iTunes Gets Competitive As Digital Sales Growth Slows

As reported yesterday in @MusicRow, the iTunes Store is now offering DRM-free music from all four major labels—Universal, Sony, Warner, and EMI—as well as thousands of independent labels. The move will please consumers because downloads without copy protection software are interoperable with a variety of programs and devices.

However, today’s (1/7/09) Wall Street Journal suggests that Apple may be adopting this user-friendly format in order to stay competitive in the changing digital music marketplace. While more than one billion songs were legally purchased in 2008, the rate of growth in paid downloads slowed significantly year over year. In 2007, paid downloads grew 45% from 2006, but between 2007 and 2008 that number slowed to a 27% increase (Nielsen SoundScan). Tough competition could also be a contributing factor to Apple’s new strategy, the newspaper points out. Amazon.com and others have been undercutting iTunes prices for months, and doing so without the burden of copy protection.
Beginning in April, iTunes is also offering three new price points. Songs will sell for 69 cents, 99 cents and $1.29, with most albums still priced at $9.99. It currently uses the 99 cents price almost exclusively for every track.

The iTunes Store began offering eight million of its 10 million songs in the higher-quality, DRM-free iTunes Plus format yesterday, with the remaining two million songs offered in iTunes Plus by the end of March. Customers can also upgrade their library of previously purchased songs to iTunes Plus for 30 cents each or 30 percent of the album price.