Apple threatens to close iTunes over royalties hike

1 Oct 2008

Technology powerhouse Apple, which showed the music industry a legitimate route for selling music, has reportedly threatened to pull the plug on its popular iTunes music service because of a 66pc royalties increase demanded by artists.

According to a report in Fortune Magazine yesterday, the Washington DC-based Copyright Royalty Board is to rule tomorrow on a request from the US National Music Publisher’s Association to increase royalty rates paid to artists by 66pc, effectively from 9 cent to 15 cent.

It is understood that Apple is concerned such a hike would increase the likelihood of iTunes operating at a financial loss.

The company said as much in a statement a year ago to the Copyright Royalty Board by Eddy Cue, vice-president in charge of the iTune Store.

“Apple has repeatedly made 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,” Cue told the Royalty Board.

To date, Apple has sold over five billion songs via iTunes. It can rely on an audience of over 150 million iPod owners, which makes it unlikely the company would take such a draconian measure. But the question is, how much of the increased royalty will be passed on to media buyers?

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years