In the year since Apple Computer’s iTunes Music Store(iTMS) was first launched, there have been been plenty of opportunities for critics to pontificate on how Apple’s foray into legally downloadable music would fail. “It’s only for Macintosh, so it will never grow into anything,” they said at first. When Apple later released a Windows version of iTunes and started reporting impressive sales figures, the naysayers thought that it wouldn’t last. With companies such as Microsoft, Napster, Dell and�god forbid�Wal-Mart looking to launch their own music download stores, how could Apple survive?

Well, guess what. One year later, iTMS has become the industry leader in legally downloadable music, with a whopping 70 million songs sold. It has captured over 70% of the market for legal music downloads. And, most importantly, it has even started to show a profit�this despite the huge cut that the music industry takes out of every download (by most estimates, 60 to 70 cents per song).

This is all good news, and Apple should be applauded for creating such an elegant and useful service. But there’s a catch, and in this case it’s a whopper: if certain reports are to believed, iTunes might become a victim of its own success…at the hands of the very music industry that it relies on for content.

Unburdened by manufacturing and distribution costs, online music was supposed to usher in a new era of inexpensive, easy-to-access music for consumers. In many cases, buying music online is still cheaper than shopping for CDs at retail outlets. But just a year after iTunes debuted with its 99-cent songs and mostly $9.99 albums, that affordable and straightforward pricing structure is already under pressure.

All five of the major music companies are discussing ways to boost the price of single-song downloads on hot releases – to anywhere from $1.25 to as much as $2.49 (emphasis added)

So, let’s review: With online music, record companies are free of many of the traditional costs that get factored into music sales, such as manufacturing, shipping and distribution. Yet they want to raise prices so that purchasing an online album is more expensive than its CD counterpart, even though downloads are free of such expenses and are encoded in lower-than-CD quality.

Of course, if these price hikes start occurring on a large scale (certain albums are already being priced at $13.99+, although individual songs remain at $.99), you can imagine the effect it will have on iTunes and every other legal download service. The music industry says that it is committed to making the market grow, yet has a funny way of turning words into actions. Instead, the labels would rather try to turn back the clock and have you buy the cd instead.

And that is the point: to boost CD sales. The Recording Industry Association of America believes that since people who buy from iTunes are too afraid to illegally download music anymore, they will maintain their crime-free lifestyle. Breaking the 99-cent barrier will destroy three things: the psychological appeal of the price point itself, notions of fair pricing and, most importantly, the nascent online music industry.

The record industry is obsessed with control: DRM, copyright protection, the Digital Millennium Copyright Act (DMCA). The problem it has with iTunes and other services is the loss of some control, namely in distribution. With the fledgling growth wiped out now, those who want legal music will have no choice but to buy CDs, while the record industry devises means to fully control online music distribution.

The music industry, as usual, has muddled up long-term vision with short-term greed. They blame illegal music downloading for the decline in music sales, yet they have no problem with sabotaging the legal services by raising fees…while at the same time keeping cd prices artificially high. Nowhere will you hear the music industry take responsibility for their own short-sightedness and mistakes, and they are quick to deflect the blame on this issue as well.

A spokeswoman for EMI, for instance, stresses that the retailers, not record companies, ultimately set the prices consumers pay.

Of course, this argument is plainly bullshit when the label controls 70% of the cost of each download. If illegal downloads are hurting the industry as much as it says it is, you would think that the labels would bend over backwards to steer consumers to an attractive legal alternative. Haven’t they learned their lesson yet?

Apparently not.