Most accounts of the dispute between Apple and the labels have focused on the industry's efforts to raise prices, which are undeniably a big part of their plan. No surprise there. The research we've been doing for the book shows that within the bulk of the online music business--the top 100,000 downloads--only 3.5 tracks on the average CD sell. So the record labels are getting less than $3 in revenue (wholesale) from albums when the music is sold by the track. That's less than half the wholesale price of a CD (although with none of the physical costs of making and distributing a CD). The shift from an album model to a track model is indeed an alarming thing for the labels, and it's easy to see why they'd want to raise retail prices online as a result.
But there's more to the story that that. The labels may be evil, but they're not (all) stupid. They--to say nothing of many of their artists--also see the virtues of dropping the price for lots of their music, too. For decades they've been playing with CD pricing models that range from cut-price classics to top-dollar boxed sets, and when freed of the overheads of traditional retail, they're likely to experiment more, not less. Although some of the more vocal commentators have encouraged Apple to hold the line at $0.99, there's a strong argument that introducing variable pricing might ultimately lead to a more consumer-friendly outcome.
