Digital music pricing a giant question mark

At yesterday's otherwise sleepy MacWorld keynote speech, Apple executive Phil Schiller announced that iTunes would at last be going DRM free by April of this year. Then there was a cryptic note about how pricing was going to change, with songs soon to be available at 69 cents, 99 cents, and $1.29.

On the surface this sounds pretty good, but that's because I, like everyone else, is focusing on the 69 cents part of the announcement. That's a great deal... but you have to wonder how many songs will really be available that cheaply. Obviously the record industry has a different number in mind: The goal clearly being to try to sell the most-purchased music for $1.29.

But will that work? GigaOm has an interesting post today about the potential for that 69 cent price point to condition customers into purchasing only the cheapest tracks, and to expect cheaper, not more expensive, tunes as time wears on.

The record business has always been hit-driven, of course, so $1.29 songs will probably continue to sell reasonably well as long as they're at the top of the charts. As GigaOm points out, nothing has been successful in stopping the iTunes juggernaut, which remains a massive success despite being the most expensive place to buy your music. But the risk of a backlash against a sudden 30 percent price hike is very real, and one which could not just damage the already battered music industry but could also erode Apple's position as the #1 merchant of music as customers finally go looking elsewhere for bargains. Remember that Wal-Mart is actually taking the opposite approach and pricing its hits at 74 cents each. Songs on iTunes will cost nearly twice as much after the tiered pricing hits.

What do you think? Will the tiered pricing strategy work? Or is $1.29 finally going to be enough to drive you to buy music somewhere else?