After we’ve all moved away from buying CDs and instead have converted to the more user-friendly method of purchasing music online, news has come out that this means of increasing your music collection is under threat. The Digital Media Association, which represents Apple, has put in a request to the American Copyright Royalty Board to decrease royalty rates to 4.8 cents for each song downloaded to keep iTunes profitable.
However the twist comes as the National Music Publishers’ Association has put in an opposite request to raise rates from nine cents to 15 cents a track; an increase of 66 per cent. The Copyright Royalty Board is due to pass a ruling today on the issue.
Apple have said that any increase could cause iTunes to be unprofitable and it has threatened to close the store if the ruling goes in favour of a royalty increase. Arguably, for the music artist to profit in the end, they need to get their songs out there through online mediums like the Apple store, so a closure of this outlet would simply put them in a worse-off position than a decrease in royalties.
Vice president of iTunes, Eddy Cue said, “If (iTunes) 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.”
Harsh words indeed. However, analysts think that it is unlikely that Apple would close the iTunes store as it is a vital component of its iPod business.
iTunes currently sells songs for 99 per track in the USA. However, an estimated 70 cents of every purchase is paid to record companies, who in turn pay 9 cents to the music publishers.
*UPDATE 03/10/08: The Copyright Royalty Board has turned down the request to increase royalties from 9 to 15 cents on songs bought online, keeping Apple happy and iTunes profitable.
Source: Sky News