In case you missed it, Apple lowered prices on iTunes Plus tracks (you know the ones encoded DRM-free in 256 kbps AAC) from $1.29 to $.99. Now the simple analysis is that Apple caved to Amazon's MP3 Store priced for non-DRMed tracks of ~ $.99, but there is also another, and I think more likely reason.
Universal is trying to destroy iTunes. They are withholding video content, DRM-free audio content, and have refused to sign a long term contract with the iTunes Store for existing DRMed audio content. They are offering their music catalog to other online music stores, again Amazon, without DRM at $.99 a track retail pricing It seems obvious to me that Apple priced iTunes Plus songs as a huge carrot to the music cartel for giving DRM-free songs a chance to succeed. EMI and Apple were respectively the first major music company and online music store to offer DRM-free music, but a large motivator for EMI must have been not only the additional per track revenue, but making the $9.99 album price more attractive again. At $1.29, buying just a few songs starts to make the album price look more attractive. It has been nearly 5 months since EMI started offering DRM-free tracks on iTunes, and other majors have still not agreed to offer DRM-free tracks on iTunes. Apple has been pretty adamant that track pricing should be $.99, but it seems pretty obvious they sacrificed this principle in order to achieve the even more desirable DRM-free state for all music sold on its store. Since the majors still haven't cooperated with iTunes, Apple finally decided to remove the carrot. Any majors counting on the additional revenue when they decided to finally, inevitably, offer DRM-free tracks on iTunes can say goodbye to that forever. The window of opportunity is closed. I am sure Apple had Universal in mind when making this decision.
