Sizing Up Digital Music Deals

Music fans know that they can rely on iTunes to find the latest hits, but they can't rely on it for the best prices. In fact, now that Apple (AAPL) and other online music stores like Amazon's (AMZN) and Wal-Mart's (WMT) have jacked up prices for popular songs and albums, it may be time to take your digital tune shopping elsewhere.

Earlier this month, Apple started varying the prices it charged for its songs, moving from a flat rate of 99 cents per download to tiers that span from 69 cents for older and niche music to $1.29 for the most downloaded and popular songs. Amazon and Wal-Mart soon followed -- raising prices for the most popular music to $1.29 and $1.24, respectively.

“They’re taking advantage of Americans’ appetite for downloading,” says Andrea Belz, an independent technology consultant based in Pasadena, Calif. Consumers spent $2.6 billion on digital music last year, roughly $1 billion of which went toward individual song downloads, according to the Recording Industry Association of America.

Initially, such downloads were considered a great value for those who wanted a song or two without paying the full $20 for the entire album in stores. But with higher prices for the songs music fans love the most, downloading music has become a much less financially-savvy proposition. And while opportunities to download free music online abound, music lovers need to be careful. Everyone from Internet service providers to the Recording Industry Association of America have been cracking down on consumers who violate copyright law by downloading music over peer-to-peer file sharing sites.

For cheap -- and legal -- ways to expand your digital music library, try these options:

At just $13 a month for unlimited downloads to your computer at Rhapsody or Napster, music subscription services can save those who typically download 15 or more songs a month a healthy chunk of change. But there is a catch: You’re essentially borrowing the music, which means you’ll lose it all when you stop paying for the service. (Napster tries to counterbalance this by letting you purchase tracks at discounts of up to 20%.) With both services, you'll also have to pay an extra $3 a month if you want to play your songs on a compatible MP3 player. And it must be a Rhapsody- or Napster-compatible player, like the Haier Rhapsody ibiza ($199 for a 4GB model) or Creative Zen X-Fi ($130 for an 8GB model) for Napster. So be sure you like the players that work with the service before you sign on, says Paul Verna, senior analyst for eMarketer, a market researcher specializing in e-commerce.

Bottom line: If you like the latest hits but often abandon one band for the next big thing, subscription services may be the best deal for you, says Verna. In the short term, you get total control over your playlist, but don’t have to purchase a lot of songs that you may end up deleting months down the road.

Internet radio stations like Slacker Radio, Pandora Internet Radio, SHOUTCast and Jango, offer a range of music genres without charging you a dime. Users can customize stations or create their own by requesting artists and songs, and then rating the playlist. On Jango, for example, you can request that a song be played a little, a lot, or never again. Over time, the services tailor suggestions to your taste.

The tradeoffs: Besides the fact that you never have full control over what's played and when, you'll also need to endure some advertising. To keep stations free, the web sites intersperse songs with ads. While you can sign up to pay for ad-free music -- Slacker charges $4 per month -- weigh the costs and benefits against those of a subscription service first, says Heather Polinsky, an assistant professor at Central Michigan University’s School of Broadcast & Cinematic Arts. It may be more worthwhile to pay the $13 a month for Rhapsody and have a little more control over your playlist.

One more helpful tip: Skip out on buying the pricey hardware that picks up Internet radio stations. (A 4GB handheld player from Slacker costs $200, while Pandora and Logitech offer home receivers that start at $300.) You’re better off downloading the sites’ free cellphone applications, which use a phone’s Internet connection to sync with an online account. Slacker has one for BlackBerry phones. Pandora also has versions for the iPhone and other smartphones.

If you have a burning desire to own your music and carry it with you everywhere you go, do some comparison shopping first. DownloadShopper.com tells you which of the big three -- iTunes, Amazon or Wal-Mart -- offers downloads at the cheapest price. Rihanna’s "Don’t Stop the Music,” for example, comes up as $1.29 at iTunes, 99 cents at Amazon and 94 cents at Wal-Mart. You’d save 35 cents by downloading the song from Wal-Mart's.

Also check for weekly free songs on the various sites, advises Polinsky. This week’s freebie may be next month’s hot new song. In 2007, for example, iTunes offered Amy Winehouse’s “You Know I’m No Good” shortly before the singer became popular in the United States.