Steve Jobs is a friggin' genius. Yeah, most people already know that, but to really appreciate it, one must understand the process. In the case of the recent announcement that the iTunes Store will start to offer music free of digital rights management (http://tinyurl.com/2gtxv6), that process starts with the initial offering of 99¢ songs.
For a long time, Jobs held a hard line at 99¢ (http://tinyurl.com/yweel2) for song price, despite pressure from music labels to raise prices and claims that iTunes wasn't profitable at that price point (not that it needed to make a profit since its purpose was to drive iPod sales). Now we see the price fix also served as his secret weapon for lifting DRM restrictions; the labels drop DRM, Jobs raises the price cap to $1.29 per song.
It is also important to note that this higher price only affects singles. Album prices are unchanged. This too benefits the labels because the better price per song makes them more attractive purchases, and the industry desperately wants to boost album sales. So the higher price on singles is a double-win for the labels.
But what about us lowly consumers? Is being DRM-free worth the 30% price hike? Perhaps not, but Jobs didn't stop there. The DRM-free, higher priced songs are also of higher quality - 256 kbps vs the original 128 kbps. That's CD quality! Not a bad deal. Surely, this was another perk held in reserve to sweeten the pot for us consumers. And it applies to albums, which are not going up in price. Quite a nice compromise.
For Apple, this deal lifts a huge weight off their shoulders in regards to anti-trust lawsuits. By selling music that is compatible with most digital music players, they wipe out accusations that their iPod + iTunes combo is monopolous in regards to music. Good way to settle that dispute.
Finally, this deal puts iTunes ahead of the competition. There is now serious pressure to offer better quality with no DRM and, in the case of albums, with no price hike. The extra bandwidth cost doesn't hurt Apple since they make their money on the hardware. The other guys don't. And no one in their right mind would believe this move makes the iPod appear less attractive.
Currently, the only music label signed up for the deal is EMI, but others will follow. The lure of the higher price on singles and greater incentive to buy albums is too good for them to resist. Hopefully, this deal sees much success, and leads to a great decline in music DRM. Now about video... | 
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