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VP: Apple would rather close iTunes Store than pay additional royalties

Robert Palmer

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.]

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