NEW YORK Apple Inc has reached a deal with major record labels to sell digital songs without the copy protection software that had prevented fans from sharing music bought from its iTunes store, the maker of the iPod and iPhone said on Tuesday.
The company also said it would start selling over-the-air download songs for its popular iPhone 3G and introduce variable pricing at the iTunes Music Store, with songs priced at 69 cents, 99 cents and $1.29 starting in April.
Phil Schiller, Apple's senior vice president of marketing, announced the long-expected changes at the Macworld Expo trade show in San Francisco.
Copy protection software, also known as digital rights management, has proved a controversial topic with music fans and record labels alike.
DRM was designed to prevent fans from illegally sharing digital downloads on file-sharing services. But it also prevented many fans from moving their own songs between devices and became increasingly unpopular.
Apple founder Steve Jobs publicly called on major record labels to drop DRM in February 2007. But the labels had resisted his call even though iTunes is the world's biggest digital music retailer, with more 6 billion songs sold since 2003.
The labels had agreed to allow other retailers, including Amazon.com and Napster, to sell DRM-free songs in a bid to help increase competition in the digital music market. iTunes has more than 70 percent market share in the United States.
iTunes will offer all 10 million songs free of digital rights management by the end of the quarter, Schiller said.
The DRM-free songs will be sold as higher-quality 256-kilobyte-per-second AAC encoding for better audio quality. Most DRM-free songs are sold in the more popular MP3 format.
Jobs said in a statement that the company was "thrilled" to reach the deals with Vivendi's Universal Music Group, Sony Corp's Sony BMG, Warner Music Group, EMI and thousands of independent labels.
In exchange, the labels have convinced iTunes to sell songs at variable prices. Currently, iTunes sells all individual songs at 99 cents regardless of their popularity or date of release, unlike most other retail outlets.
The labels hope to increase profitability from iTunes by selling the most popular hit tunes at the highest-tier prices. Traditionally, labels make most of their profits from a small number of big hits. Apple's insistence on flat-pricing had wreaked havoc on that model and upset senior music executives who felt the technology company had become too powerful.
Apple said iPhone 3G users would also now be able to buy songs while on the go, over the air through its popular App Store. Prices will be the same as those for songs bought via the computer.
Songs purchased on an iPhone will automatically sync to users' computers the next time they sync their phones, the company said.
(Reporting by Yinka Adegoke, editing by Matthew Lewis and Lisa Von Ahn)