Apple Threaten to Axe iTunes Over Royalties Row

by Charlotte Cardingham
Posted by Hannah on 2 October 2008

A ruling on record industry royalties due later today could push Apple towards a decision to close the iTunes store.

Today America’s Copyright Royalty Board (CRB) are meeting to settle an appeal that could mean the end for Apple iTunes.

At the request of the largest music publishing association in the States, the NMPA (National Music Publisher’s Association), the 3-judge panel will convene in Washington to rule on whether the royalty payments made to recording artists by digital media providers, such as Apple, should be raised.

This decision represents the culmination of the NMPA’s year long campaign for a 66% hike in royalty rates from the current 9 cents to 15 cents (5p to 8p).

While the verdict will extend to sales of ‘physical music media’ such as CDs, Casettes and DVDs, it is largely aimed at providers of permanent digital downloads. This £680million sector is soon expected to become the driving force behind the music industry with sales increasing by 38% from 2006 to 2007.

However, should the CRB rule in the favour of artists, industry ‘middlemen’ such as Apple will be left to foot the bill, something that the software giant has vowed not to do.

Eddy Cue, vice president of iTunes is already on record having acknowledged that Apple is more likely to shut down the iTunes store than absorb the cost of any increase.

"If (the iTunes store) were forced simply to absorb any increase in its mechanical royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss,

"Apple has repeatedly made clear that it is in this business to make money and most likely would not continue to operate (the iTunes store) if it were no longer possible to do so profitably" Cue wrote in an earlier letter to the CRB.

While unlikely, a decision of this nature would see the 160 million iPod users forced to look elsewhere for new music online, potentially fueling the illegal downloading that is already the bane of the industry.

However, while potentially unpopular with iPod owners, the NMPA have defended their appeal in an interview with the BBC, saying: "Apple may want to sell songs cheaply to sell iPods. We don't make a penny on the sale of an iPod."

In all likelihood the Copyright Royalty Board will avoid rocking the boat by bypassing the NMPA’s request in favour of a more incremental approach.  Many of those in the industry expect that the board will instead stick with the bi-annual, fraction of a cent, rise that has been in place since the early 80s.

Source

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Your Comments

Gabe
on 3 Oct 2008 02:35
But they do make 9 cents off the sale of a song with absolutely no overhead.
 
gustavo
on 2 Oct 2008 22:21
"However, while potentially unpopular with iPod owners, the NMPA have defended their appeal in an interview with the BBC, saying: "Apple may want to sell songs cheaply to sell iPods. We don't make a penny on the sale of an iPod."" are you serious?
 
Kevin
on 2 Oct 2008 22:20
"Apple may want to sell songs cheaply to sell iPods. We don't make a penny on the sale of an iPod." ... Is he suggesting that the music industry should start making money off any kind of device for playing music, such as CD players, HiFi stereos, speakers, and the like? Sounds absurd.