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Apple Revamps iTunes


Tiered pricing seeks to prop up sales.

Ripping music just keeps getting easier.

With online-sales growth slipping, the music industry is being forced to stay dynamic in a space it was reluctant to enter in the first place. Yesterday, Apple (AAPL) -- the world's leading music retailer -- announced that it would adopt a new 3-tier pricing structure for iTunes.

According to the Wall Street Journal, songs will now cost $0.69, $0.99 or $1.29, with the most actively downloaded songs landing in the highest price bucket as Apple tries to prop up revenues in a tough economic environment.

Nevertheless, the Apple said the changes will be "great for customers."

In addition, the House of Jobs also plans to relax copy restrictions on music downloads. So-called digital-rights management, or DRM, restricts customers from copying and sharing songs at will, making iTunes purchases tough to play on competing music devices. By dropping its strict limitations, Apple is trying to compete with rivals like Amazon (AMZN), which allows customers to copy songs as many times as they like.

Apple will charge customers who purchased songs prior to the switch $0.30 to upgrade to the new, more shareable version of their favorite tune.

Apple, along with competitors like Wal-Mart (WMT), is searching for ways to maintain high sales volume even as their customers struggle to make ends meet. Tight credit markets and drastically weakening employment conditions are forcing consumers to cut back on non-essential purchases (like ZZ Top's entire back catalogue, for example).

The shift in pricing strategy mirrors broader changes in retail, as consumers find themselves lured by flashy sales and big discounts. Once inside, however, they're often disappointed to find that the things they actually want still cost just as much as they did before.

Apple's reliance on having the simplest, coolest music platform simply won't cut it in an environment where consumers are becoming increasingly discriminating with their discretionary dollars. And as its competitors begin to catch up in the world of portable music, the company will be forced to keep innovating - or risk losing the edge it worked so hard to secure.
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