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The W - Internet & Computers - iTunes Threatens to Shut Down Music Store
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Leroy
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Since: 7.2.02

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Apple Threatens iTunes Shutdown over Royalty Dispute (Wired: Listening Post)

Uh, really?!?



    Apple has threatened to shut down the iTunes music store if an obscure three-person board appointed by the Librarian of Congress increase the royalties paid to publishers and songwriters by six cents per song.

    The Copyright Royalty Board is scheduled to hand down its decision on these rates by Thursday. As part of their general muscle-flexing of late, music publishers asked the board to increase the royalties paid to publishers and songwriters for the sale of digital downloads from 9 cents to 15 cents per song.

    ...

    "If the [iTunes music store] was forced to absorb any increase in the... royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss -- which is no alternative at all," wrote Apple iTunes vice president Eddy Cue in a statement filed with the board last year, according to Fortune. "Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably."

    Out of each 99 cent song, Apple currently pays artists and labels an estimated 65 to 70 cents per song, 9 cents of which they currently pass on to publishers. According to Apple, the 66 percent increase in publishing royalties to 15 cents per song requested by the National Association of Music Publishers (NMPA) is too much for the company to bear.

    Of course, Apple could simply tack the extra six cents onto the price of each song in its store and make up the difference that way. But part of iTunes' longstanding allure is that every track costs 99 cents (with the exception of DRM-free tracks in the iTunes Plus previous to October '07).



I'm really surprised that there hasn't been more press about this, considering the Apple Store has become a major outlet. I have absolutely zero love for the CRB as it is, as they have a history of ruling without regard to all impacted constituents (see also: web radio).

One the other hand, I do feel for artists in all of this, as they seem to be the ones consistently caught in the middle. It also doesn't help that the RIAA themselves have actively petitioned to have artists royalty rates reduced.

Anyway, I think Apple is bluffing, and the likely result is an increase in the cost of songs, unless the sole purpose is not to give the labels anymore leverage in negotiating the pricing structure.

They next few days should be very interesting.




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