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 @ 6:58pm

    @ techdirtReader

    If I had to venture a guess, I'd say music is best served attached to some sort of visual content. This could be that music you listened to while cranking out a 35 page document over a weekend while your significant other whined about going out, the music you listened to while waiting in traffic, or that which you listen to at a movie.

    But unless your some sort of a music director on a major production and need to "cast" music to some sort of content, there really is no "thrill of the hunt" in an all-you-can-eat strategy. If I was to venture a guess, most customers first fill their new PMP with music that they like, are familiar with, and probably want to become acquainted with an artist's full repertoire. They probably use all-you-can-eat services to listen to music they've already purchased in the past. Should they then "rent" music they already purchased?

    The end result of All-You-Can-Eat is similar to that of eating at a Chinese Buffet: the customer becomes inundated with lots of stuff. Some of it is good, some bad, all served with a lot of MSG (DRM), but nothing stands out because it lacks an connection to their personal reality.

    At the end of the day, an astute customer will end up going back to that one tasty restaurant that may cost more, but they are specialized in the area and push the art form forward. El Gaucho comes to mind.

    Put simply, Nordstrom Service can't compete with WalMart Prices. Trying to compare the two can be the issue of many debates. But those that shop at Nordstrom don't go there for the price but for the overall experience. "Yes" I want to buy this. But overall, considering that Apple has a 160M user advantage, I wish you luck in the new year with changing consumer behavior.

    The song which I was listening to while writing this can be acquired here.

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