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Apple and the Labels have different business models when it comes to selling music.

Apple want to sell iPods.

Labels want to sell CDs.

Apple knows that it will not make the big money by selling music. The big money is in selling little black and white music players. Thus, it is in their interest to push music at a price as low as possible, so that the music can a) drive newbies to buy an iPod, b) lock in existing customers so that they will continue to buy iPods.

The majority of purchases at iTunes Music Store is probably individual tracks. Raising the price of individual tracks means feweer purchases, which means the incentive for iPod purchases is lower. Remember: it's not the amount of profit that Apple gains from iTunes Music Store that is important to Apple; rather it is the number of purchases.

Labels know that not all music are sellable, even by the same artist. The record format works well for the Labels because they can command a high price (because, hey, there are more music) without spending expensive production and marketing expenses on each and every track on the record.

Appe's iTunes model — $0.99 per track — kills the album.

To the labels, it makes sense to rasie the price for each individual track. This is so as to push their customers towards buying the entire album instead. (Note all these recent talks about raising prices is mostly about the $0.99 price point, and not the album's price point.) And failing that, at least the Labels can recoup the cost they spent on the tracks that the customers didn't buy.

We do indeed live in interesting times, as we all sit and watch and see which business model wins out — or whether Google or Microsoft or somebody can come in with a win-win-lose solution and kills Apple. :-)