iTunes to close?

**ninja|oaklandr** · 10-02-08, 08:20 AM

For those that don't want to read, if royalty rates go up 6 cents iTunes will not be a money maker and will close (so they say).

If you have iTunes, how many songs have you bought? What other places do you buy from?

Apple Threatens iTunes Shutdown over Royalty Dispute

By Eliot Van Buskirk EmailOctober 01, 2008 | 9:50:11 AMCategories: Digital Music News

JudgesApple has threatened to shut down the iTunes music store if an obscure three-person board appointed by the Librarian of Congress increase the royalties paid to publishers and songwriters by six cents per song.

The Copyright Royalty Board is scheduled to hand down its decision on these rates by Thursday. As part of their general muscle-flexing of late, music publishers asked the board to increase the royalties paid to publishers and songwriters for the sale of digital downloads from 9 cents to 15 cents per song.

Apple -- which has mightily resisted tampering in any way with its 99 cent price point for tracks -- said that if the rate hike goes through and the labels refuse to absorb the entire resulting increase, the iTunes music store will become unprofitable.

And, Apple says, it likes making money.

"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," wrote Apple iTunes vice president Eddy Cue in a statement filed with the board last year, according to Fortune. "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."

Out of each 99 cent song, Apple currently pays artists and labels an estimated 65 to 70 cents per song, 9 cents of which they currently pass on to publishers. According to Apple, the 66 percent increase in publishing royalties to 15 cents per song requested by the National Association of Music Publishers (NMPA) is too much for the company to bear.

Of course, Apple could simply tack the extra six cents onto the price of each song in its store and make up the difference that way. But part of iTunes' longstanding allure is that every track costs 99 cents (with the exception of DRM-free tracks in the iTunes Plus previous to October '07).

Steve Jobs is unlikely to raise the standard track price on iTunes to $1.05, although that would probably be just fine with the labels, which have been pressuring Apple to budge on its 99 cents per track policy for years by allowing Amazon to sell DRM-free albums that they insist be wrapped in DRM when iTunes sells them, among other things. Despite this pressure, Jobs has refused to relent, continuing to insist on the 99 cent flat pricing structure. It's hard to believe that Apple would close iTunes rather than raise prices, but that's exactly what iTunes vice president Cue threatened to do.

Prospects for the record labels absorbing the entire increase are dim. They're not trying to do Apple any favors when it comes to keeping the price of songs at 99 cents, and a 15 cents per song publishing royalty would gobble over 20 percent of their per-song revenue. Apple will almost certainly have to pony up some of any additional fees, meaning that it'll either have to raise prices, run the store at a loss or stop selling music altogether. According to Cue's statement to the board, Apple prefers the third option.

Apple and the NMPA had no comment.

The Copyright Royalty Board, pictured above, is set to announce its ruling on digital publishing royalties for the first time ever by Thursday. Previously, digital downloads had operated under the same rate that governed the sale of physical albums. In addition, the board will set new publishing royalty rates for physical albums and ringtones. The new rates will be in effect for the next five years. The previous rate of nine cents per track has been in effect since '96 (updated) -- one reason publishers say it's high time for an increase.

http://blog.wired.com/music/2008/08/...s-rumored.html

**Tamato24** · 10-02-08, 01:33 PM

I've bought 67 of my 3500+ songs from iTunes. The other 3433 I've DL'ed from isohunt or albumhunt. Buying music is so pointless. I only do it if I absolutely cannot find the entire album elsewhere

**DJ Ms. White** · 10-02-08, 01:39 PM

I've about half of my purchased music from there. (Maybe 30 albums?) This saddens me.

**Tractorpull** · 10-02-08, 01:46 PM

That reminds me, I have to put songbird back on this comp

**draco7891** · 10-02-08, 02:37 PM

They're trying to say that people wouldn't buy music from them at $1.05?

$0.99 + $0.06 = zomg same profit as before!

:P

Draco

**TehSpaz** · 10-02-08, 04:10 PM

Originally Posted by draco7891

They're trying to say that people wouldn't buy music from them at $1.05?

$0.99 + $0.06 = zomg same profit as before!

:P

Draco

MOST of that .99 goes to royalties and such....

**Kelderos** · 10-02-08, 04:41 PM

I disliked the fact Itunes was turned into basically another device were it could only be played on Apple Products without third party software. This IMO is a retarded strategy to begin with, and I hate it when a Company says My way or the highway. If I buy an Album I'll buy from someone who sells it in a format I can Convert and make compatible with every product I buy.

Anyways Itunes seems low on their agenda, I doubt they care to much if they drop it off since they only had it a year before trying to sell it off.

**...bigdog...** · 10-02-08, 05:22 PM

Originally Posted by Tamato24

I've bought 67 of my 3500+ songs from iTunes. The other 3433 I've DL'ed from isohunt or albumhunt. Buying music is so pointless. I only do it if I absolutely cannot find the entire album elsewhere

thief.

**Arreo** · 10-02-08, 05:25 PM

Not happening anymore. News was premature:

http://www.pcmag.com/article2/0,2817,2331598,00.asp

Fear not, iTunes fans. Rumors about the death of iTunes were a tad premature.

The Copyright Royalty Board (CRB) ruled Thursday that the royalty rate for permanent downloads, like those found via Apple's iTunes, will remain at 9.1 cents per download, according to an organization of music publishers.

The CRB also ruled that rates for physical CDs will be 9.1 cents while sellers of ringtones will be charged 24 cents per selection.

For each 99-cent song sold on iTunes, Apple hands over about 70 cents to the record companies. Those companies must give 9.1 cents, or a mechanical royalty rate, to songwriters, composers, and publishers.

"We're pleased with the CRB's decision to keep royalty rates stable," Apple said in a Thursday statement.

The National Music Publishers' Association (NMPA) was pushing for a rate closer to 15 cents per song "because the costs involved [with digital downloads] are much less than for physical products," NMPA president and CEO David Israelite wrote on the group's Web site.

Apple was fiercely opposed to this proposal, and threatened to shut down its iTunes store if the CRB approved a royalty rate the company deemed financially ruinous.

"An excessive royalty rate would stifle any effective competition with piracy or the physical retailers, as we would either be forced to raise prices, limit further investment in present and future services or even simply drop out of the market," Eddy Cue, vice president of iTunes, said in written testimony submitted last year to the CRB. "Any increase in the royalty rates we pay for musical works would have a significant adverse impact on the commercial viability of iTunes."

If anything, the CRB should lower the rates, Cue said. "To the contrary, to make the tremendous investments necessary to create and grow this market more reasonable, the costs associated with our business need to be reduced," he said.

Despite pushing for an increased rate, the NMPA said it was pleased by the decision.

"These events will bring clarity and order to an environment that for the past decade has been hampered by litigation and uncertainty on all sides," Israelite said in a statement.

The Nashville Songwriters Association International and Songwriters Guild of America also issued their support for the ruling.

The CRB opened a formal inquiry into the matter in January.

Also on Thursday, the CRB approved a deal between songwriters, the recording industry, and the digital media industry that sets the mechanical royalty rate for interactive streaming and limited downloads at 10.5 percent of annual revenue.

That deal was announced last week and submitted to the CRB for its consideration.

Interactive streaming Web sites are music sites that let users select the songs to which they want to listen, like imeem.com. Limited download sites let users download a song and listen to it for a set amount of time, or as long as they continue to pay a monthly fee, like Rhapsody or Napster's subscription services.

Still up in the air is the royalty rate for Internet radio stations like Pandora. In March 2007, the CRB announced a rate that Web stations said would make it impossible for them to stay in business.

Under a bill approved by Congress this week and now en route to the White House, Internet radio stations and copyright holders have until February 15 to come up with an agreement over rates. Normally, the two sides would be subject to government oversight care of the CRB, but this bill guarantees that the government will not intervene if the opposing parties can agree on a settlement.

**Gonzo0100** · 10-02-08, 05:27 PM

Originally Posted by Kelderos

I disliked the fact Itunes was turned into basically another device were it could only be played on Apple Products without third party software. This IMO is a retarded strategy to begin with, and I hate it when a Company says My way or the highway. If I buy an Album I'll buy from someone who sells it in a format I can Convert and make compatible with every product I buy.

Anyways Itunes seems low on their agenda, I doubt they care to much if they drop it off since they only had it a year before trying to sell it off.

iTunes doesn't work directly with other manu. products. It does convert to MP3 and organize your music folder so you can either add the music to another program (zune software or whatever) or drag manually. They may make it a little tuffer than necessary but stil do-able.