Amazon and others follow iTunes' lead in hiking MP3 prices

Take it as a sign that the digital music industry is finally reaching maturity. The labels that once clamped down on digital distribution with absolute prejudice have generally loosened up, allowing DRM-free distribution to flourish. Now, the business is expanding to make room for fully variable pricing.

The cost of digital music has long been an issue of concern for me, as a fan of short, fast, and loud music. I always felt that there was a problem with the 99¢ per song across the board pricing scheme iTunes employed. While you cannot measure musical enjoyment in minutes, cents, or kilobytes per second, it just never felt fair to have to pay 99¢ for a twelve second song like "Wienerschnitzel" by The Descendents, when it could buy a nine-minute song like Dream Theater's "Metropolis, Part 1..."

ITunes did put a cap on songs at 10 minutes, making anything longer than that available in albums only. But stores like the Amazon's MP3 market do not...and prog rockers could spend 99¢ and get a 41-minute self-indulgent epic while fans of short songs would have to dish out $10 to get 30 songs that don't even amount to that single track.

But that was mostly just a personal gripe, which is on the way to resolution.

This week, variable pricing has hit the big online music shops. Most famously, iTunes introduced its pricing model which prices DRM-free tracks at 69¢, 99¢, or $1.29.

Amazon MP3 is the number two digital music shop with a 16% market share according to NPD data this week. Before Apple made its move, Amazon had individual songs for 89¢ and 99¢, and albums for $5.99-$9.99. Now there are even more prices for individual tracks, including 69¢, 79¢, and up to $1.29. Amazon generally put greater emphasis on cheap music, with its "5 albums for 5 dollars" weekly promotions, and iTunes put greater emphasis on discovery, with its "Just for You" recommendation system.

Wal-Mart, Rhapsody, and Lala have all added pricing tiers to their download shops. In a blog post yesterday, Lala said it signified an industry-wide shift.

A new paradigm in digital music, direct artist marketing, such as Topspin's platform, already offers variable pricing based upon audio quality. According to CEO Ian Rogers, 55% of all customers who downloaded the Beastie Boys Paul's Boutique 20th anniversary edition re-issue, opted to pay more and get it in a lossless format.

This interest is encouraging, because it shows that many of the old music consumer fringe roles still exist. It still has its "tapers," those who record streams directly off of their sound card; it still has its "traders," or the people using peer-to-peer to swap collections; and it still has its audiophiles, those who consume the highest fidelity recordings as a matter of principle. The inclusion of variable pricing to the everyday consumer makes room in the digital music market for yet another of the old record store stereotypes: the bargain-bin hunter.