It will be interesting to see who blinks first today with a possible downloadable music track royalty rate increase. Apple has publicly stated it may close iTunes if the increase passes.
The rate increase being discussed, 66%, would amount to an additional 9 to 15 cents per track increase for Apple. Apple would have to absorb this increase or pass it on to its iTunes customers in the form of a track price increase. Absorbing this size of increase for Apple could mean iTunes would be losing money with each sale.
Apple currently pays 70% of it’s sales to the music industry in the form of royalties.
The music industry is pushing for this increase to make up for declining CD sales. I wonder if any of this increase would ever be seen by the artist…I doubt it! The music industry seems unable or unwilling to redefine it’s business model from the days of records and CDs and seems oblivious to the fact that the light they see ahead is in fact the digital train instead of an exit from their narrow visioned tunnel.
Apple has alway stated the goal of iTunes is to make money and they have demanded strict control of content and pricing. Apple also has a history of drawing a line in the sand and not backing down. In 2007, Apple and NBC reached a stalemate over pricing issues and NBC threatened to pull its media from iTunes. Apple said “see ya” and at the end of 2007 NBC pulled its media. NBC soon learned iTunes is a money maker for all concerned, returning to iTunes this year.
So while we can’t take Apples statement about closing iTunes simply as an empty threat, we also have to consider iTunes is more then just the selling of digital media. It’s a front end for iPod sales which generate billions of dollars for Apple.
If this increase passes I believe Apple will absorb part of the increase and pass part of it along to customers rather then closing iTunes. In either case the Music Industry will once again get a public PR black eye, which they deserve!
Update 2008/10/02: The Copyright Royalty Board has denied a request by music publishers association to increase royalties for songwriters and publisher and froze it at the current rate. Apple iTunes continues business as usual.
I think that someone besides the music industry is forcing the issue here. For example, millions of people have switched from windows media player to itunes, simply because they found out that itunes is superior in many ways and that no one as of yet can be as generous with it’s music software as Apple has been, in letting us even windows microsoft users, enjoy the easiness, readiness, virtuality and high quality of it’s product. I think that Apple it’s doing the right thing but the one’s that are going to suffer the most, are those involved directly with the music business. If I could give advise to the music business will be: develop a better program yourselves, better than itunes, and provide it for people all over the world; then start making threats.
@Edger: Good points. A late update, the royalty increase was disapproved so for now things will continue as they are.
Thanks for the comment.