2019 American Music Awards

Report: iTunes To Offer Variable Pricing, Expands DRM-Free Offering

With the MacWorld conference kicking off today, rumors are swirling that Apple is poised to unveil new music licensing deals with the major labels that will allow it to sell DRM-free music at variable prices.

Citing two unnamed sources, CNET is reporting that Apple agreed to a three-tier variable pricing model in return for the ability to sell music without its limiting FairPlay technology, which restricts the use of iTunes-purchased music to Apple-created devices. According to the report, there will be different prices for older catalog titles, modern but less-popular songs, and current hits. The announcement could come during the MacWorld keynote.

Neither Apple nor representatives from the major labels returned requests for comment. Sources contacted by Billboard say the new wholesale rates work out to 91 cents for current hits, 70 cents for most other tracks, and 49 cents for catalog titles.

Apple can then mark-up those prices in any way it wants, but it is assumed that the cost to customers will likely result in $1.29, 99-cents and 79-cents, respectively. The labels will be able to decide which songs go in which pricing tier.

The labels and Apple also reportedly have come to an agreement of over-the-air music downloads to the iPhone using the AT&T wireless network. Currently, iPhone users can buy iTunes songs only using the devices WiFi connection for lack of such a deal.

If the reports are true, the variable pricing deal would represent a major win for the music industry. While other digital retailers like Amazon.com and Napster have won rights to sell music without DRM protection, labels were reluctant to extend the same offer to iTunes without some concessions - variable pricing.

For iTunes users, the DRM issue was largely inconsequential, since music purchased from iTunes worked just fine on their iPods and other Apple devices. But with interest in digital music turning away from just the iPod and towards more integrated uses-like home streaming media devices and in-car options-the restrictive FairPlay technology could soon pose a problem.

More immediate is the labels' desire to price tracks at different levels based on popularity and demand. Apple has been a stalwart believer that a one-price-for-all model was necessary for simplicity purposes. While that may have been true in the early days of digital music, the market has progressed to the point where music fans are familiar with the concept and the process, and introducing a new pricing model won't be as disruptive as it may one have been.

Exactly what impact the move will have on iTunes competitors remains unclear. One of the differentiating features they all shared was that they could sell DRM-free music and iTunes could not. But studies have shown that DRM is not a major consideration for most consumers considering making a digital music purchase.

Rather, label sources in the past have told Billboard that digital retailers will compete more on their user experience, discovery capabilities and other factors. Amazon, for instance, has a more generous partnership model, which played a large in its selection as the music sales provider for MySpace Music.

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