QUOTE(fracai @ Jul 5 2008, 12:18)

Lossy audio is lossy. That probable eases some concerns about piracy.
Demand. I doubt there's all that much demand for lossless audio from the masses. There are lossless stores around, but for the most part the ones I've come across are for classical (which is more likely to overlap the audiophile market) or single bands (like The Barenaked Ladies).
I don't understand about there not being much demand for it. If a person went to a record store and had the choice between buying a CD for an artist vs. a cassette tape (analog), most people would buy the CD.
It makes sense to prefer digital downloads (even in MP3 format) to CDs simply because people like to buy single tunes vs. whole albums, and also music files are portable, and you don't have to leave home to get it.
However, if you can get all that PLUS the quality of a lossless audio file, then I don't see why people wouldn't want it. There would be an increased download time vs. 256k MP3, but most of the top music stores these days have their servers hosted on the backbone, so even a 20 MB file would download in less than a minute w/most broadband connections, i. e. w/3 Mbps down, 20*2^20*8/3e6 = 56 sec.
The dload time WOULD be an issue if the server was hosted on maybe a T-class or low-tier connection, but stores shouldn't need to do that--they can host on the backbone (i. e. Level 3, Saavis), pay the huge hosting fees and still make a profit, and they can adjust the needed upload allocation w/how much music is being downloaded from their site.
Even if this strategy incurs a net $$ loss for maybe the first 1-2 years in business, should still be worth it.
The BIG issue cannot be the download time, then. Physical memory on the music players is also not an issue since iRiver, Cowon, etc. have lots of RAM (1-4 GB), i. e. can hold 50-200 FLACs.
And the other issue, the lack of support for FLAC in players, isn't an issue either since conversion can easily be done.
IMHO, the only issue left is the DRM, which is odd because all four labels are giving away their stuff DRM-free on Amazon at 256k VBR, which is SUPPOSEDLY just as good as CD-quality. But, of course, FLAC IS CD quality, so the labels have an excuse to throw a fit over that, because they don't want their FLACs floating all over the place on P2P networks.
So then, we're down to putting DRM in FLAC, which is impossible, except to add a watermark into FLAC, which, as far as I know, can't be done without altering its sound.