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I was under the impression (perhaps mistaken) that music you purchased in iTunes had to stay in iTunes. Can I take my files where I please or do they have to reside in the Apple walled garden?

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iTunes purchases have been DRM free since the mid 2000s. Most, but not all are also available in Apple Lossless format, which means you can convert them to whatever format you prefer without any quality concerns.

AFAICT, iTunes doesn't sell music in ALAC, just AAC. Do you have a source for purchases being downloadable as DRM-free ALAC?

You can download AAC files that are AFAIK digitally watermarked with your Apple ID to prevent piracy, but you can use freely in all your client tools. But they are not lossless. I don't know if iTMS sells lossless music.

However, they do cap the number of times you're permitted to download our collection.

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