Huh? What gives?
Seems that the Copyright Royalty Board, a three-judge panel that oversees statutory licenses granted under federal copyright law, is expected to rule Thursday on a request by the National Publishers’ Association to increase royalty rates paid to its members on songs purchased from online stores like iTunes.
The publishers’ association wants rates increased from 9 cents to 15 cents a track. At the same time, the Digital Media Association, which represents digital music stores, wants rates lowered to 4.8 cents per track.
Apple, the No. 1 music seller in the world, accounts for 85 percent of digital songs sold. It pays an estimated 70 percent of digital music revenue to record companies, who pass on a percentage to artists.
Eddy Cue, an Apple vice president, filed a statement with the board around April 2007 — why it’s coming to light now is anybody’s guess — said, “If the [iTunes 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.
“Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the store] if it were no longer possible to do so profitably,” Cue said. [via Fortune]
It’s highly unlikely that Apple will shut down iTunes. The store has been the centerpiece of Apple’s iPod ecology since the beginning. Apple just didn’t manufacture a digital audio device, it created hardware, software (iTunes), commerce (iTunes Store) and a complete, enjoyable consumer experience. Nobody has come close to duplicating it.
But this situation does highlight how utterly screwed up and out of control the music industry is — that in the face of slowing music sales of physical product it would want or allow Apple to shut down the No. 1 digital music store. iTunes is responsible for 5 billion digital songs bought to date, with another 2.4 billion songs expected to be sold this year.
Unfortunately, if the rates increase, somebody will have to cough up the dough: either Apple, the record companies, or the consumer. All of these (with maybe the exception of Apple) have financial woes of their own, especially with the current U.S. financial crisis.
Apple, to its credit, has stood steadfast with its pricing scheme of 99 cents per track, or $9.99 for most albums, even in the face of stiff criticism from the music industry and labels and solid competition from the likes of Amazon and its DRM-free MP3 store and now, maybe, MySpace Music.
Expect some deal to be made to avoid yet another meltdown. After all, U.S. political officials and governing bodies saw this week just how pissed off consumers and the markets can be if deals fail.