Apple Plans for iTunes: Signs of Retreat?

Steve Jobs may not be at Macworld this week, but that doesn't mean Apple didn't hope to make a splash in other ways. In addition to releasing new versions of iLive and iWork, the company also announced radical changes to iTunes, including a new pricing structure and changes to its DRM approach.

Apple is rolling out a three-tier pricing structure: $.69, $.99, and $1.29 - price dependent on the value or popularity of the song. This approach has indeed worked well for others (among them, AmazonMP3), but Jobs has been adamant in the past that a flat-fee approach was key to iTunes' success.

The company is also changing its stance on DRM, another move that alters the company's model. Apple has been criticized in the past for its closed DRM that only allows its songs to be played on Apple devices such as the iPod and iPhone. But now it's said that Apple will open up its DRM on songs from Sony, Warner, and Universal so that other devices may be used. Paving the way for the Zune?

These are somewhat head-scratching moves, except that Apple's market share may be threatened by the tiny but growing AmazonMP3. AmazonMP3 launched September 2007 and quickly reached about 10 percent the size of iTunes in its first six months. Other developments in online music, including Rhapsody and Pandora, and the slow-to-start Zune, which is believed to have sold well in the holiday shopping season, also threaten Apple's once undisputed dominance.

by Laura Rich