Let the MP3 Price Wars Begin

In that way, DRM had served as a retaining wall for Apple, keeping buyers of more than 3 billion songs through iTunes locked into the iPod player -- unless they jump through ridiculous hoops like burning their music to CDs and then ripping them back to MP3s. (Our house is home to three iPods, and we have yet to buy a single song through iTunes for this very reason.)

Apple delivered the first blow to DRM this spring by selling DRM-free songs at a 30% premium on its iTunes Plus service. But the number of popular songs available on iTunes Plus appears to be a small fraction of what's available on Amazon.

Amazon's new store may cause that retaining wall to crumble, prompting many Apple customers to buy songs that offer them better options.

But what about iTunes Plus, the service Apple launched earlier this year that lets you buy DRM-free songs? Well, here's where things will really start to get interesting:

ITunes Plus sells those DRM-free songs for $1.29 each. Amazon sells the same songs for either 89 cents or 99 cents. That's a discount of between 23% and 31% from iTunes' DRM-free songs. Many of Amazon's best-selling songs -- including those in the Top 100 albums -- are retailing for the lower price.

There are two reasons this is interesting: First, it's setting up a new tech-titan smackdown between Apple CEO Steve Jobs, the master strategist, and Amazon CEO Jeff Bezos, the Crazy Eddie of the Internet.

Bezos is doing here what he does best: Building market share and volume by slashing prices. Jobs won't take that sitting down, and he is probably plotting some cunning strategy to hold on to its iTunes customers.

Second, it's leading to a full-blown price war. In fact, the first shot has been fired by Amazon with its 31% discount of popular songs. Over time, more companies are going to be jumping into the DRM-free market, each one trying to build market share with bigger discounts.

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