New iTunes Prices: Good Deal or Out of Tune?

Apple (AAPL) devotees might want to pop out those trademark white earbuds for a minute.

In lieu of the headline-making devices (think, iPod and iPhone) that the company has become famous for unveiling at its annual Macworld Conference & Expo, Apple announced something a lot less attention grabbing, but with potentially far greater impact for many consumers: a complete revamping of its iTunes pricing structure, as well as access to digital rights management-free music downloads.

Here's what iTunes fans need to know:

Apple announced that it will abandon its flat 99-cents-a-song rate and begin variable pricing in April, charging consumers 69 cents, 99 cents or $1.29 per song. (Most albums will still cost $9.99.) Apple hasn’t given details on how the different prices will be applied, but it's expected that new hit songs will command the premium price of $1.29.

Apple will also start to transition its entire song library to a digital rights management-free format called iTunes Plus. (Up until now, users could only download a limited selection of songs in this format.)  Apple's long held fast to its DRM system, which restricts users from transferring downloaded music and videos to a certain number of computers and makes listening to iTunes purchases on non-Apple devices problematic. The company says it will remove these restrictions on music downloaded through iTunes Plus and plans to transfer its entire song library to the new format by March.

Want to listen to your iTunes collection on a Microsoft (MSFT) Zune and your computer at work as well? With Apple’s DRM-free content through iTunes Plus, users will be able to do that as well as have greater freedom to share and copy purchased music. ITunes users won’t pay a premium to download new songs in iTunes Plus. But updating previous purchases to the format won’t come cheap — users will have to pay 30 cents per song, or 30% of the album price, to upgrade their existing music collection to the DRM-free format.

That depends on what you listen to and how you listen to it. Apple says there will be more songs priced at 69 cents than $1.29, but there are few details available beyond that.

Fans of new music could find the new prices an expensive change. It’s expected that new, popular releases will fall on the pricier end of the spectrum, which would hurt devotees of pop bands like the Jonas Brothers. On the other hand, fans of oldies but goodies will likely benefit from the price drop.

For families (or techies) with multiple computers and portable music devices in the house, the new deal could prove beneficial. Now, with the DRM-free music that will be available on iTunes Plus, they can share their music library among several devices (Apple or otherwise) and among several family members without having to buy a song more than once.

At least until the iTunes pricing switch in April, competitors Amazon (AMZN) and Wal-Mart (WMT) offer better deals on downloads (although not necessarily a better selection):

Wal-Mart
Most songs cost 94 cents; albums, $9.22. The retailer offers sales on some tracks and albums, pricing them as low as 74 cents and $5.64, respectively. (Albums exclusively available at Wal-Mart may be priced at a premium. Journey’s “Revelation,” for example, is $10.88.)

Amazon
Album prices range from $5.99 to $9.99, with most songs costing 89 to 99 cents. Weekly specials drop prices lower, to 79 cents.

While some may say they're old school, CDs offer the advantage of a built-in backup -- you have a copy of that music on hand no matter what happens to your computer. Until you upgrade your home and car audio components for digital music, it’s also helpful to have something to slap in the CD player. The big downside is price: At Best Buy (BBY), the soundtrack for recent blockbuster "Twilight" is $16.99; on iTunes, it’s $11.99.