Today, the Copyright Royalty Board—a panel of three lofty judges overseeing federal copyright law—will likely approve a request by the National Music Publisher’s Association to raise the royalty rate paid on digital music sales by 66 percent. Now iTunes will owe 15 cents per track, instead of just nine. That’s a big deal. So big, in fact, that when the Publisher’s Association originally put in the request last year, Apple threatened to close down iTunes if it was approved. Its argument is simple: Apple only makes 29 cents from the sale of each song—the rest goes to record companies, and nine cents of that goes to publishers. If they were forced to pay 15 cents, they’d be operating iTunes at a loss and they are absolutely, totally, full-on opposed to raising prices above 99 cents. “Apple has repeatedly made it clear that it is in this business to make money,” iTunes VP Eddy Cue wrote last year. “I have no doubt that an increase in the per track price would lower total music purchases at the store.”
No need to run back to your failing neighborhood record store just yet, people. We have little faith that Apple will go forward with its threat. iTunes is expected to sell 2.4 billion songs this year—that’s 85 percent of the digital market—and the online store is primarily how Apple lures fans into buying iPods (not that we need much prodding). Plus, total digital music sales have risen 46 percent this year, bringing in $1.2 billion. No way is Apple going to close up shop. Rather, it’s you who will take the hit. Somehow, whether by raising its per-song cost or through other veiled fees, Apple will absorb the 66 percent royalty hike if it has to. Steve Jobs will see this one through. It’s inevitable that the only growing arm of the music industry will attract more folks seeking a bigger piece of the digital music pie. Prices can only go up.
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