If CDs costed $5 or less, I'd buy a zillion of them. I'd have to build an addition on my house just to store them. A $5 CD would still make the recording industry a lot of money, in fact, they could make more money than they ever did before.
Consider the movie industry. In the early days of the videocassette, movies costed upward of $90 each! I remember Christmas shopping in 1985 and checking out a video of "The Godfather" to buy for my father. I recoiled in horror at the price ($120) and put it right back on the shelf.
Hardly anybody bought videos in those days. Many people would buy blank videocassettes and tape movies off HBO and Showtime. I built a pretty decent video library myself in this manner. When the price of videos (and later DVDs) dropped to the $10-15 range, the movie company started selling them by the millions and today, nobody bothers taping movies off the TV anymore. Why go through the trouble when you can buy a movie almost as cheap as seeing it in the theater? The movie industry sold 10,000,000 copies of "Harry Potter" in the first week of release! That's almost $200,000,000 in revenue. Movies on video and DVD now regularly generate more cash than box office receipts. They sure weren't doing that when videocassettes costed over $90!
The music industry is shooting themselves in the foot right now. They could have lowered the price of CDs to about $5 and they would have been generating billions of dollars more revenue than they are right now. People would still download MP3s, but they wouldn't go through all the trouble of burning them to CDs if they could pick them up at Wal-Mart for about the cost of a pack of cigarrettes! And since it costs only pennies to manufacture each CD, the profit margins will still be tremendous at the $5 price-point.