A few other people have also suggested I raise the price.
If "too many customers" becomes a problem (increase in customer service expenses, etc) I'd consider it. But right now that's not an issue and I love that it's cheap.
I love that it's cheap, too. It recognizes the reality of the situation: There is no reason for middlemen, like this, to exist...except that the market is currently broken because of over one hundred years of copyright law being built up around expensive duplication and distribution.
I believe you're doing it Right, both from an ethical perspective and a business perspective. At this price, you can position yourself to be the distribution partner people choose even after the market evolves to fit reality. It will still be easier to use your service, and you can add additional features for marketing, discovery, licensing for other purposes (like film use of songs, or for commercial use in businesses, which is owned by Sirius/XM and their ilk currently) and more.
The problem would be better named "too many customers, too much hassle and not enough income to support it". It might be wise to come up with a premium service for users who can/want to pay more. In general you don't want to compete on price, but on quality and convenience.
Well said ... it's not a "too many customers" problem so much as you need to maximize the profit per customer. If you can build a service that's intuitive and error-free (within reason) customers and costs scale linearly. Peldi (Balsamiq) and patio11 (BingoCardCreator) are great examples of this.
If "too many customers" becomes a problem (increase in customer service expenses, etc) I'd consider it. But right now that's not an issue and I love that it's cheap.