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. These dolts will shoot themselves in the feet if they want to go toe-to-toe with Apple and Steve Jobs. What are the viable online music selling alternatives to iTunes are there at this point? maybe Amazon, but that’s it.

    NBC thought they could pressure Apple, by leaving…
    Look who came crawling back?

    +++++++++++++++++++++++++++++

    I’ve never bought anything from the iTS.

    Paying 99¢ for a low bit-rate track is a rip-off.
    If they were lossless…. maybe.

    For a few bucks more than what they charge for an album, I can buy the CD, rip it at any bit rate I want as many times as I want. Plus I get a disk (to add to my music library), album art and liner notes. NONE of those things do I get for the price of a download.

  2. “there are ways for their former paying customers to obtain their product for free. The royalty rates from P2P are 0%.”

    —————————

    There is always a way for people to obtain a product for free, It’s called stealing.

    Very irresponsible for MDN to even suggest that it’s the only alternative.

  3. iTunes was the only reason I stopped downloading free songs from P2P sources.

    National Music Publishers’ Association should rethink what they are about to decide on… As Gogol Says:

    “Oh yeah, oh no, it doesn’t have to be so. Forces of the creative mind are unstoppable!”

  4. Oh, “John,” externalizing one’s inner self is so immature and banal. Frankly, your opinion means less here than Jack Valenti’s when he pronounced to one and all that video tape would initiate the demise of the movie business. You’re just another of the great unwashed who want everything to be free, with rose petals bestrewn beneath your feet, no evil corporate giants to shinny down your beanstalk, and magic beans for one and all.

    You, sir, are a puerile ass . . . so begone. You are banished. Banished, do you understand? Back to your bridge, you troll.

  5. I still prefer importing music @ lossless quality from CDs. That said, the recording industry needs to tred very carefully here. The recording industry is not very popular with the general public. But the general public considers Apple to be extremely chic, and the iTunes Store recently surpassed Wal-Mart to become the #1 distributor of music in the USA in terms of sales volume. In other words, who do you think the John Doe and his wife Jane are going to blame if the iTunes Store goes away? With a minimum of marketing on Apple’s part, John & Jane will think that it’s the recording industry’s fault.

    If Apple shows its ping-pongs by closing the iTunes Store, the recording industry could find itself in some serious trouble. Amazon is really the only company at the moment which is in any sort of position to fill the void that would exist if the iTunes Store were to turn itself off.

  6. @Shame on you MDN

    MDN is not saying that people should steal, and is certainly not saying that stealing is “the only alternative.” It is simply stating the obvious fact that if iTunes closed, rates of stealing would go up, so the record companies would lose money. Therefore, to help the record companies themselves, in addition to of course the consumers and Apple, iTunes should remain open.

  7. 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!

  8. 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¢.

  9. ” 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

  10. 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.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.