Apple Cranks up iTunes Prices

Tuesday, Apr 7, 2009  |  Updated 12:42 PM PDT
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Apple Cranks up iTunes Prices

www.apple.com

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The era of one-price-fits-all-songs on iTunes came to an end Tuesday as Apple Inc., the Internet's dominant digital music store, began selling some of its most-downloaded songs for $1.29 apiece.

Apple said in January that it would end its practice of selling all individual songs for 99 cents each and begin offering three tiers: 69 cents, 99 cents and $1.29.

Record companies pick the prices, much as they did for CDs sold in stores and online. On day one, songs including "Jai Ho" from the "Slumdog Millionaire" soundtrack, "Single Ladies" by Beyonce and "Chicken Fried" by the Zac Brown Band were bumped up to $1.29. The main iTunes page advertised collections of 69-cent songs that included "London Calling" by The Clash and "Monkey" by George Michael.

Other songs from the same albums and artists remained at 99 cents.

Apple also did away with copy protection technology known as digital rights management, or DRM. Without DRM, the songs can be copied to any number of CDs, computers and music players, as long as those devices support the AAC encoding format Apple uses. AAC, like MP3, is a method of compressing large audio files while trying to preserve sound quality.

Susan Kevorkian, an analyst for the technology research group IDC, said music retailers have historically set higher prices for hit songs and lowered prices to stimulate interest in new artists and reinvigorate sales of older albums.

"ITunes was very much a market maker for digital music services," Kevorkian said. "It made sense for Apple and other retailers to charge 99 cents a song, $9.99 an album. It was a new way of buying music for many consumers, and the less complexity and the better perceived value, the better for all involved -- Apple and the music labels."

But as people got used to buying music online, Apple had trouble arguing that it was simplest if all songs were 99 cents. And when Apple became one of the last holdouts still selling most songs with embedded copy protection, it let go of control over pricing in order to keep its service in line with competitors like Amazon.com Inc.

Shares of Cupertino, Calif.-based Apple fell $4.05, or 3.4 percent, to $114.40 amid a broader market sell-off Tuesday afternoon.

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