As early as tomorrow, Apple may be expected to pay more in royalty fees for downloadable music. A ruling that, in the past, had the largest online music store threatening to shut down.
The Copyright Royalty Board in Washington, D.C. is expected to rule 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.
Last year, Apple informed its Board that it would have to shut down the iTunes store if the ruling passed. This week, Apple refuses to discuss the results of the outcome. Here is the statement made last year.
"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," Vice President Eddy 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."
Here is my take. It is a symbiotic relationship. The Music Publishers Association needs iTunes to continue to sell songs. Apple needs the store in order to be able to see iPods.
However, Apple is looking out for the consumer in one sense. They do not expect customers to want or be able to pay more than the 99-cent cost of downloading a song. If the rate is increased, the cost will raise. Right now, Apple pays an estimated 70 cents of every dollar it collects per song to the record companies responsible for each track. Record companies do not want to take their portion of the profit out to pay the extra royalty fees either. Because CD sells continue to fall at a whopping 20 percent just last year, they do not see it as their responsibility.
The Copyright Royalty Board is a three-judge panel that oversees statutory licenses granted under federal copyright law. Its ruling will be in effect for the next five years.
I understand that Apple wants to make money, but I am not sure closing the store is the answer. I personally could not live without iTunes. I am not sure how closing it would affect the new iPhone apps. Therefore, I don't believe that Apple would honestly ever close the store. That is the reason no statement has been made at this point.
I think they will wait until they hear the ruling and go from that point. Honestly, they could raise the price a little and I am sure the consumer would still pay for the product. In turn, the store will still make money off of their other non-music products. Not to mention, the endless amount of money they make off of the iPods too!
I personally would pay the extra six cents per song if it meant that the store stayed open. I predict the ruling will pass and the store will stay open at least for the next five years. Then Apple might come up with some new way of making music available.
