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99-cent downloads shows Apple’s strength over music studios

By Therese Poletti
Mercury News

Apple Computer still reigns the digital music world.

When the Cupertino company confirmed this week that songs at its iTunes Music Store will remain 99 cents each, it showed that Apple continues to set the terms in the digital download market it pioneered just three years ago.

As CD sales have continued to decline, Apple’s digital music sales and its iPod music player have been a standout success story. Music industry executives have meanwhile clamored for more control over prices — just as popular CDs cost more, executives have asked for the freedom to charge a premium for hit songs.

Apple’s answer: No.

No further details on the negotiations, which were confirmed late Monday, were available. Natalie Kerris, an Apple spokeswoman, would only say Tuesday that Apple had renewed its agreements with the major music companies.

“We’re pleased to continue offering iTunes customers music at 99 cents per song from a library of over 3 million songs,” she said.

But the music industry has been rife with talk in recent months that the big four music labels — EMI, Sony BMG, Warner Music, and Universal — wanted to offer variable pricing. That model would have entailed a variety of prices, where newer, hotter songs would be priced above 99 cents, and certain older songs could be priced below 99 cents.

A Warner Music spokeswoman in New York confirmed the company had signed an agreement with Apple but gave no further details. A Sony BMG spokesman declined to comment, as did a spokesman for EMI. Universal Music did not return calls seeking comment.

“Certainly it’s a vindication of strategy in terms of pricing models and consumer acceptance,” said Michael Gartenberg, an analyst with Jupiter Research. “The fact that Apple was able to sell one billion songs clearly demonstrated that it was not a model that you want to mess with lightly.”

Since Apple launched iTunes in April 2003, sales have soared. While the music industry was wringing its hands over piracy, Apple found the right formula to get consumers to pay for music online. It is now the leader in selling digital music over the Internet. The iTunes store had about two-thirds of the $900 million market for digital music. According to iSuppli, a market research firm in El Segundo, iTunes sales were $600 million in 2005, up from $200 million in 2004.

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