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Royalty rate stays the same, iTunes Store still open
The U.S. Copyright Royalty Board decided today to keep rates the same for digital music stores, kneecapping Apple's threat to shut down the iTunes Store rather than operate at a loss. The three-member board kept the royalty rate at 9.1 cents, and mandated a 24-cent rate for ringtones. The board has never before established mechanical rates for digital files. "We're pleased with the CRB's decision to keep royalty rates stable," said an unnamed Apple spokesman. The popularity of Eddy Cue's statement that Apple would shutter the iTunes Store apparently had an effect on the board. "Sure it was posturing," said a music industry source, according to CNET. "I don't think Apple would have gone out of business but a statement like that from the biggest music retailer is going to carry some weight." [Via CNET.]
VP: Apple would rather close iTunes Store than pay additional royalties
If a ruling expected tomorrow by the Copyright Royalty Board raises royalties for online music sales from 9 to 15 cents per track, Apple would rather shut the iTunes store down than operate it at a loss. Them's fightin' words. Eddy Cue, Apple's iTunes VP, wrote in a statement to the Times of London, "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. Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [iTunes] if it were no longer possible to do so profitably." Of course, this is the "nuclear" option. Apple is most likely trying to gain aggressive leverage before the CRB decision is made. Apple is essentially asking music publishers, "do you want all the revenue you've earned through iTunes, or another measly 6 cents per track?" Shrewd, but is it shrewd enough? Some analysts speculate that Apple is more likely to pass the additional cost on to the consumer, rather than demolish a key slice of their business. What that will do to sales in the U.S. is hard to say. If the CRB raises royalties, what do you think will happen? Will you continue to buy music online? Sound off in comments. [Via IGM.]
