News: UPDATE: ITunes Stays In Business After Fee Hike Denied

Friday, Oct 3, 2008 11:30AM

Written by Cyrus Langhorne

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After Apple recently threatened to shut down their popular online digital seller iTunes yesterday, the Copyright Royalty Board has ruled against raising the fee from 9 cents per song for recorded music.

According to the CNET, the highly anticipated decision was e-mailed yesterday (October 2) directly to the Digital Media Association (DiMa), the National Music Publishers' Association and a number of different online music retailers including Apple.

As previously reported by SOHH, the ruling was scheduled to occur yesterday when the board was expected to increase the wholesale price of a song. Despite reportedly upping the rate every two to three years by a fraction of a cent, the ruling came at a time when the music industry has continued 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 has continued stems from the unexpected popularity of digital downloads rather than physical music purchases.

Despite these arguments, Apple executives have repeatedly stressed the 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."

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