I beg your pardon, but I didn't know we could negotiate a price with the record companies or software houses. I thought they set a price and effectively tell us to take it or leave it. While some people are simply taking the "free" versions, I think you'll find that many of them WOULD pay what they consider to be an equitable price. It is the fact that there no option to negotiate such an equitable price that leave them without an option (though see below for my comments on iTune).
I believe that many people are in this category. They object to paying a large amount of money for a CD when they only want one or two songs on it, but they'll pay a couple of dollars to get those songs. The success of iTunes is, I think, evidence that people WILL pay what they see as an equitable amount. The prices they were previously charged were not equitable, and (just like at the time of Prohibition) they took illegal action in protest.
You've reminded me of another point. What about libraries? For those who believe in copyright this strongly, should libraries be banned, since they pay one set of royalties to the copyright owner, and then let hundreds, if not thousands, use the copy they've bought?
I don't want to come over as an apologist for pirates, but one reason they are prevalent is because prices are perceived to be inequitable. People would pay if the price was better. As a simple example, people BUY pirate copies of CDs and DVDs every weekend at markets around the world. Most will know that they are buying pirated copies, but they still pay for them. If the legal owners sold them at that price, people would pay them instead. It is not all just free vs pay.
There will always be an element who prefer to not pay for something, but I firmly believe that the vast majority will pay reasonable prices. Piracy flourishes when prices are not reasonable....