Apple Considering the Thought of Shutting Down the iTunes Music Store

by Jody Mitoma on October 1, 2008 at 2:56 pm

CNN Fortune has it that Apple is actually considering shutting down iTunes. Reasons being the Copyright Royalty Board in Washington, D.C. is expected to rule Thursday on a request by the National Music Publishers’ Association to increase royalty rates paid to its members on songs purchased from online music stores like iTunes. The publishers association wants to raise the rates from 9 cents up to 15 cents per track. That is a raise of 66%! What the hell is that? I mean, I would understand the association raising the rates a couple cents to 11 cents per track, but straight up to 15 cents? That’s unheard of. As you’ve probably already guessed, Apple Inc. is highly against this act, and will not tolerate it. Eddy Cue; Vice President of iTunes said, “Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably.”

If Apple cannot talk the publishers association into lowering the cost per track, they will consider shutting down iTunes entirely, which is a very scary thought. Piper Jaffray estimates that Apple will sell approximately 2.4 billion songs this year giving the company an 85% share of the digital music market. That’s over three quarters of the entire market! If Apple doesn’t agree, then I think it’s pretty safe to say that it won’t happen, because if Apple shuts down iTunes, which they do not want to do of course, that’ll leave us with only the remaining 15% of the market. Albeit, if Apple shut down iTunes, that would be stupendous news for Wal-Mart, and other competitors, it’d be quite a let down for hundreds of millions of people around the globe. The iTunes Music Store has been the Internets most successful music store for over five years now, and we do not want to see that disapear now.

If Apple wanted to continue making profit with the raise to 15 cents, they would be forced to raise their 99 cent per song price, which they feel is highly unacceptable. In other words, Apple would rather shut down the iTunes Music Store entirely, rather than raise the 99 cent per song price tag.

“I have no doubt that an increase in the per track price would lower total music purchases at the store,” the Apple executive said in his statement.

Apple pays an estimated 70 cents of every dollar it collects per song to the record companies responsible for each track. The record companies turn over nine cents to the music publishers who control the copyrights to these songs.

On the contrary, The Digital Media Association, which represents Apple and other online music services, is seeking an even lower rate of 4.8 cents a track, or 6% of “applicable revenues.”

Apple doesn’t make any income off of iPod sales, which is one reason they would like to keep the iTunes Music Store open, as it is their way of making income off of proposed iPod sales.

(via Fortune Apple 2.0)

5 Responses to “Apple Considering the Thought of Shutting Down the iTunes Music Store”

Dustin Schriffert said:

October 1st, 2008 at 6:53 pm

I think Apple has the upper hand here. Even though they can’t control what the royalties are, Steve knows that if iTunes shuts down, there goes the entire music market, and then the NMPA will feel terrible, knowing they just ruined music all over the world. That is a hefty burden to carry on their shoulders. I can see it now…

“NMPA: Single-handedly caused the demise of digital music”

I think iTunes is too powerful to be shut down, and Apple knows that. If the NMPA doesn’t lower the cost per track, you can expect the music industry’s fate to be just like Lehman Bros…belly up because iTunes has so much power over the digital music market.

Go get’em, Steve!
UncleBoogie said:

October 2nd, 2008 at 1:35 am

Are there shenanigans here? Word for word it’s the same article.

http://ipodtouched.net/?p=1175
MM said:

October 2nd, 2008 at 10:32 pm

Don’t care about iTunes, really. I think Apple are just bluffing anyways.
Eric March said:

October 3rd, 2008 at 12:33 am

@Uncle: ipodtouched ripped off Jody. His site is all about laziness and cracking apps. Unfortunately it’s not the only one we found. Frickin’ thieves.

If you notice, he hotlinked the image, too.

@MM: I’m sure they’re bluffing — but the industry can’t afford to call them on it.
Jody Mitoma said:

October 3rd, 2008 at 1:03 am

There are in fact updates on this front.

A new story is being posted now.

Give me 10 minutes…