Apple threatens to shutter iTunes Store as music publishers look to hike royalty rates 66%

“For five years, Apple’s iTunes Music Store has been the Internet’s most successful music store. But as music publishers have sought a higher share of its proceeds, Apple has threatened to shutter iTunes,” Devin Leonard reports for Fortune.

“The Copyright Royalty Board in Washington, D.C. is expected to rule Thursday on a request by the National Music Publishers’ Association to increase royalty rates paid to its members on songs purchased from online music stores like iTunes. The publishers association wants rates raised from 9 cents to 15 cents a track – a 66% hike,” Leonard reports.

“In a statement submitted to the board last year, iTunes vice president Eddy Cue said Apple might close its download store rather than raise its 99 cents a song price or absorb the higher royalty costs,” Leonard reports. “‘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,’ Cue wrote. ‘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.'”

“Piper Jaffray estimates that Apple will sell 2.4 billion songs this year, giving it an 85% share of the digital music market,” Leonard reports. “The Recording Industry Association of America says sales of digital songs and albums rose 46% last year, to $1.2 billion. But as Cue notes in his statement, Apple’s profits from iTunes remain slim. This is because Apple doesn’t think the market is strong enough for it to raise its 99-cents-a-song price.”

Full article here.

The National Music Publishers’ Association would do well to remember that, if they greedily insist on killing the goose that lays the golden eggs, there are ways for their former paying customers to obtain their product for free. The royalty rates from P2P are 0%.

72 Comments

  1. Honestly, I don’t have a problem paying an extra dime, if I know that at least six cents of it is actually going to the artists.

    I’ve started buying digital tracks directly from the artists whenever possible (and it’s rare).

  2. ‘Apple threatens to shutter iTunes Store?”

    Is that really a correct way to use that word? Shouldn’t it read “Apple threatens to shut down the iTunes Store?

    Just curious. I’m sure there are some grammar police here…

  3. @sleeve

    Just because it’s not physical doesn’t mean it doesn’t have value and people who produce it don’t deserve to be paid for what they create.

    I for one get sick and tired of people who say they aren’t paying for it but still want it and steal it. Those people have never produced anything anyone would want to rip off otherwise they might think different(ly) about it.

  4. Wait, The National Music Publishers want more money, but who is getting the bulk of the money? Shouldn’t they be hammering the record company for this money? How many people get proceeds from iTunes?

    There ought to be some “logic” to this. I thought all the money went to the record company and they would dole out royalities to various entities like the Music Publishers and what not…….

  5. I would think that the key here is “Why does the artist want to charge iTunes more. iTunes does not market the artist or create records. It only helps sell the artists work. There is a processing fee that Apple charges but the main money maker for music is the music cartels. In fact, many times then now own the music. It longer beongs to the artist. Just ask Madonna. When she left to join a new marketer, she had to leave all her own songs behind.

    Its a crazy world out there. 🙁

    en

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