It looks like the company did, finally giving in last month and allowing the record companies to jack up prices for hit product. The cover was the removal of DRM, something Steve Jobs had long campaigned for.

Today however, comes news that the real heart of the deal was an agreement with the labels to allow wireless downloads to the iPhone.  The story is somewhat vague on the details:

But according to one music industry executive involved in the negotiations, Apple’s primary goal was securing distribution of music over its iPhone, as mobile phones are expected to become an increasingly important outlet for music.

Much later in the story, we read:

Apple indicated it was willing to make the switch to variable pricing [”variable pricing” is an industry euphemism for “raising prices”] provided that the music companies — which negotiate individually with Apple to avoid colluding — would agree to license songs for wireless downloads on the iPhone, as well as drop copyright protections using digital rights management, or D.R.M., software.

All the labels agreed except Sony Music. […] Eventually, Sony gave in ….

But it looks as if Jobs, by selling out consumers on the pricing issue, gained for himself both a new income stream and an enviable new selling point for his iPhone.