Thanks so much for your thoughts Andrew! I instantly thought stock photos as well...
Well, I wrote him back and let him know that my photos are not stock photos and the value of them is greater because its the actual clients products image that is being used to sell that product. But I said it in a very nice and polite way
I'm also doing away with the yearly liscence. But I will not go lower on my pricing! I've already given him one heck of a deal and learned my own lesson. From now on for product photos I will come up with the pricing first, in writing, and have the client sign before even taking one photo.
Just to add in, in case anyone else learning about pricing product photos reads this... the other interesting thing I've learned from this experience is to charge for web use (small res), and seperately for print at different resolutions.