Phil Schiller’s “One Last Thing…” moment today during his Macworld keynote consisted of announcing significant changes to the #1 music sales channel, iTunes. The announcement consisted of three things:
- Variable pricing. Songs at the US iTunes store will be available at three prices: $0.69, $0.99, and $1.29. No pricing changes out of the US were announced yet.
- Conversion to DRM-free media. Apple will sell 8 million songs out of its catalog without DRM starting this month; the other 2 million titles will be DRM-free by April 1, 2009.
- Over-the-air music delivery via 3G. Now that the majority of iPhones are now 3G enabled, Apple will now allow customers to buy music over 3G networks as well as today’s WiFi delivery and USB side-loads from iTunes.
With iTunes commanding the vast majority of digital songs sold to date — more than six billion songs in six years — this change is a big deal for two reasons:
- It now paints DRM as a losing music strategy. With the vast majority of music now available without DRM, media companies thinking that DRM is their path to higher sales and less sharing of music will have an uphill battle. DRM-focused music subscription services like Rhapsody and Napster now really need to think hard about their futurem, and video media companies will now have an example of how their business may play out in future years as well.
- Apple has added another impulse-powered commerce stream to the iPhone. By requiring customers to buy all-you-can-eat data plans for iPhones, Apple can freely sell iPhone customers everything from new applications to music over the air, without requiring the consumer to wait until they can connect their phone up to their computer. That means more impulse buys, more spontaneous use, and more Apple revenue. The downside? iPhone-offering carriers who have their own music stores and sell tracks for $2.99 can probably write off those efforts for the iPhone-toting consumer.