Does Apple's pricing really need to be at $1.29 per song?

you'd know why AAC is better than MP3!!!

Companies do not lower price because they "can afford it". This is not a government run communist society (yet). Prices are set by the following method: cost to produce, plus overhead, plus profit, plus what the market will bare. Any price fudging is in the last two variables. They can only go so low, before losing money... on the other hand, they can only go so high, before getting diminishing returns. This is a universal fact. If I charge more then a competitor for a service that is the same, I have to be giving the client more perceived value then the competition, for the client to justify paying more. On the other hand, if the additional value isn't there, and competition exists at a lower price, a prudent shopper will will take the deal. The higher priced company, will see diminishing profits due to diminishing sales, and either add value to bring customers back, or drop their price to compete. None of this is bad for us, as music consumers... this is all very, very good. Getting the labels to agree to DRM free was the winning shot in the war. Now many music stores can open and compete on a level playing field. Good for Apple, good for us. Let some time go by; the labels are business men, and a lower price may actually be more profitable for them... as already stated, they have no data and are testing the price elasticity of music downloads... time will tell.

Apple charges what it must, dictated by it's costs. iTunes is not there to make money, but to add value to the iPod proposition (which is where they do make their money). It's not in Apple's best interests to squelch music demand, as people would not then, need an iPod. That's one of the reasons Apple is continually adding more value to the iPod, so that it is not a one trick pony, but rather, that it will become a device useful for a myriad of things besides music. Music was just the start. Now it's video, including music & tv shows, podcasts, educational courses, books (both audio and written), applications, & games. In the beginning, music was the key to the iPod. Apple won, by negotiating fixed 99 cent pricing in exchange for DRM. Now, Apple won again, by negotiating DRM free and allowing variable pricing. Now that there are other stores and competition, variable pricing will work. In the beginning, it would not have.

Sorry about the spelling errors above. I typed that out quickly on my iPhone, and should have reread before submitting.

My basic point, was that Apple knows business, and they know their customers, even if the labels do not. Believe me, if the data and financials show that lower prices will make the labels more money, Apple will be there pushing for it. They will never show that higher music prices make more money (even if it turns out that it does), as their profit center is not music, but hardware. We just don't know where that "sweet spot" will level out at... time will tell, but my bet is that overall, prices will eventually go down, or, more value will be added to justify a higher price.

Let 6 months go by, and some historical data build up... in this case, I am confident that Apple is our advocate, as their and our interests are the same: keep it simple, keep prices low, offer the best quality available.