Royalty Rate Unchanged, Apple's iTunes Safe For Now

[MacRumors]

Apple generated some headlines on Tuesday when statements by iTunes vice president Eddie Cue suggested that Apple might shut down iTunes rather than pay increased royalty rates to music publishers.

Few took the threat seriously, but CNet reports that the Copyright Royalty Board decided to keep royalty rates at 9.1 cents. Music publishers had been pushing for an increase to 15 cents per track, while Apple was insisting that the price increase would not be tolerated by the market.

The 9.1 cents/track rate is now set for the next five years. An Apple spokesperson stated they were very pleased with the decision.


Article Link

[Fast Shadow]

There is big news in that article - the rates for downloadable songs and CDs may have remained unchanged, but a rate of _24 cents_ has been established for ringtones.

The three-member board that sets statutory copyright licenses e-mailed the Digital Media Association (DiMA), the National Music Publishers' Association, Apple, and other download stores with its decision to keep the royalty rate at 9.1 cents a song. The board also set the same rate for CDs and established a 24-cent rate for ringtones.

[edesignuk]

Originally Posted by MacRumors

An Apple spokesperson said stated they were very pleased with the decision.

heh, I bet they were.

[DARKJ3DI]

yay the music store stays.

[sammich]

Originally Posted by Fast Shadow

There is big news in that article - the rates for downloadable songs and CDs may have remained unchanged, but a rate of _24 cents_ has been established for ringtones.

I don't get it? What is so special about a ringtone? 'Hey, let's buy a 20 second snippet of a song for about 5x the price of the whole song itself'.

[cal6n]

Originally Posted by sammich

I don't get it? What is so special about a ringtone? 'Hey, let's buy a 20 second snippet of a song for about 5x the price of the whole song itself'.

That's what's so special. The fact that it's just a snippet. There's very little additional work for the middlemen, so they're entitled to a smaller cut (even though it's still too big), leaving more for the composer.

Remarkably sensible decision.

*edit* Oh, and the Music Store was never in threat. That statement was Apple's way of saying that they would ensure that any royalty increases would be paid out of the record companies' profits, rather than the music-buying public's pocket.

Seen in that light, leaving the download-able rate untouched seems like rather a poor decision.

[Matek]

Wait, so if a song is $0.99, 90 cents goes to Apple? If not - what exactly is this royalty about?

[moopf]

Originally Posted by Matek

Wait, so if a song is $0.99, 90 cents goes to Apple? If not - what exactly is this royalty about?

No, I think apple keeps around 30%. The rest, of which this royalty is a part, goes to the record labels. They then pay this royalty. The problem Apple saw (as I understand it) was that they would be expected to up that 70% to cover the extra royalty but what they really wanted was for the record label to pay the extra out of the 70% they already get.

So, actually, it's the record labels being greedy.

[Plas00]

No surprises there,

When you ask for a salary increase and your boss tells you is either u keep working for the same money or the street it is for you, and basically there's not many options that offer what u already have u will definitely just shut up and keep working.

In a way good that iTunes have the power to make things stay the way they are I really can't care less how they divide the money people pay por the tracks.

[229dan229]

the 30% royalty to Apple is only for the App Store. For music they get a lot
less than that, iTunes is there to persuade people to buy iPods not so much fill their pockets.

[Loge]

Originally Posted by sammich

I don't get it? What is so special about a ringtone? 'Hey, let's buy a 20 second snippet of a song for about 5x the price of the whole song itself'.

Clearly writing a snippet of a song is much harder than writing a complete song.

Seriously, who is still paying high prices for ringtones, when most phones will just let you use files that you already have?

Sensible decision though, perhaps if they'd asked for a bit less than a 66% hike, they might have got an increase.

[motulist]

Ya know what? The prices SHOULD have gone up. This royalty fee was money that was gonna go to the artists (afaik).

[Matek]

the 30% royalty to Apple is only for the App Store. For music they get a lot
less than that, iTunes is there to persuade people to buy iPods not so much fill their pockets.

Not exactly true. I did some googling now and Apple pays about 65 cents for a single, which means they get about 35 cents.

Ya know what? The prices SHOULD have gone up. This royalty fee was money that was gonna go to the artists (afaik).

I agree, artists should get a bigger share of money, but not at the price of music simply being more expensive! Record labels, retailers and everyone else who makes money by just being the middle man and not participating in the creative process should get less.

[Courtaj]

Originally Posted by Loge

Seriously, who is still paying high prices for ringtones, when most phones will just let you use files that you already have?

Those who either (a) don't like using the start of the song, or (b) can't be ars*d / don't know how to edit the track to make their own ringtones.

I say, charge 'em!

Anyway, as a "public performance," surely ringtones are a breach of copyright. Perhaps that explains the higher charge. Technically it's copyright infringement, but we (the record labels) will let you do it if you pay us up front.

[booksacool1]

Originally Posted by Matek

I agree, artists should get a bigger share of money, but not at the price of music simply being more expensive! Record labels, retailers and everyone else who makes money by just being the middle man and not participating in the creative process should get less.

Agreed. Having said that though, apple is already getting a reasonably generous cut. 30-35c markup on an item that originally cost 65-70c is a 50% margin. Artists getting too little, recording labels, retailers (apple) etc getting too much. That's the problem.

[Marky_Mark]

Try as I might, I can't feel too sorry for the artists, they still drive round in big cars, live in bigger houses, and get to swan around the Cote d'Azur and the Caribbean all summer. When they sign up with a record label, it's hardly the world's best kept secret that the label gets a big slice of the pie. However, for many artists, the marketing clout the labels can bring to bear is the reason the artists make any money at all. Apple is just another distribution channel/reseller, and is increasingly becoming the modern standard for such. Each has their part to play; the proportions of the revenue might be unfairly weighted, but many artists are still exceedingly well-off.

[matticus008]

Originally Posted by moopf

No, I think apple keeps around 30%. The rest, of which this royalty is a part, goes to the record labels.

More or less. Apple doesn't really keep the 29 cents, though. More than half of it goes to others (via processing fees, bandwidth providers, and taxes), and much of what's left goes to the cost of maintaining the Store, which is not a trivial expense. I asked a client what their datacenter air conditioning bill was, and the bill at the thoroughly mid-sized facility was pushing $2 million/year. Apple's bill is much higher, and that's just a minor operating expense for something like the iTunes Store.

Originally Posted by Matek

Wait, so if a song is $0.99, 90 cents goes to Apple? If not - what exactly is this royalty about?

No. This royalty is for the songwriters. Basically, once a song has been published or recorded with permission, anyone else can re-record or redistribute the song for 9.1 cents per copy (as long as the recording and distribution are themselves lawful). No express permission from the songwriter is required; no objection of the songwriter carries any weight. In the case of studio recordings, however, the sound recording must also be licensed, and this is where the performers, the studio, and the record label get involved.

In the end, the total royalties on a single song are about 70 cents. This royalty is somewhat unique because it is set by law, for historical reasons, whereas the other royalties are negotiated and are not compulsory.

Originally Posted by 229dan229

the 30% royalty to Apple is only for the App Store. For music they get a lot less than that

Apple gets about the same gross intake for both. Their expenses are higher for music, though, so the net profit is somewhat less than the App Store.

Originally Posted by Courtaj

Anyway, as a "public performance," surely ringtones are a breach of copyright. Perhaps that explains the higher charge.

That's part of it. A duly licensed ringtone includes a right of public performance. They're more expensive, though, because they can be. They are utterly frivolous purchases, and they're priced accordingly.

Where you get into trouble is with making your own ringtones. That public performance is not licensed. It is not fair use. It is copyright infringement. There's some unconvincing argument that the copying is de minimis. At the end of the day, though, it's not worth enforcing, and it's certainly not worth litigating.

Originally Posted by booksacool1

Agreed. Having said that though, apple is already getting a reasonably generous cut. 30-35c markup on an item that originally cost 65-70c is a 50% margin.

It's a 41% margin (29 cents on 70), and a gross margin, at that. Depending on which analyst you believe, the net profit is somewhere between 5 and 12 cents. Apple, furthermore, is really doing most of the work: recommendations, reviews, previews, sales, distribution, customer support. In other words, just about everything the record label would otherwise be doing. The record company probably paid for the studio time, some marketing of its own, and an advance to the artists, so they certainly deserve a cut. But they're getting 50 cents or more of the 70 cents for royalties. The performers get whatever they've negotiated with their labels. The songwriters get 9 cents. Various other entities get a few pennies.

Artists getting too little, recording labels, retailers (apple) etc getting too much. That's the problem.

Retailers getting too much has never been, and likely never will be, the problem. Just ask Tower Records.

[kornyboy]

Wirelessly posted (iPhone: Mozilla/5.0 (iPhone; U; CPU iPhone OS 2_1 like Mac OS X; en-us) AppleWebKit/525.18.1 (KHTML, like Gecko) Version/3.1.1 Mobile/5F136 Safari/525.20)

I'm glad to hear this. It was a bit of a shock to hear that Apple threatened to close the store. Though I don't think that was likely to happen, I do think that the extra cost would have been passed on to people buying the music.

[ATimson]

Originally Posted by matticus008

Where you get into trouble is with making your own ringtones. That public performance is not licensed. It is not fair use. It is copyright infringement.

Has a court yet determined that it actually is public performance? Because if a ringtone is, they're essentially saying that listening to music with your car windows down, or watching a movie without the curtains closed, is also a public performance.

[johnmcboston]

Originally Posted by Marky_Mark

Try as I might, I can't feel too sorry for the artists, they still drive round in big cars, live in bigger houses...

There are a few big artists that are lucky enough to be this successful, but most of the artists out there just get by with a career in music.

To be honest, I've gotten so disgusted with this whole music mess, I now get most of my music form people you've never heard of, and shop at places like AMIE street and CD Baby, where artists get a lions share of the proceeds. And I get great music!!

[adderz]

Originally Posted by Marky_Mark

Try as I might, I can't feel too sorry for the artists, they still drive round in big cars, live in bigger houses, and get to swan around the Cote d'Azur and the Caribbean all summer.

Thats a bit of a misconception. Not every artist is Britney Spears or Fall Out boy. For every one that lives the high life their are 20 bands trying to make it big. They all have to start somewhere and ALOT dont make it at all. You cant start out at the top.

I would thinking becoming an artist would be a HUGE risk to take. If it doesnt pay off your stuck with nothing.

[Kilamite]

Good news that nothing is going up in price.

Originally Posted by matticus008

Where you get into trouble is with making your own ringtones. That public performance is not licensed. It is not fair use. It is copyright infringement. There's some unconvincing argument that the copying is de minimis. At the end of the day, though, it's not worth enforcing, and it's certainly not worth litigating.

You should check out the wee neds and lassies we have at the back of buses in Scotland that blare out their chip munk music to the rest of the bus.

[QuarterSwede]

Personally, I think they should have raised the rate as it's been 9c/track for years. Good thing most great artists aren't on major labels anymore and a good many of them have their own label or use grassroots ones that pay far more.

Originally Posted by ATimson

Has a court yet determined that it actually is public performance? Because if a ringtone is, they're essentially saying that listening to music with your car windows down, or watching a movie without the curtains closed, is also a public performance.

Ringtones have never been seen as a public performance because 1) they're far too short at about ~24 sec max (you can sample music under 8 seconds for free anyway) and 2) it isn't advertised and 3) your playing to a very limited audience (not very loud). If you were playing it at the Karaoke bar then yeah, they would consider that a public performance.

Originally Posted by adderz

Thats a bit of a misconception. Not every artist is Britney Spears or Fall Out boy. For every one that lives the high life their are 20 bands trying to make it big. They all have to start somewhere and ALOT dont make it at all. You cant start out at the top.

I would thinking becoming an artist would be a HUGE risk to take. If it doesnt pay off your stuck with nothing.

Too true. MOST artists/songwriters make a pittance compared to them. By the way, a superstar makes on average 12-15c a song but they make far more on tour because the labels have nothing or very little to do with it (for most artists if they have a good manager).

[Loge]

Originally Posted by QuarterSwede

Personally, I think they should have raised the rate as it's been 9c/track for years. Good thing most great artists aren't on major labels anymore and a good many of them have their own label or use grassroots ones that pay far more.

How long has it been 9c? How much is it for a CD? Isn't this just going to mean the songs will get shorter?

Originally Posted by QuarterSwede

3) your playing to a very limited audience (not very loud).

If only.

[QuarterSwede]

Originally Posted by Loge

How long has it been 9c? How much is it for a CD? Isn't this just going to mean the songs will get shorter?

mp3, CD, whatever, the artists gets 9c/per track. It's been that rate since at least 2004. Songs shouldn't get any shorter (can't see the logic in that reasoning).