iTunes May be Shut Down Over Royalty Dispute

Apple is threatening to shut down iTunes if the Copyright Royalty Board increase royalty rates that they would have to pay by six cents. The decision is scheduled to be reached by Thursday.

Six cents does not sound like a lot, but considering the 99 cent price tag per song, it is a significant increase. The extra is enough to make operating the iTunes music store not profitable.

This gives Apple essentially four choices:
1) They could raise their prices to $1.05 per song. Apple has been strongly against this from the beginning and have been very firm on their 99 cent price point.
2) Ask the people the royalties are due to for a pass, or ask for a waver. In other words, ask if they will eat the cost themselves.
3) Operate the iTunes music store at a loss.
4) Close the iTunes music store.

Number "3" seems the least likely of the choices. Numbers "1" and "2" do not seem likely either. Number "4" could be a disaster for the music industry and could mark a massive increase in illegal music downloads.

If the royalty rates are increased, the likely outcome is a combination or gradation of "1" and "2". Apple may raise its prices, but it is doubtful that they will go above $1. The people due the extra money may grant a partial waver saying that they only force Apple to pay "x" cents instead of what they are actually owed. A combination or gradation may be enough for Apple to keep iTunes profitable and prevent the possible disaster that the shutdown would cause.


http://blog.wired.com
http://blog.wired.com/music/2008/10/thursdays-copyr.html

"Apple has threatened to shut down the iTunes music store if an obscure three-person board appointed by the Librarian of Congress increase the royalties paid to publishers and songwriters by six cents per song."