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.
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.
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.
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.
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.
