Apple To Close iTunes?

Rumours that Apple will close iTunes if it’s forced to pay more royalties to artists are highly unlikely to come true – but are they more than misinformed gossip?

For the last five years iTunes has been the biggest and most successful online music store – so it’s quite hard to believe it will simply close its doors for good.

But the crunch will come later today as the Copyright Royalty Board is expected to rule on the request made by the National Music Publishers' Association to hoist the royalty rates from 9 cents to 15 cents a track – that’s an increase of 66 percent.

Apple has stated that 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," although this was more likely an attempt to stop the legal action before it started.

An Apple exec continued to say that, "I have no doubt that an increase in the per track price would lower total music purchases at the store.”

At present Apple pays around 70 cents of every dollar it gathers to the record companies. They then turn over just nine cents to the music publishers and artists which control the copyrights.

The Digital Media Association is seeking an even lower rate of 4.8 cents a track, it says that, "No one disputes the impact of rampant Internet-based piracy in the marketplace…The result is drastic reduction in the sales of recorded music in all formats and intense downward pressure on retail prices - along with a brutally difficult competitive environment."

However the music publishers are unyielding as they say that the market is growing and so the higher rates are justified in terms of future prosperity.

The Copyright Royalty Board's forthcoming decision is its first affecting digital sales and will set royalty rates for the next five years.

Story source: theinquirer.net