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4/7/2009
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Apple Raises iTunes Music Pricing As Much As 30%

The variable cost structure will price older songs at 69 cents each, most new tunes at 99 cents, and the hottest hits at $1.29.

Apple's new variable pricing for music purchased through its iTunes store took effect Tuesday, with the most popular music costing as much as 30% more.

Apple announced in January at Macworld that the company would switch to tiered pricing: 69 cents a song for the older catalog, 99 cents for most new songs, and $1.29 for the most popular tracks. Jobs also said at the time that Apple would offer its whole catalog free of digital-rights management, a copyright-protection technology that many consumers felt was too restrictive.

Before the new pricing, Apple charged a flat 99 cents for every tune, a strategy that didn't sit well with record companies, which had been pressuring Apple for more pricing flexibility. Because of the market clout of its iTunes store, Apple was able to resist record labels' desire to change the one-price strategy. The iTunes store surpassed Wal-Mart last year to become the leading music retailer in the United States.

But times have changed and the competitive landscape is different. Online retailer Amazon.com launched its music download service from the start with only DRM-free music from all the major record labels. Amazon has always offered variable pricing, with many songs costing less than 99 cents.

Amazon has done better at competing against Apple than RealNetworks' Rhapsody service and other rivals that have failed to make a dent in Apple's market dominance. In 2008, 16% of people who downloaded music bought from Amazon versus 87% from Apple, according to the NPD Group. The survey took into account that people use more than one service, and Amazon's share was the largest reached by any Apple competitor.


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