The recording industry keeps asking for tiered pricing on iTunes , and Apple keeps saying no . This seems odd--why can't the two agree on how to make the most money off online music sales? In fact, I'm sure they agree, and I'm sure the recording industry is right: more money could be made with tiered pricing. The real problem is a conflict of interests--the recording industry makes money off music, and Apple makes money off iPods. Here are some numbers: in under 3 years, 600 million songs have been purchased on the iTunes music store. Apples cut of that comes to just over $210 million. Meanwhile, the Apple has sold 6.5 million iPods in thealone. That's well over $1 billion in just 3 months; the money from iTunes is pocket change.From the perspective, it's clear why Apple doesn't want to raise prices on iTunes. They couldrevenue from the music store and they still wouldn't approach iPod level revenue. While the recording industry is interested in iTunes to generate revenue, Apple doesn't it see this way. They have other things in mind for iTunes:1.They have two reasons for this: first, making good software is tough, and I don't believe they would trust someone else to do it for them. iTunes is easy-to-use, well designed, and well programmed, and the iPod is all the more successful because of this. Second, depending on a 3rd party for a business critical application could put them in a strategic bind in the future. Napster's subscription model and other byzantine DRM restrictions pose obvious problems here.2.I think this is Apple's main concern. Everyone who has taken Econ 101 knows about complement products--when the price of DVD's goes down, sales of DVD players increase. Alcohol prices on the rise? Bad news for Trojan . Music is a complement to the iPod, and the lower the price of music, the more iPods Apple can sell. If it were up to Apple, music downloads would be free, and we'd all be out buying 60GB iPods because our old 10GB models just can't fit everything. Do you think Apple is concerned that people are using iTunes to steal music? Not at all! Free music makes it easier for Apple to push their new, high capacity iPods. The motivation for the two latest additions to iTunes becomes clear in this light: fill up people's iPods faster (videos) and without asking for money (Podcasts).