Apple iTunes is a fantastic service, used by millions of people every week of the year. It’s easy-to-use, has almost every song you could care to buy (damn The Beatles), and is also reasonably priced. Having said that, it could be cheaper, especially now that you can buy a $200 iTunes gift card for $2.60.

According to Outdustry, that is how much you can buy an iTunes gift card for on Taobao, China’s biggest c2c (consumer-to-consumer) shopping site. This isn’t just an isolated incident either, with thousands of cards available to buy at similar prices at the same time.

How is this possible? Because Chinese hackers have circumvented Apple’s algorithm for creating the digital vouchers. Using their own key-generators, the sellers give you a code which can then be redeemed online at the iTunes Store. The sellers get their couple of dollars, the musicians and record labels get their cut as usual, and Apple is left paying the bill.

This practice reportedly began six months ago, and the prices then were closer to $45. The amount of sellers then increased by a huge amount and the prices inevitably dropped to what they are today. Regardless, it means Chinese music fans can buy $200 worth of content from iTunes for about one percent of the asking price.

But of course, most Chinese music fans will instead opt for one of the numerous free mp3 search engines available, with Baidu being the biggest. What’s slightly jarring though is those who do decide to go through more official channels can still get music on the cheap.

Apple has yet to comment on the revelation but is highly likely to change the algorithm in order to try and stop the practice at this relatively early stage. No matter where this is happening in the world, Apple is directly losing money as a result of this activity, and that’s really not good for business.

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Entry was posted on Tuesday, March 10th, 2009 at 11:55 pm under Apple, Ecommerce, Hacking, Internet, Opinion, Technology.

Read more entries by Dave Parrack.
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