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ITunes shift hits right note with industry

Associated Press / January 15, 2009
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LOS ANGELES - Although Apple Inc. has said some songs sold on iTunes would be available for 69 cents instead of the 99-cent tag Apple had insisted on for years, the change won't necessarily put more money into the pockets of music lovers.

In fact, record companies are the ones that plan to come out ahead. While some songs will be 30 cents cheaper, popular songs likely will be marked up to $1.29. That price breaks a psychological $1 barrier and prepares consumers for a new strategy by labels to bundle songs, videos, and other exclusive content together - all in the hopes of reversing years of falling music sales.

According to NPD analyst Russ Crupnick, the music industry has been faced with a vexing question as fans bought fewer albums: "As the album as we know it goes away, how do we replace a $12 or $13 item with something that costs more than 99 cents?"

If the new variable pricing can make several songs packaged together seem like a relative discount, it could finally entice some consumers to pay more.

Music sales have declined in seven of the last eight years. The industry peaked in 2000, only to face the advent of the file-sharing program Napster, which made it easy for people to trade songs at no cost. Since Apple CEO Steve Jobs introduced iTunes in 2003, downloads of single digital tracks have exploded, but not in the volumes necessary to offset what last year was a 20 percent drop in sales of physical albums.

Apple also said that all of its tracks will soon be free of copy protection, enabling other manufacturer's devices to play them.

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