Macworld 2009: iTunes now DRM-free, iPhone music purchases over 3G network are a go

Posted by Christian Zibreg

San Francisco (CA) - Remember last year when EMI was the only big music label that
offered its music on Apple's iTunes free from the dreaded digital rights
management (DRM)? It now appears that the remaining three labels have
given up trying to build an iTunes rival. They've done this by now giving everyone DRM-free
tracks, including iTunes.


Apple announced earlier today that all music on
iTunes is now totally DRM-free and comes encoded in higher fidelity at 256
kbps (compared to previous 128 kbps - some people claim to be able to tell a quality difference). Also, iPhone users can finally purchase songs over-the-air
directly on their handset using the 3G cellular network data (not just
WiFi). To persuade carriers and labels into these concessions, Apple
agreed to variable-pricing policy that will tweak the uniform 99 cents
pricing model with three different price points beginning this April.

Long-standing rumors that other big labels will join EMI in bringing
their music DRM-free to Apple's iTunes have been proven true after all.

Speaking before the faithful gathered at the Macworld 2009 in San
Francisco earlier today, Apple's marketing gonzo Phil Schiller
announced three key changes to Apple's iTunes Store. Starting today,
all music on the service will be sold in DRM-free format as Apple inked
the deal with Universal Music Group, SonyBMG and Warner Music Group. The last three labels now join EMI who agreed to offer its music on iTunes in 256 kbps AAC encoding and in DRM-free format last year.

Apple said that eight out of a total of ten million songs on iTunes
are available today DRM-free, while the remaining two million will
become DRM-free by the end of March. Interestingly enough, Apple will
not provide users who previously purchased DRM songs on iTunes Store
with DRM-free versions free of charge. Instead, the company insists
that users upgrade existing DRM songs to DRM-free format for "just 30
cents per song, or 30 percent of the album price."

Of course, Apple had to give labels something in return,
something they have been lusting after for years: variable song pricing
on iTunes. As of this April, "based on what the music labels charge
Apple," three price points for music will be put in effect: 69 cents,
99 cents and $1.29. The 69 cent price point is designed to push sales
of labels' vast back catalogue (the less popular songs), but the majority of
popular and recent songs should stay at 99 cents, at least according to
Apple.

The $1.29 price point will
almost certainly be applied against the most popular or recent content.
In a nutshell, hit releases will almost certainly become more expensive, though Apple's Steve Jobs claimed in the company's press release that
there will be "many more songs priced at 69 cents than $1.29."

Also, in order to help push music sales, labels and carriers have
agreed to allow iPhone owners to purchase iTunes music over-the-air,
using 3G cellular data network. Users were previously limited to purchasing
songs from the device only via WiFi networks (because Apple's carrier
partners wanted to limit data traffic and protect their own song and ringtone sales).

Apple stressed that iPhone users can now preview and purchase the
entire iTunes Store music catalog on their iPhone 3G over their 3G
network, just as they do with WiFi today, and for the same price and in
the same high quality format. Songs purchased on an iPhone
automatically sync to your desktop the next time you sync to the handset
with iTunes.

Analysts warn that Apple's deal with the four labels might also
help the company greatly in settling dozens of lawsuit that resulted
from the fact that the combo of DRM-only iTunes and Apple's refusal to
license FairPlay DRM technology to other music player makers
effectively locked iPod owners into an iTunes world and vice-versa. For example, a class action monopoly lawsuit against Apple and legal complaints by Norwegian consumer group have been filed.

Since the iTunes store opened in 2003, Apple has sold 6 billion songs. The store now offers 10 million individual tracks for all four
big labels, along with thousands of independent labels. It is the number one
channel for music in the U.S., shooting past Wal-Mart last year to
become nation's #1 music retailer as well. The iTunes Store currently has
75 million active accounts with credit cards enabled for one-click
purchases.