Apple Unveils Higher Quality DRM-Free Music on the iTunes Store: "DRM-free tracks from EMI will be offered at higher quality 256 kbps AAC encoding, resulting in audio quality indistinguishable from the original recording, for just $1.29 per song."
This allows the labels to go above the $0.99 price point, and Apple to give customers a justification to spend more per track-- the $1.29 track is simply a better product than the $0.99 track in terms of sound quality and freedom to use.
The next question is: do the other majors sign on?
When does Apple offer the same terms to independents. Many indies would be willing to go DRM-free at $0.99. How price elastic are digital downloads?
Albums will remain at $9.99 with some price flexibility, but will be the premium, 256 kbps, DRM-free versions. It's a subtle way of adding value to the higher priced album product.
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What I find really interesting is that they didn't choose to make the 99c tracks 256kbps+drm and the 1.29 tracks lowerquality+nodrm. They probably could have gotten consumers on the 1.29 pricepoint without offering both, so that's really pleasing.
To the general public-- beyond the IP attorneys and the BoingBoing/Slashdot crowd-- I don't think that DRM-free is much of an incentive for a 30% price premium. But sound quality is an easily marketed and sold premium product.