News: iTunes Threatens To Close Shop

Thursday, Oct 2, 2008 12:45PM

Written by Cyrus Langhorne

ITunes

A decision ruling on whether or not to raise the fee for recorded music has tempted Apple to threaten the shutdown of their popular online digital seller iTunes today.

According to the Associated Press, the Copyright Royalty Board is expected to increase the wholesale price of a song from its' current 9 cents fee to an undisclosed amount. Despite reportedly upping the rate every two to three years by a fraction of a cent, the ruling today comes at a time when the music industry continues to suffer financial losses.

"Everybody expects it to go up somewhat but nobody expects it to go up all that much," Steve Gordon, author of The Future of the Music Business, told the AP. "The record business has a lot of problems. This is not going to make it much better or much worse."

Beginning in 1981 when the fee per song was only 4 cents, much of the reason why a hiked increase in song prices to retailers is occurring stems from the unexpected popularity of digital downloads rather than physical music purchases.

"For the last seven years, we've been fighting over those business models," David Israelite, chief executive of the National Music Publishers Associate said in defense of the raise.

Despite these arguments, Apple executives have stressed their inability to profit from the ever-increasing song fees.

"If [the iTunes store] were forced simply to absorb any increase in its mechanical royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss," Apple's VP of iTunes, Eddy Cue, told the AP. "Apple contended that it can't raise iTunes prices to compensate for higher royalties because the store is competing with pirated music available for free."

A decision on whether or not song fees will increase will be made sometime day.

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