Business – iTunes Store Offers DRM-Free Music with Pricing Tiers

Barry Levine, newsfactor.com Barry Levine, newsfactor.com – Tue Apr 7, 3:50 pm ET
There are new prices on the songs at Apple’s iTunes Store, but they’re now all free of digital-rights management (DRM). Beginning Monday night, pricing at the popular online music store has three tiers — 69 cents, 99 cents, and $1.29. iTunes was previously known for its original one-price model of 99 cents per song.

Amazon Competition

It’s expected that older, less popular songs will be priced at the lowest rung, and at least some of the top-ranked songs will carry the highest price.

According to news reports, six of the top 10 songs are currently listed at $1.29, and 29 of the top 100. By contrast, many of the same songs can be found at Amazon’s MP3 store for 99 cents, although iTunes’ catalog, at about 10 million songs, is estimated to be twice that of Amazon’s.

At the same time that it’s switching to pricing levels, iTunes is making all of the music on the store available without DRM and at the high quality of 256 Kbps encoding. Users who already own songs from iTunes with DRM can upgrade to a DRM-free version, assuming such a version exists. There are reports that some songs that were present on the store before this transition are not available in DRM-free versions.

DRM-free songs can be played on all players, without such restrictions as limits on copying or restrictions on the kinds of playback devices that can be used.

The move to DRM-free songs for the entire store was announced in January during Apple executive Phil Schiller’s address at Macworld Expo. At the time, Schiller said there would be more songs priced at 69 cents than at $1.29.

‘What the Labels Wanted’

Some observers have suggested that the new pricing levels were part of a deal Apple made with the record companies, trading freedom from DRM for variable prices. Apple has said the price increases were pushed by the record companies.

“Flexibility in pricing is what the labels wanted,” said Mike McGuire, an analyst with industry research firm Gartner. He added that Apple has been “pretty clear” that its priority for iTunes was to provide value for its iPod and iPhone devices. The store dominates the online music industry, with industry research group NPD estimating that 87 percent of digital-music buyers have made purchases on iTunes.

McGuire noted that price changes at iTunes can only happen once a week, so the store won’t become a kind of stock market for songs. He predicted that the older catalog titles, such as ones released at least 18 months ago, would be at the lowest level and could “possibly lead to a resurgence of sales for older songs.”

He doesn’t expect the pricing tiers to affect iTunes Store sales over the long run, particularly for “those folks who are habituated to buying songs there,” but he added that it depends on how the record labels use their new pricing ability.