I didn't read the article but the entire idea is flawed for one reason: Price elasticity is different for every song and artist. To use one demand-driven criteria for every song and artist would be stupid. To determine individual price elasticities for each song & artists would be impossible, at best a guessing game.

Demand only determines price when coupled with price elasticity.

The reason prices rice and fall on the stock market is because people buy and sell certain stocks causing the prices to either rise or fall respectively. If a stock is not bought or sold it could maintain its price point (though this doesn't happen too often since people are almost always buying and selling listed stocks). Without a "sell" model, how would you lower the price on music? You would have to implement a sort of timed decline in pricing, which would have to lower prices not on some hard constant but at a good variable rate to maintain interest before the one hit wonder becomes worthless, again.

There are also cases of insider trading which occur on Wall Street. In order to regulate this the SEC monitors the trades and activities of stocks. This means that someone at Apple would have to do a similar job on a model based like this. If no one was monitoring the purchases properly then I am sure you would see big labels paying individuals to purchase songs in order to raise the price. If a song were popular enough they could quickly drive up the price forcing people to pay $1.59 a song instead of getting the lucky starting price of $0.99 a song, or whatever it might be.

Let us not forget that the industry is already fairly well dependent on a supply and demand style. Obviously some people are willing to pay $0.99 for less popular songs, while others might be willing to pay more. The true magic here is that Apple found the perfect price point to appeal to both side, which keeps the pricing and market simple for the users to follow.

Tiered pricing schemes make a bit more sense because they would not be affected by spikes in song purchases or by the temporary decline of a song or by the aforementioned conspiracy. However, they also have their own set of problems. You would quite effectively remove some purchases by raising the songs price. Fewer people would be willing to pay $1.49 or more for the song they were willing to pay $0.99 for. At the same time you might find a few people who are more willing to pay $0.79 or $0.49 for a song then they were to pay $0.99, but I highly doubt the $1.49 songs could outpace the $0.79 or $0.49 songs.

Let us trust Steve's decision for now. I am sure the folks at Apple had enough sense to ask some economists to look at the system and analyze the effects that a tiered system would have. Going on this assumption, it would be safe to say that $0.99 songs are here to stay (so long as the RIAA continues to play nice).

iTMS works with the labels. Their store runs promotions at their request, and buys music only through the major labels (or large music groups, in the case of "indie" music), rather than run a label of its own or simply pirate files from a country beyond copyright enforcement powers (as allofmp3.com does.)

Don't blame Apple Computer for this; they're legally barred from doing otherwise becasue of their settlement with Apple Records. Now, on the other hand, if Apple C. bought out Apple R., then they'd be getting somewhere.

Actually, that 18-song album will cost $10 to download. The only albums that cost more than $10 have a very large number of songs (30+, say) and would be even more expensive multi-disk sets on CD.

Dude, forget iTunes. I use AllOfMP3 [allofmp3.com]. You pay per # of bytes you download. For 128Kbps a song typically costs $0.10. And they provide songs in MP3 or OGG Vorbis format. No DRM and Legal! You can get 320Kbps quality songs too, an entire album for $2!

No, I'm not trolling, I'm not trying to advertise, I just don't understand why people don't just use this or similar services like MP3Search.ru [mp3search.ru].