The Hole In Apple’s iTunes Price Cut

October 17, 2007, 1:32 PM UTC

Two days after Apple (AAPL) began cutting the price of its DRM-free music for new customers, from $1.29 a song to 99¢, the company is still charging the higher price for existing customers.

The fact of the 30¢ price cut was confirmed yesterday by Steve Jobs, although the company denied that the move was in response to competition from Amazon (AMZN), which charges 89¢ to 99¢ per song, or Wal-Mart (WMT), which charges 94¢. “It’s been very popular with our customers, and we’re making it even more affordable,” both Jobs and spokesperson Natalie Kerris insisted.

But the price cut was not applied across the board. The discrepancy arises in the Upgrade My Library feature, which is still charging existing customers 30% extra for DRM-free songs.

For example:

A new customer who buys Norah Jones’ Feels Like Home on iTunes pays $12.99 for a 256 kbps, DRM-free version of album. That’s the same price existing customers paid for a 128 kbps, DRMed version when the album first came out. To get the higher-quality, iTunes Plus version through Upgrade My Library, those customers have to shell out an extra $3.86.

Of course, there is no competition for Apple’s Upgrade My Library feature. It’s the one thing you can’t do at Wal-Mart or Amazon.

However, Amazon sells a DRM-free, 256 kbps MP3 version of Feels Like Home for $8.99. They also sell the “Enhanced” CD for $12.97 new and $6.47 used.