iTunes store shutdown feared Page: 1

Veiled threat by Apple to close its iTunes store

iTunes Future Uncertain?

According to a report on the BBC technology pages, Apple made a veiled threat that they would consider shutting down iTunes Store in response to the proposed increases in royalties being ruled upon by the Copyright Royalty Board. The threat was made in April, 2007 by  the company's vice president for iTunes, Eddy Cue, in a submitted testament to the Board at the Library of Congress: 

"If iTS (iTunes Store) were forced to absorb any increase in the mechanical royalty rates, the result would be to significantly increase the likelihood of the store operating at a financial loss - which is no alternative at all. Apple has repeatedly made clear that it is in this business to make money, and would most likely not continue to operate iTS if it were no longer possible to do so profitably."
As the Copyright Royalty Board has met today to rule on a requested 66% increase for sales of digital music from 9 cents to 15 cents a track, it would seem that, depending on the ruling, Apple may have to put up or shut up. If the ruling is in favour of the increase, the extra would have to be paid for by either Apple, the record company or the consumer. Apple have said that they would be unwilling to raise the download price for tracks, which is currently set at 99 cents, to account for the royalty increase. The raise is being sought by the National Music Publishers' Association. David Israelite, president of the NMPA has the folowing to say:
"I think we established a case for an increase in the royalties, Apple may want to sell songs cheaply to sell iPods. We don't make a penny on the sale of an iPod."
It looks like there could be a full blown battle between the two opposing sides soon, depending on the ruling. You can discuss in our forums here.