'They' being the record labels. £1 is easily enough to cover their costs - and as i said before, historically bands have had no trouble making their money from gigs/touring and merchandising.
£1 (£0.83 ex VAT) is not enough to cover the costs of production of an album.
Recording
Producing
Pressing
Distributing
iTunes 30% commission
Marketing
Also up and coming bands struggle to make any money touring. It requires a fairly large investment of funds to get going.
For mainstream pop acts maketing costs are astronomical. It costs about $1m to produce and release a Rihanna single.
Today, it is very tough to make a living in the music industry (even for very talented bands) unless they sign to a major label which is a different animal altogether. Major labels have the money to plough in but they need to see a high return to pay back their investors for risking their money.
It's nowhere near as simple as you seem to think.