After announcing updates to the iLife software suite, and a new MacBook Pro, keynote speaker Phil Schiller said there would be major changes coming to the iTunes music store, including the stripping of digital rights management, variable pricing, and tighter iPhone 3G integration.
For the last six years, Apple has sold the vast majority of its music through iTunes for 99 cents with DRM. It has been a winning strategy so far, as Apple's iPods hold nearly 75% of the digital music market, and the iTunes store has become the largest seller of music in the United States.
But the music labels have bristled at the single price point, and some consumers felt the DRM was too restrictive. This potentially opened the door for digital music competitors like Amazon.com, which sells DRM-free music for multiple prices.
But Schiller said starting today users can buy 8 million tracks without DRM. This DRM-free music comes from the four major labels, and multiple independent labels. By the end of the quarter, Apple said it will offer its whole catalog of music, 10 million tracks, for sale without DRM.
The DRM-free music will be in the iTunes Plus format, which is a higher-quality 256 Kbps AAC encoding. Users have the option of upgrading their current library to the higher-quality, DRM-free format for 30 cents a song.
The company will also introduce variable pricing for its music starting in April, with price points of 69 cents, 99 cents, and $1.29. This has been a point of contention for many music companies that wanted to be able to charge different prices depending on the demand of the song. Schiller said "most" of the music companies are planning to offer songs at the lowest price point, and all three price points will be DRM free.
The company also couldn't ignore the popular iPhone 3G in its announcement, and Apple said customers can now browse, preview, and purchase music from iTunes on the go over 3G data networks. Previously, iPhone users could only buy music from Apple over Wi-Fi networks.
The songs purchased over the air will be the same quality and price as those bought from a desktop, and the music is transferred to the desktop account the next time the smartphone is synced.