Andre Yoskowitz
1 Oct 2008 13:47
Apple has threatened to close down its iTunes store if proposed royalty rate increases for digital music sales pass tomorrow.
The Copyright Royalty Board is set to meet tomorrow to vote on whether to increase royalties 66 percent, to 15 cents a track from the current 9. The rise would either have to paid by Apple, the record labels or the consumer.
Apple is completely against the rate hike and has said it will close down the store rather than absorb the hike or raise the price of a track to over 99 cents.
Eddy Cue, the vice president for iTunes, said this to the Board at the Library of Congress.
"If iTS (iTunes Store) were forced to absorb any increase in the mechanical royalty rates, the result would be to significantly increase the likelihood of the store operating at a financial loss - which is no alternative at all.
"Apple has repeatedly made clear that it is in this business to make money, and would most likely not continue to operate iTS if it were no longer possible to do so profitably," said Mr Cue.
The NMPA (National Music Publishers' Association) has repeatedly asked for the royalty rate hike ans believes the move will benefit everyone as the market for digital downloads continues to grow.
"I think we established a case for an increase in the royalties," added David Israelite, president of the NMPA.
"Apple may want to sell songs cheaply to sell iPods. We don't make a penny on the sale of an iPod."
Apple says they currently pay 70 percent of total revenue from digital music sales to the record labels which then passes a percentage on to the artists.
It is clear that the royalty rate hike will not benefit anyone, and the record labels are as unwilling as Apple to absorb the hike. Tomorrow should be interesting.