It's just part of capitalism, if you have money you can use it to make more money from others who don't.
How would this be different to say a venture capitalist or indeed any other sort of investor?
If it was such a terrible deal then why would content creators sign up for it in the first place?
For the same reasons a lot of people sign up for terrible deals. E.g.:
* They believe they have no choice, * The dealmaker says: no, it's really a great deal, * They are naive, * They are desperate, * They believe they'll be the 1 in 100 who does better, * The dealmaker promises more than is delivered, * Information asymmetry, * Etc, etc, etc.
It's different than VC investment, and especially different than regular investment, in that publishers control much more of the playing field. Also, to get VC money you generally have to have a reasonable understanding of business. That's definitely not true of writers and musicians, which would make them much easier to take advantage of.
Music, video games, application/software development are all areas where this is completely false -- very minimal financing is required for any of this and we already see a growing, open media landscape as a result of it. You seem to forget the capitalistic tendency for market potential to dictate the cost of services as well.
That is to say, Hollywood movie budgets are extremely over-inflated because of the monopolistic business models that guarantee them capital they do not require to finance the creation of content in the first place. Actors, directors and writers do not require millions of dollars to write or produce this content anymore. A market for its production -- or at the very least a social imperative -- would exist regardless of this artificial establishment.
Walk through this with me:
* it costs nothing to distribute the content anymore (in stark contrast with even a decade ago)
* it costs very little to create most content, and where it does costs a lot, it's mostly because of copyright's existence
* it costs nothing to market the content anymore. Social media is in a dominating role.
Copyright depended on all of these factors being completely opposite. It depended on some cost for creation, or more broadly, some quantifiable scarcity. It depended on a publisher -- an intermediary -- to connect the consumer with the creator. It eventually depended on advertising and extremely competitive marketing as well.
The realities of 21st century communication and technology simply are not compatible. Financing the production of works by selling the right to copy it is absurd in this economic climate. It made sense when publishing was a capital-intensive and narrow industry, but it now forms the basis by which many people communicate today.
Instead, works should be financed by the public interest in its creation. Nobody has to pay more than they want for their "copy" of the "intellectual property", the artist is subsidized as much as they transparently request, and perhaps an arbiter is compensated under contract.
Regardless, it is unenforceable and ultimately counter-productive to support copyright, just about anything could be better.
This is not the kind of money most people have lying around, it has to come from somewhere.
Distribution is cheaper for sure, but you still have to factor in costs for bandwidth so it's not quite free although you may get some mileage from using a P2P system for some of the distribution. You also (in the case of software at least) need some sort of support infrastructure in place for when people have problems with your product. This means contracting out to a call centre or at least hiring someone to answer the emails.
I would hazard that many content companies spend quite a lot of money and time marketing their products which includes finding ways to pimp them on social media. If anything you have to do more to stand out now that there is so much noise, this means either spending more money or hiring smarter people to do your marketing (who probably want to get paid).
There are projects like kickstarter which offer an alternative way to finance works, of course it's early days yet so we will have to see how that works out.
The problem with "pay what you want" is that this is probably going to be as close to zero as you feel comfortable going. Even if you wanted to objectively try and pay a fair price , this will be affected by what you see other people paying.
A case in point would be the ardour music production software which is one of the few free software projects to have a full time programmer working on it who was not an employee of some corporate entity. However when you look at the donations he has received I'm surprised he is able to feed himself, bear in mind that this is pro level software which is actively used by enthusiasts and some pros. I think it would be difficult to agree that he is paid anything close to the value of what he produces.
Simply not true, the true cost is the people's time. A 20-person dev team for 6 months can easily cost north of $1M paid market rates[1], even if they are all using their own equipment and working at home. Double that if you include office space.
That is the elephant in the corner of the room: people working on open source have to have day jobs that pay well enough.
[1] Notforgetting employer's taxes
There may be a few people who have the energy to work a 40-60 hour week in a serious job and then come home and put the same level of love into an open source project but these people are a minority.
If I thought I could just quit my job tomorrow and spend my time hacking on some game or open source project without having to find someone to fund me up front (who would subsequently want some plan on how I would return their investment) I would do it in a flash.
Obvious point is 99.9999% of content creators cannot afford to create for free, and cannot attract gratuitous "free money" sufficient to cover basic food/shelter needs (dependents included). Observing that 0.0001% can serves to irritate, not facilitate, the discussion.