Greg Sandoval at Cnet was first to report that Apple has finally cut a deal with Warner, Sony and Universal to sell DRM-free tracks on iTunes.

The catch—Steve Jobs is apparently retreating from his long-time insistence on a 99-cent consistent price:

Apple has cut deals that will finally enable iTunes to offer songs free of copy protection software from the three largest music labels, according to two sources close to the negotiations. In exchange, Apple has agreed to become more flexible on pricing, the sources said.

Note how even Cnet is using the phrase “become more flexible on pricing” in its record-industry preferred way, as a euphemism for “raise prices.” (See my previous discussions of this tendency here.) The piece is a little too-industry friendly overall:

The good news is that the price of catalog music is falling to 79 cents per song. The labels will get an opportunity to price some hit songs for more than 99 cents but eventually those songs will drop to 79 cents, according to one source.

Before iTunes users get too worked up, they should remember that song prices at iTunes haven’t increased in five years. According to the Consumer Price Index, a 99-cent song in 2002 would be worth $1.17 today.

Since the bad news was “flexibility,” the good news makes things seem all better. The real bad news, which the piece doesn’t say flatly, is that the hit songs of the day Apple is going to allow the companies to charge more for will of course make up a huge percentage of a day’s typical sales.

As for the CPI, the peer-to-peer networks offered music for the competitive price of zero in 2000. Today, adjusting for inflation, the price there is still … free.

Last graf of the Cnet piece:

Not only will new music downloads be free of copy-protection software, but Apple and the labels will begin removing DRM from music already available in the iTunes Store, the source said. However, it’s unclear what will happen to songs that have already been purchased.

Removing the DRM from already purchased music would be an important and somewhat ameliorative gesture by the labels how wrong their insistence on DRM was.

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The question of selling non-handcuffed music raises the question of how much the companies are going to be sacrificing in sales. Without the copy protection, purchasers will be able to do what comes naturally: Email a friend a song, right after purchasing it at the iTunes store.

It’s possible to pass along legitimately purchased music to friends right now in any number of ways, ranging from simply letting them rip a store-bought CD to the more laborious one of burning a physical CD from one you bought on iTunes (i.e., thereby removing the DRM) and letting them import that.

The new way, obviously, is going to be easier, and ironically enough it’s going to hit the hits, most minor and major, most heavily, because someone who eagerly buys a new Beyoncé track will presumably have a friend or ten who are interested in it as well and can now immediately and easily pass it on. If you’re digging up an old song from Nirvana’s first album, by contrast, it’s unlikely you have ten friends who are going to want it that same minute.

You’d think, in fact, that the industry would charge less for hits (to encourage people to buy it online rather than get it from a friend) and price catalog higher—if you want that old Nirvana song, you’ll pay the extra quarter, and the chances are lower a friend of yours would have it.

I think Jobs, for all his severity, was appealing to the better nature of people with consistent pricing. In a world where you don’t have to buy, the image of an industry playing fair, for once, on pricing couldn’t have hurt.