Itunes May Be Forced to Shut Down-The Greed Doesn't Stop
The greed simply does not stop when it comes to these major label guys.. here's the
latest drama...
A ruling TOMORROW by THE COPYRIGHT ROYALTY BOARD on THE NATIONAL MUSIC PUBLISHERS' ASSOCIATION
request to increase royalty rates on songs purchased from online music stores could dramatically
disrupt online music retail, FORTUNE reports.
If the publishers group gets what it wants -- a 66% increase, from 9 cents to 15 cents a track -- iTUNES VP EDDY
CUE warned that APPLE would consider shuttering its iTUNES store instead of absorbing higher
royalty costs, or raising its current 99 cents-a-song price.
"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.
"
The reason APPLE is so resistant to the publishing rate hike is that since iTUNES profitability already
thin, it would have to raise the price of the music or lose money. End result: "I have no doubt that an
increase in the per track price would lower total music purchases at the store," CUE said. THE
DIGITAL MEDIA ASSOCIATION went further, predicting that any rise in online music pricing would send
consumers back to illegal P2P avenues.
For each track sold, APPLE pays an about 70 cents of every dollar it collects to the appropriate label.
The label then pays music publishers nine cents and a certain percentage to the artists. While some
observers scoff at the threat, citing iTUNES' impact on fueling iPOD sales, the labels have mixed
emotions on the situation. While it's no secret that some on the label side want to break the iTUNES monopoly
(PIPER JAFFRAY estimates that APPLE will sell 2.4 billion songs in 2008, about 85% of the digital music
market), they don't want to give the publishers any more money, either.
In fact, they asked the COPYRIGHT ROYALTY BOARD to abandon the fixed per-song payment in favor of
assessing a piece (8%) of wholesales revenues
THE NATIONAL MUSIC PUBLISHERS ASSOCIATION, not surprisingly, isn't impressed with APPLE's
threat or the labels' counter-offer. "I think we established a case for an increase in the
royalties," Pres. DAVID ISRAELITE said. "APPLE may want to sell songs cheap
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