"However, I don't think the price is important, because of where their competition is at. The competition is the torrents, and their price is zero. 99 cents or a buck 29 isn't the game changer here."
The number of people who know how to torrent music hasn't changed recently, but the price of music on itunes has. So it doesn't make sense to attribute the declining growth to something that has remained basically constant when there has been a huge (30%) increase in the price for legitimate music.
"I would suspect that most users are more interesting in playing with music they know (popular music) rather than obscure bands, regional bands, or artists they know nothing of."
And as a listener of obscure, regional bands, I do want to play music I know. Most of the songs I like to play on rock band aren't bad, but I'd never go out of my way to listen to them. Highway Star is as obscure to me as 1-800-ALARM-ME probably is to you.