Apple Threatens to Shutter iTunes Over Royalty Rate Hike...

[Zim Hosein]

New York - In a statement filed with the Copyright Royalty Board (CRB) last year, Apple (NASD: AAPL) threatened to shut down its iTunes Store should the board increase in the royalty rates that would make the Web store unprofitable -- a move the board may make tomorrow, Fortune reported. Songwriters and music publishers have petitioned the CRB to increase their royalty payments by six cents per song, a hike opposed by Apple and others including the major record labels, who favor paying instead a percentage of total revenues ranging from 6% to 8%.

"If the [iTunes music store] was forced to absorb any increase in the... royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss -- which is no alternative at all," Apple iTunes vice president Eddy Cue said, in the statement.

"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."

Apple wouldn't comment for Fortune on whether it would follow through on its threat from a year ago should the CRB decide to increase royalties for songwriters and music publishers this week.

Apple pays about 70 cents of the 99 cents it collects from songs purchased at the iTunes Store to the record labels, who in turn then pay 9 cents per song to music publishers and songwriters.

The latter group is seeking to have this payment raised to 15 cents per song, an increase of 66%.

While record labels may absorb some of this increase, Apple would likely have to share the burden, introducing the possibility that the top Web music retailer may actually begin to lose money on song sales.

Apple Threatens to Shutter iTunes Over Royalty Rate Hike

I'm definately not a mathematics major, but from reading this article, APPL is saying that 0.06¢ increase would make put the iTunes store in the red? What am I missing? 😕

 

[tfinch2]

Originally posted by: Zim Hosein
What am I missing?

Operating expenses.

 

[CrazyLazy]

Well it's $0.06 multiplied millions of times. The artists should be trying to take their money from the record labels, not apple though.

 

[middlehead]

The people who actually make the music want an extra 6 cents, the assmongers who rob them blind will surely increase it further to compensate, driving up Apple's costs, creating a circle of fuckery.

 

[Zim Hosein]

Originally posted by: tfinch2

Originally posted by: Zim Hosein
What am I missing?

Operating expenses.

The infrastructure is in place, how much could it possibly cost to add an album to the their store tfinch2? 😕

 

[IronWing]

The record companies are trying to kill the golden goose. Can't blame them as the iTunes model demonstrates that record companies are no longer needed.

 

[akshatp]

Apple could of course raise the song price from 0.99 to 1.05, no?

Seems BS that the record lable gets that much and the actual songwriter/musician gets so little. Limewire FTW!!!

 

[OdiN]

Yeah I'd say take that extra money out of what the record companies get. Because you know they won't and they will get what they get no matter what.

But yeah, they could just raise the price of the songs on the store.

Problem with that is they break that 0.99 magic number...less people buy @ 1.05 than at 0.99, and overall still make less money. So maybe they would have to raise to 1.15 to cover it.

 

[CrazyLazy]

Originally posted by: Zim Hosein

Originally posted by: tfinch2

Originally posted by: Zim Hosein
What am I missing?

Operating expenses.

The infrastructure is in place, how much could it possibly cost to add an album to the their store tfinch2? 😕

The bandwidth required to run the store is probably humongous. Not to mention support/normal costs of running a business.

 

[JS80]

lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to artist after apple takes a commission.

 

[gar3555]

Originally posted by: middlehead
The people who actually make the music want an extra 6 cents, the assmongers who rob them blind will surely increase it further to compensate, driving up Apple's costs, creating a circle of fuckery.

We all know how bad creating a circle of fuckery is, but what about the rhombus of fuckery? Even Apple doesn't stand a chance.

 

[RadiclDreamer]

How about the label gives up a few % of their cut to the artist?

 

[frostedflakes]

Originally posted by: RadiclDreamer
How about the label gives up a few % of their cut to the artist?

Inconceivable!

 

[Perknose]

Originally posted by: JS80
lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to apple after the artist gets their measely 15 cents.

Fixed.

 

[middlehead]

Originally posted by: gar3555

Originally posted by: middlehead
The people who actually make the music want an extra 6 cents, the assmongers who rob them blind will surely increase it further to compensate, driving up Apple's costs, creating a circle of fuckery.

We all know how bad creating a circle of fuckery is, but what about the rhombus of fuckery? Even Apple doesn't stand a chance.

They'd better stand a chance, we know they won't be able to sit when it's over.

 

[IronWing]

I wonder if iTunes causes cancer and that is the real reason Apple might shut it down.

 

[Zim Hosein]

Maybe APPL is trying to be the 800 pound gorilla so to speak as the iTunes store is currently the #1 music retailer in the US according to NPD?

iTunes Store Tops Over Five Billion Songs Sold

Apple Renting & Selling Over 50,000 Movies Per Day

CUPERTINO, California?June 19, 2008?Apple® today announced that music fans have purchased and downloaded over five billion songs from the iTunes® Store (www.itunes.com). iTunes is the number one music retailer in the US* and features the largest music catalog with over eight million songs. Also, iTunes customers are now renting and purchasing over 50,000 movies every day, making iTunes the world?s most popular online movie store.

iTunes features movies from all of the major movie studios including 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount, Universal Studios Home Entertainment, Sony Pictures Entertainment, Metro-Goldwyn-Mayer (MGM), Lionsgate and New Line Cinema. Users can rent movies and watch them on their Macs or PCs, all current generation iPods**, iPhone? and on a widescreen TV with Apple TV®. iTunes Store customers can also purchase new movie releases from major film studios and premier independent studios on the same day as their DVD release.

The iTunes Store is the world?s most popular online music, TV and movie store with a catalog of over eight million songs, over 20,000 TV episodes and over 2,000 films including over 350 in stunning high definition video. With Apple?s legendary ease of use, pioneering features such as iTunes Movie Rentals, integrated podcasting support, iMix playlist sharing, the ability to turn previously purchased tracks into complete albums at a reduced price, and seamless integration with iPod® and iPhone, the iTunes Store is the best way for Mac® and PC users to legally discover, purchase and download music and video online.

*Based on data from market research firm the NPD Group?s MusicWatch survey that captures consumer reported past week unit purchases and counts one CD representing 12 tracks, excluding wireless transactions. The iTunes Store became the largest music retailer in the US based on the amount of music sold during January and February 2008.

**Movie rentals work on iPod classic, iPod nano with video and iPod touch.

iTunes Store Tops Over Five Billion Songs Sold

Hmmm... 😕

 

[JS80]

Originally posted by: Perknose

Originally posted by: JS80
lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to apple after the artist gets their measely 15 cents.

Fixed.

You don't get something for nothing. A lot of times artists get a salary along with the royalty. Not only that, the studio fronted all the costs of producing, recording, paying for hookers and blow, etc.

15 cents is VERY generous.


This actually can be Apple's chance to become a "fair" record label for independent and future artists and bust the record label monopoly. Nowadays you can get all the recording gear for a few grand...Apple should set up a program where unsigned artists can sell directly through them and split it 50/50 if they record it themselves. If it catches on, already famous artists who are due for a renewal can sign directly with apple, threatening the entire record label existence and network.

 

[mugs]

Originally posted by: JS80

Originally posted by: Perknose

Originally posted by: JS80
lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to apple after the artist gets their measely 15 cents.

Fixed.

You don't get something for nothing. A lot of times artists get a salary along with the royalty. Not only that, the studio fronted all the costs of producing, recording, paying for hookers and blow, etc.

15 cents is VERY generous.


This actually can be Apple's chance to become a "fair" record label for independent and future artists and bust the record label monopoly. Nowadays you can get all the recording gear for a few grand...Apple should set up a program where unsigned artists can sell directly through them and split it 50/50 if they record it themselves. If it catches on, already famous artists who are due for a renewal can sign directly with apple, threatening the entire record label existence and network.

I wonder how Apple's major label business partners would feel about that.

 

[JS80]

Originally posted by: mugs

Originally posted by: JS80

Originally posted by: Perknose

Originally posted by: JS80
lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to apple after the artist gets their measely 15 cents.

Fixed.

You don't get something for nothing. A lot of times artists get a salary along with the royalty. Not only that, the studio fronted all the costs of producing, recording, paying for hookers and blow, etc.

15 cents is VERY generous.


This actually can be Apple's chance to become a "fair" record label for independent and future artists and bust the record label monopoly. Nowadays you can get all the recording gear for a few grand...Apple should set up a program where unsigned artists can sell directly through them and split it 50/50 if they record it themselves. If it catches on, already famous artists who are due for a renewal can sign directly with apple, threatening the entire record label existence and network.

I wonder how Apple's major label business partners would feel about that.

lol not good. probably threaten to pull from apple.

in fact, i wouldn't be surprised if there was a clause in the agreement that forbids apple from doing this. so i take it back.

 

[JackBurton]

Originally posted by: JS80

Originally posted by: mugs

Originally posted by: JS80

Originally posted by: Perknose

Originally posted by: JS80
lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to apple after the artist gets their measely 15 cents.

Fixed.

You don't get something for nothing. A lot of times artists get a salary along with the royalty. Not only that, the studio fronted all the costs of producing, recording, paying for hookers and blow, etc.

15 cents is VERY generous.


This actually can be Apple's chance to become a "fair" record label for independent and future artists and bust the record label monopoly. Nowadays you can get all the recording gear for a few grand...Apple should set up a program where unsigned artists can sell directly through them and split it 50/50 if they record it themselves. If it catches on, already famous artists who are due for a renewal can sign directly with apple, threatening the entire record label existence and network.

I wonder how Apple's major label business partners would feel about that.

lol not good. probably threaten to pull from apple.

in fact, i wouldn't be surprised if there was a clause in the agreement that forbids apple from doing this. so i take it back.

LOL, I'd like to see them pull themselves from Apple. iTunes is a MONSTER selling machine. NBC tried to pull that crap and guess what? They're right back with iTunes now. But even though I love iTunes, I think it would be hilarious if iTunes shuts down and P2P becomes even bigger than it is now.

How about $0 royalties? That sound good record labels?

 

[nakedfrog]

Originally posted by: JS80

Originally posted by: Perknose

Originally posted by: JS80
lol idiots.

why not give option for a donation rate? min 99c, then give option to buy at 1.05, 1.15, proceeds go to apple after the artist gets their measely 15 cents.

Fixed.

You don't get something for nothing. A lot of times artists get a salary along with the royalty. Not only that, the studio fronted all the costs of producing, recording, paying for hookers and blow, etc.

15 cents is VERY generous.


This actually can be Apple's chance to become a "fair" record label for independent and future artists and bust the record label monopoly. Nowadays you can get all the recording gear for a few grand...Apple should set up a program where unsigned artists can sell directly through them and split it 50/50 if they record it themselves. If it catches on, already famous artists who are due for a renewal can sign directly with apple, threatening the entire record label existence and network.

What?
Fronting the costs only means the artists pay for it after the fact. Please let me know which artists receive a salary.

 

[LikeLinus]

Originally posted by: Zim Hosein

Originally posted by: tfinch2

Originally posted by: Zim Hosein
What am I missing?

Operating expenses.

The infrastructure is in place, how much could it possibly cost to add an album to the their store tfinch2? 😕

Seriously, is this a joke?

Server space
Server upkeep
application development
customer service (for said application)
graphics department to generate/create and upload content
editors
bandwidth expenses
marketing cost

This isn't HAL 2000. It doesn't just take care of itself.

 

[abaez]

Originally posted by: akshatp
Apple could of course raise the song price from 0.99 to 1.05, no?

Seems BS that the record lable gets that much and the actual songwriter/musician gets so little. Limewire FTW!!!

I don't understand your logic. Even though the labels are ripping off the artists, at least they get something when you buy from iTunes. Limewire gets them absolutely nothing... how is that better or "ftw"?

 

[frostedflakes]

There may be other companies who offer a similar service, but I know CDBaby can act as an intermediary between independent artists and iTunes, Rhapsody, etc. They keep a 9% commission, so 91% goes to the artist. Artists are paid weekly, by the way (assuming they meet the minimum payment, which is $10 I believe). 🙂

Why artists are still willing to relinquish the rights to their music -- their blood, sweat, and tears -- is beyond me. Labels may have been necessary 30 years ago, but the internet and digital distribution allows musicians to connect with more fans than ever in an unprecedented way.