“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%.
Greed is the downfall of any business model.
They better be careful… Price too high and everyone will flock to p2p again and then no one makes ANY money.
It’s a bad move to raise prices now considering the poor state of the global economy, if anything they should be reducing them!
According to AppleInsider:
“Apple, which has leveraged the iTunes Store to help sell over 160 million iPods, typically collects 99 cents each time a customer downloads a song, of which 70 cents is turned over to the record labels. The record labels, in turn, then typically pay 9.1 cents to the music artists who own the copyrights to the songs.”
I’m all for increasing the royalty to the artists from 9.1 to 15¢. But it should come out of the labels’ 70¢ not Apple’s 30¢.
” music publishers have sought a higher share of its proceeds, ” Higher share ? as stated in the article and previously stated MANY times, Apple does not make a “profit” on the store. So, as usual the fscking scumbag idiot fatcats in the music industry are just looking to (further) pad their pockets. The should read ‘ music publishers have sought a higher AMOUNT of proceeds’
IDIOTS
NMPA (National Music Publishers Association)
Currently representing over 800 American publishers; information about membership, and activities.
http://www.nmpa.org/
Business creates strange bedfellows.
In this case Apple and the record labels are on the same side, they don’t want the NMPA to get a royalty increase. According to the full article they want to reduce the current royalty to 6 cents from 9 cents. But ironically, the labels want higher prices for themselves, and Apple doesn’t want either party (NMPA and labels) to get more.
Apple does want to sell more iPods.
Time for artists to go directly to Apple and forgo the the music cartels.
If I recall correctly, the music companies take 70 cents of the 99 cent cost of a song on iTunes. I wonder how much of that trickles down to the artist/songwriter?
As is pointed out above, the music industry is making this money with very little effort and no sales and distribution costs other than the slice that Apple takes to host the iTunes Store. This is especially true for all of the old songs/albums – just digitize/encode and then sit back and wait.
It sounds like everyone in the music industry wants a bigger slice of that 70 cents, and there isn’t enough to go around. So the music industry wants to increase the size of the pie.
The music industry will fragment as the more talented artists/bands realize that they can make a living as independents.
“as stated in the article and previously stated MANY times, Apple does not make a “profit” on the store.”
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Don’t fool yourself, Apple DOES make money from the iTunes store.
True, it’s not Apple’s typical 30% or more margin on the iTunes Store, but they’ve said many times they operate just above break even.
Even if “just above break even” translates into .02 cents per track, they are still making some hefty profit…
.02 cents x 4 billion songs… Do the math.
Let the Publishers walk. Who’s gonna do their digital distribution? Wal-Mart??
Apple, it’s time to turn iTunes into a label, and screw the middlemen.
“Artist direct to consumer via the Net” is the future anyway. Apple might as well be the ones enabling it.
1) Apple will not shutter the iTunes Store because Apple sells a lot more there than just music; from the iTunes Store you can get audiobooks, TV shows, movies, apps for your iPhone or iPod touch, etc. Apple may simple stop selling music.
2) Apple’s contracts to sell music should only be through the record labels. If royalties go up, that would come from the record labels, and could not affect the contracts w/ Apple until possibly the next time they’re up for renewal.
3) Anyone trying to play hardball w/ Apple should simply look at NBC. NBC left, didn’t get what they wanted elsewhere, and came back, w/ no concessions from Apple. Apple has a Plan B, and it probably doesn’t include record labels.
ds. =)
Los Angeles, CA
They should just leave it where it is. Apple is wrong to try to reduce it. The publishers are wrong to try to increase it. If there were to be a reduction somewhere, it should be to the fat payments to the record companies, which get about 70 cents per song. I bet, however, that if the publishers pass an increase, Apple will pass it along to consumers and monitor carefully the effects; they will only shut down iTunes if it demand shrinks enough to make it unprofitable (which is all that Cue was really saying).
“Apple, it’s time to turn iTunes into a label, and screw the middlemen.”
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They can’t. As part of their long drawn out settlement with the Beatles Apple Corps. Apple Inc, cannot act as a label in any way shape or form. They must remain a retailer distributor.
Unfortunately, there is no legal way around this. Apple Corps, has been a legitimate record label since the 60’s.
Apple’s iTunes ‘Genius’ will save Apple: if a record label removes an artist from the store, iTunes will no longer ‘suggest’ that artist’s songs, but the songs of an alternative artist that is still available in the store. Label loses again…
A personal analysis:
1) Over here in the USA the feds have been desperately trying to hide the fact that we are in a period of strong INFLATION, the main culprit being oil prices and the greed of our Oil Corporation Overlords. Therefore, it is entirely realistic to raise iTune prices to keep pace with rising music production costs and the cost of doing business. It’s going to happen.
2) No way will Apple completely shut down the iTunes store. It is too valuable a bargaining chip. And here is how it will be bargained: Those music companies that insist on price hikes beyond inflation will be BOOTED out of the iTunes store. Go have fun at Rhapsody, the Zune Store (or whatever it’s called this week), Amazon (where the tune profits are even lower than at the iTunes Store) and various loser lounges.
3) The iTunes Store will continue onward with cooperating music companies with an accompanying higher profit than alternatives due to the volume of sales (as opposed to the P2P alternatives and the loser lounges).
4) There will be further adventures in failed music stores set up by the RIAA band of bozos and the world shall yawn.
5) Many of the booted music companies will begrudgingly beg to return to the iTunes Store.
Note: I am not saying the scenario above is necessarily good as it verges into a monopoly-like situation for Apple where the alternatives to the iTunes Store are so bad that Apple can hold sway on the market. Competition is of course required for an innovative business community to thrive.
Question: Will better alternatives to the Apple iTunes Store emerge? Will someone out-innovate Apple in music sales?
Judging by the efforts so far, I’d have to say: Nope, not if the music companies have anything to do with it. Their own incompetence and greed has painted them into a corner. They want hyper reward for minimal effort, and I don’t see that changing. Therefore, forget about them coming up with a successful scheme to compete with the Apple iTunes Store.
However, there could be other approaches to arise apart from the music companies. Imagine for example a simple way to get new and nifty music by simply clicking on a tune you just heard over at Pandora or whatever my replace it should the RIAA manage to kill them off. So simple, entirely focused on impulse buying, and with good pricing it could be a nice alternative to the efforts of conventional ‘shopping’. IOW: Nice alternatives to the Apple iTunes Store could and should happen, if the self-mutilating music companies stay out of it.
I didn’t buy music for many years.
Then the iTunes Music Store came along; reasonable price for exactly what I want.
I started buying music again, lots and lots of music.
If iTunes shuts down, and/or the only alternative to me is the cartels’ “bundled” music, (have to pay for an album to get a single), I will again stop buying music.
But, I will continue to acquire music.
I agree with @Wandering joe. Since I am the public and it is a Public Library why not copy what is rightfully mine for free!!
Still looking for Apple to become a music label.
With $20B in the coffers, they could easily buy one or more of these cretinous companies, then gut and restructure them to be SANE and profitable businesses in the 21st century.
* Warner Music Group (WMG) — Market cap $1.17B
* Universal Music Group (Parent VIVENDI) ~appx value of UMG unit = $5-6B
* Sony BMG Music — 9/16/2008: Sony agrees to purchase BMG from Bertelsmann for ~$900M
Maybe Apple simply closes the iTunes Store TO NON-APPLE (and non-indie) LABELS. Then they start signing acts like mad.
@MikeK
Apple and Apple Corp settled that dispute last year. For an undisclosed amount, Apple Inc. now owns ALL Apple trademarks and licenses them back to (the Beatles) Apple Corp.
The restrictions based on the old agreement are null and void. I have read (but can’t find supporting links) that Apple Inc. is free to do whatever it wants in the music industry.
http://en.wikipedia.org/wiki/Apple_Corps_v._Apple_Computer
MacDailyNews Take: 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%.
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& i would remind you to shut the fsck up w/ your sycophantic Apple ass-kissing BULLSHIT. the people that own the rights to the publishing DESERVE TO MAKE AS MUCH $ AS THEY CAN BECAUSE THEY CREATED THE FSCKING CONTENT WHICH YOU ARE ADVISING PEOPLE TO STEAL YOU FSCKING PRICKS!
@fred johnsen
The people who own the publishing rights are not necessarily the creators of the content.
For example: Northern Songs, the publishing company that administers the vast majority of the Beatles’ catalog, was purchased in 1985 for $47 million by none other than Michael Jackson.
In 1995, Jackson, in financial trouble, merged his catalog with Sony Music publishing. He retained half ownership but eventually refinanced and renegotiated in exchange for $300 million to reduce the interest rate on a payable loan he had.
http://en.wikipedia.org/wiki/Northern_Songs
The net result is that Sony Music owns a majority of, if not all of, the publishing rights to the entire Beatles catalog. Any time someone re-records a Beatles song, the royalty payment goes to Sony, NOT to the Beatles.
And sorry — Sony did NOT, as you postulate, create the content. Nor did Michael Jackson. At this point, it’s simply an “investment property,” much like a piece of real estate.
And regardless, MDN is NOT advising people to steal the music. They are simply stating a fact. Whether you like it or not, fred johnson, all music is EASILY obtainable at no cost. The music publishers won’t see a thin dime of the proceeds IF people choose to go that route.
MDN is simply underscoring that relationship. There’s a fine line being walked here. People are willing to do the right thing and pay for that which has value, UP TO A POINT. But when it becomes blatantly obvious that they are being ripped off, and the same identical product is obtainable “by other means” at no cost and little risk, then, watch out.
MikeK “They can’t. As part of their long drawn out settlement with the Beatles Apple Corps. Apple Inc, cannot act as a label in any way shape or form. They must remain a retailer distributor.
Unfortunately, there is no legal way around this. Apple Corps, has been a legitimate record label since the 60’s.”
Apple now owns the brand wordwide without restrictions, Apple Corps now licenses it from Apple Inc. This has already been settled.
@Oh no my shorts.
Yes, I have also read that they settled last year and Apple Inc are free to operate the iTunes store, but it was my understanding that the agreement was that Apple Inc, could NOT act as a label.
I would be interested to read the link that says otherwise if you happen to find it.
I agree with John…. let em close. The artist need to make more money therefor giving them the incentive to produce more than garbage.
Music stopped being good circa 1983.
All it would take is a single 24 hour period of shut down with a notification like:
“The iTunes Store is closed because the powers that be want more money from you than we think you should have to pay.
Don’t steal music.”
That should do the trick.
Apple has another alternative – publish music direct from the artist. Pay only the artist and not the worthless recording companies. Apple could even set up recording studios around the country to assist new artists.
I agree! The musicians should get more and the Music companies less.
I have many friends who eschew the music companies and are now making a fine living by selling directly to music enthusiast.
The end of “Big Music” is nigh!!