Apple introduced variable pricing to its iTunes online music store yesterday, raising the top price for a song to 99p.

Most songs used to cost 79p, and some still will, but the company's new three-tier pricing system means some will also be sold for 59p.

In the US, the prices will be $1.29, 99 cents and 79 cents. Anticipating a backlash before the announcement, Apple pointed out that for every one song they raise to $1.29 they will be reducing 10 songs to 69 cents. All tracks are also now DRM-free, and so can be played on all types of music player.

The new price changes are the first big test of how much fans are willing to pay for digital music. Record labels have been lobbying Apple to raise the top rate of tracks, which in the US has been 99 cents since the iTunes store was launched in 2003. Apple previously rejected their pleas, saying a price rise would dent sales.

Songs such as the current UK number one – Poker Face by Lady Gaga, as well as popular tracks by Beyonce and Kings of Leon are priced at 99p. None of the tracks in the iTunes Top 50 selling tracks is currently being sold at the cheapest price of 59p.

Major label owners like Universal, Sony, Warner Music and EMI say they can make money with more flexible prices and possibly help make music retail a profitable enterprise again.

Yesterday, Amazon cut the price of many of its top-selling music downloads to 29p as it competes for a larger slice of the market. The online site is now selling more than 100 tracks - including Lady GaGa's Poker Face, Lily Allen's The Fear and Omen by The Prodigy. Amazon, which also offers albums for as little as £3, said the reductions were being made indefinitely.

Amazon is already in second place in terms of market share for digital music, despite only launching its service 18 months ago. However, iTunes remains overwhelmingly dominant, taking around 90 per cent of all digital music sales.

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