Apple considering selling iPods with unlimited access to iTunes

The Financial Times and other mainstream newspapers are reporting that Apple is in discussions with a number of major music companies to give iPod users free access to its entire iTunes music store in exchange for a more expensive iPod and iPhone.

Apple would follow the footsteps of Nokia and Universal Music Group which have mulled a similar project last december; Appleinsider reckons that the service will be called "Comes with Music".

By doing so, Apple could potentially open a Pandora box and kill the golden goose as it seeks to boost demand for its iPods and iPhones by making itunes free, bucking the invisible "Gillette" rule which says that the initial investment should always be very cheap.

A parallel could be drawn between a cable subscription (e.g. Virgin or Sky) where the subscriber gets the set top box for free and then has to pay a fixed fee each month and the TiVo concept of lifetime service plan, where you paid a flat lifetime fee of $299 but also had to pay for the DVR box as well.

The plan died out in March 2006 although it was temporarily reinstated last year for a couple of weeks.

But Apple makes money on its iPods, iTouch and iPhones, although sales have been less than impressive lately; while other companies like Sony and Microsoft, lose money on each game console they sell.

Where things might turn sour is that Apple wants to pay only $20 to the record companies per device sold while Nokia is offering $80 to Universal for unlimited music giveaway.

The key idea here is that Apple is betting that people will continue to upgrade their iPods on a regular basis while paying more for them as research has shown that people would be ready to pay up to $100 for unlimited music access.

The idea could potentially be expanded to other content as well including Videos, e-Books and games.