There seems to be a sense in some people that the GFC is happening somewhat remotely and only affects the way that funds can be raised to run businesses, or affects consumers' interest in spending money...

The GFC is not what is at the heart of the matter. It is the manifestation of the illness, that became visible through the symptoms of increased temperature of the housing market among other things.

The real root cause of the GFC is digitization. The ability to convert information into zeros and ones made it easy to move around the planet using, of course, digital telecommunications technologies. It also made it incredibly inexpensive.

The lowering of the barriers to entry to acquiring technology was like the invention of the printing press by Gutenberg. It enabled knowledge to flow to those who wanted it, to use in whatever way they chose.

And just as business has used information technology to strip costs out of manufacturing and maintenance of inventory etc, so too is the public using digital technology to strip costs out of content, among other things.

The way that the public is doing that is probably illegal in many cases. Whether that should be the case or not is not the issue. The problem that arises is that it is very hard, as the content industry has found out, to sue all your customers.

So the problem that arises is one of business models.

The content industry wants to stop revenue leakage from online distribution. They have several choices:

1. Sue everyone (too expensive and may cause unfortunate precedents where judge's side with plaintiffs)
2. Tax ISP's (the enterprises that facilitate the distribution of the content)
3. Tax digital memory devices (problem here is that the content industry doesn't want to be seen to have implicitly legalized the copying and storage of content)
4. Introduce "paid for" business models such as the "all you can eat" ones that are being used in the UK.

The problem with number 2 is that the content industry is trying to introduce the taxing concept one sector at a time. So at the present it is the music business that is trying to get a payment system in place. ISP's see this as the thin end of the wedge, where if the idea becomes a precedent and a music levy is introduced, next there will be a movie levy, a games levy, etc. And that could increase the costs to consumers by an order of magnitude that would cause consumers to cut back on Internet usage, thus shrinking the market.

One of the key problems in the whole modelling that is being done is that music companies, such as publishers and record companies, are fighting to ensure that the payments that they receive are not reduced on a per unit basis.

Historically, publishers have always been the poor cousins in the music industry. They stand at the end of the line with their begging bowls, and get paid by the record company and receive pennies while the record company gets dollars. With the advent of digital distribution record companies were able to successfully argue that music publishers should get the same quantum of a digital download as they did from a physical record sale, even though, in reality, there was no manufacturing, inventory or other cost component for the record company such as those normally associated with a manufacturing business.

In retrospect that push back has probably been extremely damaging for the record companies - and because of the precedent, for other content owners.

The push back is in essence all about the protection of a "per unit" revenue model.

That "per unit" model was developed in a different age and a different modality. Manufacturing physical goods is all about scarcity. Digital distribution - particularly in an age where P2P is a reality, fortunate or not - is about ubiquity.

In an environment of ubiquity, what needs to happen is for the marginal unit cost to reduce to a sufficiently low number so that all people in the business ecosystem become agreeable to owning content that they very probably will never consume. That way ubiquity can rule rather than demand.

In such a system where all content is present on all available hard drives, people will choose to consume locally whatever they want, and will enable to continuing ubiquity to rule.

But to do this means that the record companies need to be prepared to drop the quantum of revenue that they require down to the same level as the publishers receive now. That would reduce the cost per unit of acquisition to about 15% of what the current sale price is. (Still too high in my opinion, but a step in the right direction). That would encourage more people to be prepared to pay for legitimate acquisition of content, or put another way, to purchase an insurance policy against being sued). 

This is essential for the content industry to adopt if it wants to survive, just as it is essential for other industries which benefit from the potential to make their products more ubiquitous need to reduce their expectations of margins in order to make consumption legal and enticing rather than illegal and exciting.