“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%.