As Rumored, Apple Gives Record Labels Variable iTunes Pricing In Exchange For Ditching DRM

from the it's-something dept

As was rumored last night by Greg Sandoval at News.com, it appears that Apple has worked out a deal with the major record labels (being confirmed as I type) where they will give up DRM (which is the direction they've been moving towards anyway) in exchange for variable pricing of music -- which they've been salivating over for years. This has been a major source of contention between Apple and the record labels. Steve Jobs has stood firmly by the $0.99/song price, while the record labels specifically wanted to be able to price hit songs at higher prices. The dropping of DRM is nice, but hardly that surprising, given that pretty much every other online download store has been going DRM free. This just puts the final nail in the coffin for music DRM. One nice tidbit: you'll apparently be able to upgrade your older DRM'd purchases to make them DRM free. That's a good (and slightly surprising) move.

As for the pricing, there's now three tiers: $0.69, $0.99 and $1.29. Hit new songs will go for the higher price while older, less popular songs will have their prices drop. The announcement isn't that surprising, but it is definitely a shift. What will be worth watching is how this impacts sales. It really may depend on how the record industry plays this. If (as seems likely) they put too many songs in that high priced level, it's going to lead to backlash. However, if they really embrace that lower price, it could encourage more folks to download music. I also wonder if it will push competing music download stores, such as Amazon.com to lower its prices even further as well.

While this definitely is a shift from the way iTunes has always worked, in the end, it's really not a huge shift. The industry was moving in this direction anyway, and killing off DRM was long overdue. The variable pricing is the type of thing that the big record labels will likely screw up, but in the long run is probably a good thing. The $0.99 per song fee has always been too high, and accepting variable pricing will eventually lead to those prices decreasing (not increasing, as the industry expects).

Filed Under: drm, itunes, variable pricing
Companies: apple


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  1. identicon
    Anonymous Coward, 6 Jan 2009 @ 11:45am

    I don't see how this is really a benefit for the major labels in the long run. First, it proves yet again that the entertainment industry's claims that DRM is necessary are fallacious and erroneous at best, outright lies at worst. Second, tiered pricing seems silly. Lowering the price on tracks nobody really buys doesn't due much, and upping the price on hits is equally pointless. Compensation for DRM removal serves no purpose as people who would pirate have already found a way to bypass the DRM anyways, and while it increases revenue, that is likely to be offset by people who will search out alternatives to the higher priced music.

    The end result? Hit sales are likely to take a slight decrease, mid range and bottom artists are likely to see a slight increase, and revenue is likely to take a mild but not substantial increase all while giving the consumer what the labels have been fighting against for a decade and making them look as stupid as they really are.

    Sorry but until they come down in price, and I'm certain I can play AAC on any music player or device as easily as Mp3s, there is no reason for me to but from iTunes.

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