Apple Humming a New iTune

Apple, Inc. (AAPL - Analyst Report) has agreed with the music publishers to allow variable pricing on iTunes. Single tracks of more popular songs will sell for $1.29, some of the library stays at $0.99 and less popular songs (older but not better) will drop in price to $0.69. In return, Apple can remove the Digital Rights Management (DRM) from songs in the catalog.

The growth in music downloads has been declining for some time as the business matures. The increase was 27% in 2008 versus 45% in 2007. Also, competition has increased as other companies have built catalogs that can be downloaded to various devices. Apple does allow tunes to be downloaded to a PC but the DRM protection prevented transfer from one computer to another.

In our opinion, this will not increase the demand for music downloads or the demand for iPods. The growth in digital transfers will continue to decline as the industry matures even further.

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