Power over how music downloads will be priced at the iTunes Music Store hangs in the balance between the music labels that control the content and Apple, the company that controls the very gateway to the concept of digital downloads. The San Jose Mercury News published an in-depth AP report on this battle Sunday, April 2nd, examining Apple's position, the goals of the labels, and the state of the industry itself.

According to the article, the labels are continuing to push variable pricing, which means higher pricing on "hit" songs, and lower prices on some older songs. This structure has been vigorously resisted by Apple, which has built the iTunes Music Store around the idea of all single being priced at US$.99, a model that Apple has cited as hitting the right price point for consumers.

It should also be noted that when the iTunes Music Store first launched, almost all albums were priced at $9.99 -- a fact often pushed by Apple in its marketing messages -- but as time has gone by, more and more albums are now priced at higher points.

In addressing this issue in November of 2005, Steve Jobs told reporters at Apple Expo in Paris, ""We're trying to compete with piracy, we're trying to pull people away from piracy and say, 'You can buy these songs legally for a fair price.' But if the price goes up a lot, they'll go back to piracy. Then everybody loses."

He also took a more direct swipe at the labels search for higher pricing in a market that already gave those same labels vastly higher profit margins than CDs, saying, "So if they want to raise the prices it just means they're getting a little greedy."

The AP report attempts to shine a light on this, by asking analysts their thoughts on record label motives. Michael McGuire, vice president of research at Gartner Inc., told the AP that, "The music industry is continuing to go through this huge transformation. To the extent that they see a market that's growing, they're going to try to take advantage of that."

In the end, however, the report suggests that it is Apple that may hold the most power in these negotiations. Matt Kleinschmit, a digital music analyst with the Ipsos Insight market research firm, said that the distribution side of the equation may be the more powerful.

"The power balance at this point is probably still going to be on the side of Steve Jobs and Apple," Mr. Kleinschmit said. "Can the record labels really afford to pull their catalog from iTunes?"

The full AP report goes into greater detail.