Increased Royalty Rate Could Kill Apple iTunes on Blog24

Increased Royalty Rate Could Kill Apple iTunes

Posted by Chris
On October 02, 2008
Categories: Apple, Featured, Opinion

iTunes Vice President Eddy Cue Later today the Copyright Royalty Board (CRB) meet to discuss and decide whether royalty rates for digital downloads should increase from 9 cents to 15 cents per track — a rise requested by National Music Publishers’ Association.

A 66% rise would have to absorbed by either by companies selling the music downloads, such as the Apple iTunes Store and Amazon, or the artists’ record companies. Otherwise the cost will have to be passed on to the consumers.

Why The iTunes Store is rumoured to close

Apple iTunes Vice President Eddy Cue [pictured] caused a stir when he stated to the CRB in a written statement [PDF] in spring 2007:

“Apple has repeatedly made clear that it is in this business to make money, and most likely would not continue to operate if it were no longer possible to do so profitably.”

Why the CRB need to think logically

If Apple did end up increasing price of each track download to remain profitable the competition would have to do the same, so the choice for consumers would remain the same. In theory perhaps, but as Eddy Cue argued in his testimony, increasing the cost of downloading music will cause more people to download music illegally for free. By keeping the price of each song low ensures that the temptation for illegal downloading is minimalised.

In order for music download stores to keep their prices attractive enough to keep customers buying music the stores must remain profitable too. Increasing royalties by 66 percent will inevitably result in losses — including losses in royalties.

Increasing royalties for downloaded music is, at the moment, an illogical step.