Apple Threatens to Shut Down iTunes

This coming Thursday, the Copyright Royalty Board is expected to rule on a request by the National Music Publisher's Association to increase royalty rates paid to its members for online purchases as much as 66% (from 9 to 15 cents a track). Apple, however, stands adamantly opposed to the decision, as it neither wants to absorb the rate hike nor raise prices from 99 cents on its popular iTunes Music Store. Although it has made no official statement on the matter as of yet, past statements indicate that, should the hike go through, the company may shut down the store, rather than risk going into the red.

Fortune reports that in a statement submitted to the board last year, iTunes vice president Eddy Cue suggested simply closing down the music store, should no alternatives present themself. "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," Cue wrote. "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."

Although the exact figures are not certain, estimates on the digital music store's profitability range from 10% to 30%. Of every dollar it makes, Apple pays roughly 70 cents to the record companies, and, currently, the record companies pay 9 cents to the music publishers.

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