I find it hard to grasp how these kind of services turn a profit (apparently they do because there are so many of them!). The bandwidth and storage costs must be huge and I can't really see the benefit in paying for an account. As far as I understand even paying users have download limits and compared to something like a seedbox your account is only valid for one file hosting service while you have no guarantee that the files you'll want tomorrow might be on a different file hosting provider.
I know how they work I just don't see how they get so many people who don't like to pay for stuff to pay for the service( I don't find the free service that cumbersome).
I don't know what percentage pays but these sites deal with a ridiculous amount of traffic - megaupload and rapidshare are each approximately as popular as the piratebay (according to alexa and compete).
Given tens of millions of opportunities a month to ask people for a few dollars + tons of resources out there to test and optimize how you're asking it's not hard to imagine these sites are making ridiculous money.
1) Why does everybody makes the assumption that people only want to download the song that is playing on the radio all the time? That is a huge misconception with no basis. In fact, those who download music [to use your example] from so called warez/pirate sources in large amounts, are usually more interested in music and more curious about the rest of the tracks than the average radio listener.
Also having 'what they want' it's a mirage if we talk about services like itunes, spotify, etc. A source of content controlled by a commercial entity will never be able to deliver the variety of content that can be found in the wild, the very nature of the concept of 'commercial service' imposes this constraint.
I myself was about to sign up for a spotify account when I checked out their catalog and find less than 50% of the music I was looking for. Not that I was surprised.
2)More convenient? For dumb users maybe... for the old school user that like to simply have his/her mp3 collection, I fail to see how itunes is more convenient than say bittorrent, let alone 1-click file hosting.
Because a very large portion of piracy now travels through ad/premium based free file hosts rather than torrents. New hosts pop up each day and those who post the files rake in cash. There's seemingly no ceiling on the number of file hosting providers, especially if the users just want to download their file and go.
So, short answer, there's a ton of money being made in this sphere and TPB could swiftly grab a large swath of it.