Apple Threatens to Close iTunes Store Over Possible Royalty Hikes

[MacRumors]

According to Fortune, the Copyright Royalty Board in Washington D.C. is expected to rule on Thursday about a request by the National Music Publishers' Association to increase royalty rates for downloads from online music stores such as iTunes. The request asks for an increase in rates from 9 cents to 15 cents a track. It should be noted that this group represents the copyright holders of songs and is distinct from the record companies themselves.

Understandably, Apple is opposed to the rate increase and, in a statement submitted to the board, even suggested that Apple might close iTunes altogether:

"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."

Apple claims that the market would not accept an increase in the per-track price and that overall sales would decrease. The Fortune article writer doubts that Apple would take such drastic measures as closing the iTunes Store as Apple has used it to leverage hardware sales of iPods and now iPhones.

Article Link

[NewMacbookPlz]

One side of me would be quite saddened by this, as the iTMS is a great way to get music legally.

On the other hand though, this would give the RIAA/NMPA a massive kick in the coinpouch and they would be forced to reform their ways.

[eidrunner247]

That would be terrible if the store closed...

[Trajectory]

I highly doubt Apple will close the iTunes store, as it would directly affect sales of their most popular consumer product: the iPod.

Apple will just do what every other business does: raise the prices and get customers to pay the cost increases.

[MIDI_EVIL]

I've never used it and I never will.

[notjustjay]

I would gladly pay more than $0.99 per song if I knew that the artists were getting more. But I don't particularly care to pad the pockets of record companies and other music industry execs any further.

[Planner Dude]

Dang...errrr...oh, well

[Klaxons2012]

This band of thugs needs to look at NBC, the last company that took their toys and left the iTMS.

*looks at Season Pass of The Office*

I rest my case.

[Mackilroy]

If Apple closed iTunes I'd like to see how many users would switch to Amazon for their music. And this wouldn't just impact Apple, but the other stores… curious to see how much it would affect their profits.

[Greydog]

I look forward to the return of LPs and 8-tracks so the greedy record companies can stuff their pockets again. That's progress.

But don't worry, Napster will embrace it, raise rates top $3/track all so they can reclaim their bragging rights.

And just how will this curb piracy??

[k2spitfire88]

Originally Posted by notjustjay

I would gladly pay more than $0.99 per song if I knew that the artists were getting more. But I don't particularly care to pad the pockets of record companies and other music industry execs any further.

i agree with that!
But I would be really sad if they closed the store. I love using it!

[cloudnine]

Originally Posted by MIDI_EVIL

I've never used it and I never will.

wow... You're, like, so cool.

[brn2ski00]

Good for Apple standing up for themselves.... My gut instinct is that the Store will not close, but you never know

[nos]

… and Apple would take al 160 million iPods back and replace them with Zunes.

That would be scary!

[Peace]

Songs from iTunes have been $.99 a long time. It isn't unreasonable to see Apple increase the cost for a song to offset the increase in royalties.

[swarmster]

Originally Posted by notjustjay

I would gladly pay more than $0.99 per song if I knew that the artists were getting more. But I don't particularly care to pad the pockets of record companies and other music industry execs any further.

Reading between the lines of the Apple quote, I think they're looking for the artist association to first tell the record labels they're going to be getting less per song before they ask Apple to absorb the full hike.

[motulist]

Sounds like a bluff to me.

1) The iTunes store is way too integral to Apple's future plans. Even if the iTunes store did run at a minor loss, Apple would still think it's really important to their business plan to keep the store opened.

2) An extra 6 cents is the difference here? Apple could just pass that along to their song prices and retain the whole business they've created with the iTunes store.

[coolfactor]

Originally Posted by MIDI_EVIL

I've never used it and I never will.

Care to elaborate? You make it sounds like iTunes store is a bad thing.

[busterbluth]

Originally Posted by notjustjay

I would gladly pay more than $0.99 per song if I knew that the artists were getting more. But I don't particularly care to pad the pockets of record companies and other music industry execs any further.

who cares about artists?

[Unspeaked]

I knew it was only a matter of time before Apple started making their own Microsoft-like empty threats...

[4JNA]

note to self; sell aapl and dust off dual cassette deck....

[kobefan234]

the stock would go way down if this happened

[229dan229]

remember this is not just targeting itunes, it will be to everyone else too. So they would all have to put prices up, surely?

[Tilpots]

If anybody now doubts the iTunes store's purpose is to sell hardware, they're crazy.

[IJ Reilly]

Originally Posted by swarmster

Reading between the lines of the Apple quote, I think they're looking for the artist association to first tell the record labels they're going to be getting less per song before they ask Apple to absorb the full hike.

Something like that, I suspect. They're saying it won't (or can't) come out of the retailer's margins, which we would not expect anyway.