Fantastic article in Wired by Chris Anderson titled The Long Tail. You MUST read it. Physical distribution limits the number of titles of books, music, DVDs that can be stocked. He explains that online sales show that the market size of stuff below the break even threshold for physical distribution is often larger than the market for the "hits" that make it into stores. He calls this "The Long Tail". We can essentially double the market for most content by figuring out ways to help people find the stuff they are looking for in the long tail and deliver it online.
He also makes another important point about pricing. The iTunes 99 cents is too expensive. It's based on a calculation to protect CD distribution. He suggests that the price should be based on how much your time is worth. In other words, at what price is it not worth your time to find, download and tag a track from a file sharing network. He thinks that maybe this number is around 20 cents for a college student.
I absolutely agree with his analysis and it's great that he's got so many figures and facts to support the argument.
UPDATE: POP STARS? NEIN DANKE! -
In the future everyone will be famous for fifteen people... written by Momus in 1991 is very relevant to this discussion. Thanks Boris.