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Will Apple shutter iTunes?
October 1st 2008

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TimesOnline (UK) reports that if efforts by the (US) National Music Publishers Association to increase its take on digital music sales from 9¢ to 15¢ per song sold has Apple threatening it will shutter iTunes.

"If [iTunes] 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," says iTunes vice president Eddy Cue. "Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [iTunes] if it were no longer possible to do so profitably."

The US Copyright Royalty Board (CRB) in Washington DC will decide whether to grant the request of American music publishers to increase royalty rates on songs purchased online.

Editor's note: Whether we're talking the RIAA, Sound Exchange or the music publishers, their endless manipulations and machinations warrant a harsh response from Apple. Honestly, if they wish to commit suicide, then why shouldn't they be allowed to?

I've not seen Apple's business plan, but I doubt it includes anything about repeatedly saving the music industry from itself...

What's your take?

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Reader Comments


There is nothing that warrants a raise in prices for online music. They have no shipping costs, no packaging costs, no media costs that would warrant a price increase. iTunes pays for the hosting.

The music industry can't get enough apparently. Never satisfied. Yet they panic at every turn about pirating. Well if they force iTunes to shutdown they better be prepared for a REAL BIG PANIC ATTACK!!!! And those higher prices won't make any difference in how much money they will lose!!!
Raising the cost of online music is suicide! Posted by Guest Poster #1 on 10/02/08 2:10 AM

I say more power to the bands and the people who MAKE the music. Not these draconian arse-hats that always wanna gouge for more and more money.

Indie!!
Let the music industry die... Posted by D on 10/02/08 2:45 AM

Apple should really stick it to them. For once they've got a good thing going (music industry at large) and of course the music industry can't help but eat itself alive.

What the frick, a form self eating cancer? IDIOTS. I HOPE THEY ALL SUFFER MASSIVE BRAIN DAMAGE FROM SNIFFING CAR EXHAUST!
Give em' HELL!! Posted by Music Nut on 10/02/08 2:48 AM

If David Pakman, formerly head of eMusic is correct, Apple pays a minimum 25¢ credit card transaction fee. It is widely reported the recording industry takes 70¢ on each 99¢ download. That leaves 4¢ for Apple. If Apple is asked to absorb another 6¢ then Apple is being asked to lose 2¢ on each single song purchase and to try to make it up on the volume. Obviously the math is different on larger purchases than 99¢, but what sort of honest partner makes demands like that?
iTunes Profitability Posted by Bob on 10/02/08 5:12 AM

I get weekly iTunes receipts from Apple regardless of many songs or when I by them. So, no, Apple doesn't pay a 0.25 per song or even download credit card fee. Urban myth, complete BS...
Posted by Guest Poster #5 on 10/02/08 8:55 AM

The minimum credit card transaction fee is paid by the retailer, not the customer. It would not show up on your receipt any more than the credit card transaction fee shows up on any other credit card purchase you make. The minimum fee is applied to transactions where the usual rate of 2% would result in a fee of less than 25¢. On a single song transaction of 99¢, 2% of 99¢ is 1.98¢, so the minimum transaction fee of 25¢ is applied. This would in fact apply to all transactions of $12.50 or less. This is according to the former head of eMusic, David Pakman, responding to a New York Times article on the profitability of the iTunes music store, not urban myth or BS. As a result of Mr. Pakman's comments the original author revised his opinion of the ITMS's actual profitability.

While, as I stated in the last sentence of my previous comment, Apple enjoys a larger margin on larger purchases, the average iPod owner has downloaded ~22 songs over the life of the ITMS. That works out to less than 4 songs per iPod owner per year the store has been open. A reasonable observer could infer that many iPod owners have purchased a single song per transaction and made purchases at extended intervals.

Below is a link to the New York Times Blog. The update I mentioned is at the bottom of the main article and Mr. Pakman's is the second comment.
LINK
iTunes Profitability Posted by Bob on 10/02/08 11:28 PM

So, Apple IS paying 0.25 per transaction and we're pretty clear that Apple's consolidating purchases into a single weekly billing / receipt.

You say six, I say a half dozen. We both get to Penn Station in time for a sandwich and a pint. Harrington's, OK? I buy this time...
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