This could get interesting.
Speaking neutrally, you have to understand that part of the point of these rulings is to punish the person responsible. You want to make the punishment sufficient to act as a deterrant against other criminals who will look at the penelties levied and decide not to take the same risk.
Simply levying a fine/punitive sttlement someone can afford isn't all that much of a deterrant. It's sort of like if someone was to give a cannibal child molester six months of probation despite being caught red handed, or if some guy tries to steal The Crown Jewels but is given a slap on the wrist because he makes under $20k a year or whatever.
I hold to the basic principle that these extreme penelties are usually appropriate. I'm not sue crazy (I have never filed a suit against someone) but if I did ever decide to go after someone for something I certainly wouldn't be after chump change, if I believe I've been wronged to the point of going to court I'm going to be after blood. If I'm up against a big company I've already decided I'm going to look at what their publically disclosed profits are for one quarter of operation (profits being computed after expenses) and that will likely be how much I sue for. My attitude is that if you sue a big company for an amount they can cover out of petty cash, it doesn't act as a deterrant or making a point. If they wind up getting sued for that much money regularly and go out of business, it's typically a sign they are such a group of douches they don't deserve to be in business no matter who they employ.
In a case like this, if someone tried to steal from me, the situation is going to matter. I don't really care if some junkie is dirt poor, if he was trying to steal my stuff, I am not going to say "well give me $20 and send him back out there". If it's some entitled collegiate douchebag robbing my stuff just because he can and thinks he should be able to get away with it, I'm going to be even more POed. On the other hand if I catch some starving person trying to steal my leftovers out of the fridge and they aren't a junkie or whatever, well I might feel a bit differant about that assuming I'm not starving myself at the time.... but that's a personal judgement call.
All in all, I have no real issue with companies protecting themselves against pirates, or taking harsh actions against pirates when they are caught. My problem is largely how companies tend to want to define piracy, and the extent to which they go to in trying to prevent it. I think the current IP laws are already ridiculous, and are just getting worse with every day.
Simply put this guy being punished for his conviction doesn't bother me. Depending on the details of the case (which I do not know) I may or may not agree with him ever having been convicted to begin with.
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Oh and as far as the question about "why does anyone still make music for these guys?" goes, understand that musicians might be artists but have a bit of reputation for being douchebags with money. Wild parties, massive drug abuse, and huge donations to bizzare charities, just to name a few. That money has to come from somewhere, and the labels are the ones that make it for them (though as we all know, the labels oftentimes try and rob their talent of their cut as well, many stories in the music industry about that).
There is a tendency to want to try and seperate the guys who produce a product from the guys who sell it, when in reality the distinction usually isn't that clean cut. Fortunes are spent by celebrities specifically to get the public to seperate them from their business as far as the public is concerned, so they can look like "one of the guys", while at the same time gouging for every penny they can get.
Like everything, there are exceptions, and it can be very difficult to tell. For example, I'd like to think Billy Joel is a nice guy (laugh if it you want, I like a lot of his stuff), he seems to do at least one major charity event a year, but at the same time the guy has remained at the top of his game and rich for so long that you have to wonder. Of course in his case he got nailed by the people running him, and that's supposed to be what the whole song "Piano Man" was about, when he went from being a big time performer, back to the club/bar circuit for a while (and what the whole "hey man, what are you doing here..." line from the song is all about). I'd imagine he wound up becoming pretty ruthless after that even if he wasn't beforehand.
At any rate this is getting further, and further afield, the point is that the penelty isn't that big a deal. Whether you agree with the conviction or not, the penelty needs to be sufficient as a deterrant. I can understand why the music industry opposed the lowering of the fine.