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 @ 6:55pm

    Re:

    I don't buy into the 'music should be free' argument based only on its infinite good status. Yes, the arguments are good that it should not be extremely high priced and artificially finite when the good is infinite once digital.

    I think individual prices for digital tracks are a fine model, and is a model that will work fine without DRM. The price point is the issue. The good needs to be worth the price being asked, and generally speaking CDs are not worth the price being asked for them. I buy lots of music at $0.99 per song, and will buy more when part of the albums are cheaper yet. Only people who listen to nothing but the latest pop culture hits are going to be worse off with this new DRM-free deal. I like to share some tracks with friends that are into a certain genre of music too, and having the DRM free to let me do that will increase sales of those albums to those friends. Apple has been doing very well at introducing people to new music with their free downloads, which almost always result in short term increase in album sales for the track that was free.

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