Comment permalink

Apple Announces Price Changes for iTunes

At MacWorld Apple announced a new pricing model for iTunes:

  • The iTunes store is moving unilaterally to "iTunes Plus." That means higher-quality 256 Kbps DRM-free AAC files.

  • All four major labels have already agreed to the change, and independents are signing on. Apple says 8 million tracks are ready now, and the remaining 2 million or so will all be converted by the end of the first quarter of 2008.

  • You can upgrade previously purchased tunes for 30 cents each, 60 cents for videos, and albums can be upgraded for 30% of the purchase price. The catch: Right now it's an all-or-nothing upgrade; you either upgrade all your tunes to Plus, or you buy new versions. Smart buyers are waiting, until all their purchases are available, or in hopes of a better future upgrade option.

The DRM-free means you can burn the files, and play them on a lot more devices, including iTunes for Windows, many non-iPod players, as well as on Macs, Apple TV, iPods, and iPhones, Sony's newer Walkman players, Microsoft's Zune and the next version of Windows Media Player.

Also in April, iTunes' pricing model will change; from 99 cents a track to a tiered model: 69 cents, 99 cents and $1.29. Record labels will set the prices, but the basic idea is that the hot new tracks will be 99 cents, while older tracks will sell for less. I'm curious to see how indie labels, Classical music, and traditional Celtic music will be priced; some of the best known names are really tiny indie labels who do their own distribution.

In February of 2007 Steve Jobs wrote a public letter called "Thoughts on Music." In the letter Jobs makes his personal preference for DRM-free music very clear, and he outlines several possible scenarios for the future of digital music. Jobs concludes:

If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.

Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven't worked, and may never work, to halt music piracy.

As Jobs says, DRM really doesn't work. Every method is eventually cracked; typically within a few days of the release. DRM is mostly an irritant to honest, paying customers; why then bother with it? With the latest announcement, Jobs has what he wanted, consumers have what we want, mostly, and even the labels get a little something. Mind, the metadata associated with any track you purchase from the iTunes store lists the account ID used to purchase the track.

Surprisingly, I'm not seeing cries of outrage over the new pricing model. Given the previous conspiracy theories suggesting that Amazon was in cahoots with the four major labels to undercut Apple by selling tracks for ten cents less, I'm surprised that I'm not seeing more consternation around the Web. I suspect the pricing change is in part conceived to off-set losses when customers can cherry-pick the tracks they want, rather than having to buy an entire CD. Remember, the labels are setting the prices; Apple runs the iTunes store as a loss-leader; it's there to sell iPods.