“Variable pricing”—to use the current vogue euphemism of the music industry—for digital downloads is the labels’ latest idea for an industry cure-all.

Now, you or I would call it simply “raising prices.” But the industry can’t do that right now. Since the iTunes Store is the de facto gatekeeper on pricing, as long as Steve Jobs likes the clarity of the site’s simple 99-cents per track, that’s where things will stay.

But a record label can dream, can’t it?

The new Billboard has a story on this, by Anthony Bruno, but since the Billboard web site sucks so much I can’t find it to link to. So here’s a Yahoo version of it.

The story is kind of funny. Basically, the labels are saying, “OK, let’s pretend Steve Jobs doesn’t exist. If we could raise prices on digital tracks, what could we get away with?” This is worth parsing:

The idea behind variable pricing is to make more money from those 33% who downloaded up to 50 songs in six months by slightly raising the price on certain tracks, while at the same time convincing those who only downloaded 10 or fewer to buy more by slightly lowering the price of others.

How that’s done is where the real science kicks in, which is why even those labels pushing for variable pricing most aggressively are still only in the test phase. The latest is Warner Music Group (WMG), which last month began a trial of a dynamic pricing system from Digonex.

The company’s system recommends raising or lowering the price of a track and/or album based on a variety of factors. In some cases, new releases selling very well may get priced higher, but so might catalog items appealing only to the die-hard fan willing to pay more. In other cases, the system recommends lowering the price of even new releases to spur more sales.

Now, the real reason that this won’t work I’ll get to in a minute, but it’s kind of fun to examine how it doesn’t work on its own terms, either. As I read the part about Digonex’s “real science,” it seems that you can raise the prices on stuff a lot of people want … but also on the stuff that only a few people want.

Since this encompasses just about everything, this finding is very convenient and was probably greeted with no little praise for the keenness of its analysis by the label.

But Digonex also noted that the labels can also lower prices. Despite the prospect of increased sales, this finding was probably greeted with less enthusiasm. The trouble with selling product at lower prices is that some of the people who buy it at the lower price might have bought it at a higher one. That might not bother you, but it is the sort of thing that keeps the record industry, collectively, up at night.

All Digonex has to do is take all of this into account, and create an algorithm for Warner Brothers that will sell each of its songs for the highest possible price to all of its customers.

The search for this particular holy grail has some theoretical interest, because it is possible. Imagine if there was only one music service, and it could track each customer’s buying habits and craft a custom pricing structure for him or her based on prior purchases.

Once the service learns that young Trevor is the kind of rap fan who’s on the east coast tip but isn’t down with the west coast, it could start dynamically shifting its pricing structure for him only, perhaps making the latest Snoop Dogg album cheaper. (Think of the deals he’d be offered for a Bocelli CD.)

There’s a certain demonic logic to such a system, foiled only by reality in about nine different ways. There isn’t only one system. Customers aren’t that stupid. Human behavior and the business plans of myriad other media corporations will not change to help the record industry turn back the clock to the time where it could raise prices whenever it wanted to.

But, again, that’s just why variable pricing won’t work on its own terms. In the real world, it won’t work either, not just because of iTunes, but because music fans have so many other outlets to get the music they want, from mp3 blogs to the file-sharing networks to the good old fashioned sneaker net. If a Madonna song is 99 cents one day and then suddenly jacked up to $1.99, no one in the world is going to feel guilty for taking the thing off an mp3 blog—and sending it around by email (or on a mp3 disc, with 150 other songs, or on a flash drive, with 500 other songs) to her friends, as well.

Now, the iTunes Store doesn’t have Digonex’s science behind it. (And where do these companies get those names?) But one thing it accomplished, which isn’t often noted, is that Apple has people content to pay the 99 cents for music its customers could get free, even though the product is inferior—in the sense that the songs are bundled in restrictive software that doesn’t let you send the songs around to friends, at least without some aditional hassle.

You almost want to see this experiment play itself out. Let the major labels have their ideal variably priced music service in all its algorhithmic glory. They might find out Apple’s dumb system was smarter than it looked.