who sit with a lot of shares in parts of the chain that becomes obsolete.
When it is like in the music industry with many times the same owners it's a major block against progress.
I can see that in the long run label, shop, distributor and CD press will become one entity. Then selling tracks for $0.99 will be very profitable indeed compared to selling CD's.
There is examples with download shops signing up artists directly in essence doing just that and for people who like CD's the shop can burn them on demand.
Great for the artists and great for the consumers.
But maybe bad for big business.