This action was probably to be expected at some point.  It also highlights how this industry is still really trying to figure things out.  Differing price points seems like a no-brainer.  DRM-free is great for the fans.  Some interesting excerpts from Information Week’s article are below:

“The DRM-free music will be in the iTunes Plus format, which is a higher-quality 256 Kbps AAC encoding. Users have the option of upgrading their current library to the higher-quality, DRM-free format for 30 cents a song.

The company will also introduce variable pricing for its music starting in April, with price points of 69 cents, 99 cents, and $1.29. This has been a point of contention for many music companies that wanted to be able to charge different prices depending on the demand of the song. … ‘most” of the music companies are planning to offer songs at the lowest price point, and all three price points will be DRM free.”