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Looming Royalty Decision Threatens iTunes Store, Apple Hints 279

eldavojohn writes "You may recall us discussing some legislation about online music. More decisions are being made that may affect how much money Apple must impart to labels and musicians. Right now, it's 9 cents a track — which adds up, when you sell 2.4 billion tracks each year. The Copyright Royalty Board is asking for 15 cents a track (66% increase) and Apple isn't going to agree." Reader scorp1us points out a similar article at CNN; both stories mention that Apple has intimated such a change might cause a complete shutdown of the iTunes Music Store. Update: 10/02 21:03 GMT by T : According to CNet, the rate has been officially frozen at 9.1 cents per track.
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Looming Royalty Decision Threatens iTunes Store, Apple Hints

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  • Amazing... (Score:4, Insightful)

    by paulevans ( 791844 ) on Thursday October 02, 2008 @03:37PM (#25237255) Homepage
    Our music in on iTunes, and they get a cut of it. Wow, Thanks Royalty Board! Thanks for taking more of our cut . . . for doing . . . nothing to help us.
  • A complex game (Score:5, Insightful)

    by stox ( 131684 ) on Thursday October 02, 2008 @03:40PM (#25237297) Homepage

    Apple is playing chicken with the Music Industry, and IMHO, rightfully so. The record companies should eat the increase in the royalty instead of passing it on to the consumer. They provide little value for the huge portion of the income they get already.

  • by Corpuscavernosa ( 996139 ) on Thursday October 02, 2008 @03:40PM (#25237301)
    Well, the music industry hasn't exactly made the best moves regarding new technology and distribution methods. They could just be stupid enough to refuse to sell though iTunes if they don't get what they want...
  • by Reivec ( 607341 ) on Thursday October 02, 2008 @03:40PM (#25237307)

    Anyone that buys DRM music deserves the backlash. I am one of those annoying guys that told everyone he knew to not use the legal music stores, not because I like to steal, but because they would surely find themselves unable to listen to the music they purchased. This has already happened to my cousin to bought through the walmart service, then had to reinstall her computer, then replaced her computer, and had all sorts of issues getting the rights to play her music again. I think she got that resolved, but you shouldn't even have to go through all that.

    I only listen to music not related to the RIAA and have done so for many years now. I find that I still find many songs I think are great and love to listen to, and never have to worry about being screwed over. And yes, I do buy CDs and songs, fairly often even.

  • Price breakdown (Score:5, Insightful)

    by Elfboy ( 144703 ) on Thursday October 02, 2008 @03:43PM (#25237353)

    Apple pays an estimated 70 cents of every dollar it collects per song to the record companies responsible for each track. The record companies turn over nine cents to the music publishers who control the copyrights to these tunes.

    So why can't the record companies absorb the extra 6 cents? Oh wait. They're greedy bastards...

  • Good (Score:5, Insightful)

    by superdan2k ( 135614 ) on Thursday October 02, 2008 @03:44PM (#25237367) Homepage Journal
    I think what's going to get missed in this is a "good for Apple!" variety of statement. They've created a whole new market for music, and provided a whole new revenue stream for the industry. That they've stood up to that industry previously on the issue of cost-per-track is admirable. Now they're willing to drop a whole channel that makes them a ton of money in order to hit back at the music industry's greed when most vendors would just bend over and take it.
  • Essentially, I'm guessing the RIAA will pressure Apple into releasing or updating their client software to not decrypt the DRM'd songs (non iTunes Plus tracks) until the user coughs up the additional six cents.

    Why on earth would this apply to songs you've already bought? This is an additional royalty for new songs, making them cost 1.05 or making Apple push back on the labels to take the extra royalty out of their share...

    Yes, you definitely need to turn "Rip Mix Burn" around to "Mix Burn Rip" and get CDR backups of all your iTunes music ANYWAY.

    But at least iTunes DRM is "honor system" level... I mean, really, it gets downloaded unencrypted and the DRM is applied by the local client. And they haven't made any attempt to close the digital hole. Imagine how much it would suck if the labels had gotten everything they wanted from Apple like they have from Microsoft?

  • by David Gerard ( 12369 ) <slashdot.davidgerard@co@uk> on Thursday October 02, 2008 @03:48PM (#25237435) Homepage

    Apple is evil [], but the music business is evil [] and stupid []. If you were going to pick someone to make Apple look good, you couldn't pick better villains.

    Do the record companies realise they're competing with free? Apple realise this. Raising the prices will drive away customers who do have another option. No-one buys music because it's the only way to get it, anyone who buys music these days does so because they want to.

    BitTorrent: because fuck you, Hollywood!

  • What, even eMusic? (Score:5, Insightful)

    by argent ( 18001 ) <peter&slashdot,2006,taronga,com> on Thursday October 02, 2008 @03:50PM (#25237465) Homepage Journal

    I am one of those annoying guys that told everyone he knew to not use the legal music stores

    What, even ones like eMusic that don't ship DRMed music and never shipped DRMed music?

    That's not just annoying, that's irresponsible.

  • 70 Cents? (Score:4, Insightful)

    by whisper_jeff ( 680366 ) on Thursday October 02, 2008 @03:53PM (#25237511)
    I think, at 70%, Apple more than pays for the right to sell the songs. Music companies don't want to pay that additional hike to copyright holders? Tough. They're making 70% off each sale - they make more than enough to pay the additional fee. Greedy pricks.
  • by geminidomino ( 614729 ) * on Thursday October 02, 2008 @03:56PM (#25237573) Journal

    And Christians wonder WHY people hate them...


  • by Creepy Crawler ( 680178 ) on Thursday October 02, 2008 @04:03PM (#25237659)

    That's why I pirate.

    Services that sell physical media have quantities of bad-ware and other anti-user software.
    Services that sell online media promise nothing, including playing tomorrow.

    Piraters guarantee good quality product that will 10 years from now. They also happen to be free.

    Media corps, give me a good reason why I should put MY money through a shredder and buy locked down, limited term, no liability media. If not, fuck off torrents, IRC, and sneakernet work great for me.

  • Re:Problem is (Score:5, Insightful)

    by sexconker ( 1179573 ) on Thursday October 02, 2008 @04:09PM (#25237761)

    By "magical" he means there is no logic involved, and people are idiots.

  • Re:Good (Score:3, Insightful)

    by MozeeToby ( 1163751 ) on Thursday October 02, 2008 @04:22PM (#25237973)

    Now they're willing to drop a whole channel that makes them a ton of money in order to hit back at the music industry's greed when most vendors would just bend over and take it.

    Well, close. I think what you meant was that they are willing to say that they are willing to drop a whole channel. Now maybe they actually will if it comes down to it, but I doubt it. Would you throw away 8% of your revenues just to make a point?

  • by 91degrees ( 207121 ) on Thursday October 02, 2008 @04:32PM (#25238135) Journal
    If anything, prices will go up a dime. (Yes, for a 6 cent increase.)

    Probably wouldn't happen. 99 cents is a key point. It's at the significant "less than a dollar" amount. Reduce the price to 98 cents and sales would barely go up at all. Increase to $1 and sales would drop by substantially more than the 3.3% extra they make per track. There would probably be another drop if they went up to $1.01.

    Is Apple's share per song went to 24 cents, then a 10 cent increase would mean 41% more per track to Apple, but $1.09 psychologically feels substantially higher than 99 cents, and if Amazon manage to keep prices down to 99 cents then a lot of customers will go there instead.
  • by Smeagel ( 682550 ) on Thursday October 02, 2008 @04:34PM (#25238145)
    Aside from emusic which rules for indie picks - with amazonmp3 out there, I can't understand why anyone would buy any drm music period any more.
  • Apple Records Inc (Score:3, Insightful)

    by jayhawk88 ( 160512 ) <> on Thursday October 02, 2008 @04:37PM (#25238201)

    The fact that music labels don't (or perhaps don't want to) see what they might be doing by forcing Apples hand here is just amazing. What's to stop Apple from getting into the record label business to support iTunes? Like they couldn't sign a thousand acts tomorrow if they promised them prime promotion in the iTunes Music Store? They might not be able to get the big names right away, because of existing contracts or just general reluctance from artists, and they would certainly lose most if not all of their back-catalog, but Apple absolutely does have the kind of capital necessary to pull this off, and a huge built-in market that is essentially tied to their wildly popular distribution mechanism.

    Losing big name artists from major labels would certainly hurt iTunes sales, but again, Apple certainly has the kind of cash necessary to subsidize an iTunes record label until it found it's footing (and until major artists realized how much iTunes sales really meant to them in this day and age). 100 million iPods aren't just going to disappear overnight, people will still turn to iTunes for their music. So long as they could keep setting the trend with their iPod line, it's hard to believe that an iTunes label would not eventually start scoring major artists, or perhaps start creating their own major artists from little known artists/bands eager to sign with the iTunes label.

  • by Duradin ( 1261418 ) on Thursday October 02, 2008 @04:40PM (#25238255)

    Too bad the Apple has hardwired its authentication system to its ability to sell music...

    It's not like they could just stop selling music while keeping the authentication running. That'd be silly. That'd only happen if they sold other things than just music. Like applications or movies.

  • by I'm not really here ( 1304615 ) on Thursday October 02, 2008 @05:02PM (#25238563)
    I would like to point out that I think the top post (the AC Troll) does not speak for the vast majority of Christians. I think that his approach to speaking his mind is infantile and (if he/she really is a Christian) is detrimental to the entire Christian movement as a whole. It is akin to passing out tracts while yelling out that "everyone is going to hell!" - ineffective, overgeneralizing (therefore inaccurate), and outright insulting.

    Most likely, XxtraLarGe is correct, that this person is not a Christian, but is, instead, someone who is trying very hard to damage everyone's perception of what Christians are like. I am a Christian. Do I appear to be unreasonable, inflammatory, or irrational? Please disregard the troll, and get to know some real Christians... many of us are really some nice people out to help the world be a better place by helping out in the community and loving our neighbors as best we can.

    And, since this post really needs to stay on topic (sorry for the above rant), I hope that Apple sticks to their guns. I am a musician, and I feel that musicians should get their fair share, but I know as well as anyone that any increases are not going to make it down to the musicians. I truly hope that Apple sticks up for the pricing that was originally agreed upon to that the impulse buy nature of iTunes remains.
  • by mrchaotica ( 681592 ) * on Thursday October 02, 2008 @05:04PM (#25238597)

    Apple has very clearly put clauses in their agreement with iTunes music buyers that if the store where to close they will bomb the DRM thus freeing your music completely.

    [citation needed] x 2

  • by supernova_hq ( 1014429 ) on Thursday October 02, 2008 @05:09PM (#25238657)
    No, if they bomb the DRM, it will just strengthen peoples' trust in DRM laden products.
  • by cowscows ( 103644 ) on Thursday October 02, 2008 @05:24PM (#25238855) Journal

    There are a number of places to buy non-DRM'd music, in both physical and digital form. Why don't you try those?

  • by Moridineas ( 213502 ) on Thursday October 02, 2008 @05:48PM (#25239195) Journal

    Wow, you cite as an example? You do realize it's like...totally illegal, right? Sure it's cheap to sell something if you don't have to buy it in the first place? Speaking of which, I've got a great bridge you might be interested in...

    I don't understand the whining about a $1 mp3. I can understand complaining about lossless to a degree. I can understand complaining about DRM. But $1? That's less than a can of coke, a swig of beer, less than a big mac, etc etc.

    Then again it seems that most people do NOT agree with your assessments, as the itunes store (and others) are doing very well selling songs for a dollar.

  • by gilgongo ( 57446 ) on Thursday October 02, 2008 @06:10PM (#25239443) Homepage Journal

    I think this is unlikely to happen, but if it does then the P2P networks will get rather more traffic, thereby providing even more proof that the publishing industry just doesn't understand what's happening. Every time they try to throw their weight around like this, it make them weaker and the darknet stronger.

    Be that as it may, there is an inaccuracy in the BBC's reporting on this. They say:

    "Apple pays an estimated 70% of digital music revenue to record companies which in turn pass on a percentage to artists [my emphasis]. It is that percentage that is expected to be changed on Thursday."

    Actually, I think the National Music Publishers' Association pays this percentage to songwriters and composers of works via the publishers that the NMPA represents. And (surprise!) the publishers cream off between 3 to 15%. In many cases the composers are not the same as the artists that perform the works, and many will in fact be dead (the money goes to their relatives, estates or licensees, or nowhere if these cannot be found).

    But who cares? The way the money works in music is - to say the least - opaque. With the exception of a tiny minority of super-stars like Cliff Richard and Simply Red, when you listen to your favourite band, you are listening to indentured servants. What will happen when we realise that the copyright system overall is completely iniquitous? In 1994 (MMC, 1996 []), 10 UK composers received more than £100,000 (from performing and mechanical royalties). How many people working in the UK music industry that year who were not composers earned more than £100,000?

    I'm betting that it was rather more than 10.

  • by JSBiff ( 87824 ) on Thursday October 02, 2008 @07:16PM (#25240309) Journal

    Man, I would love to just see how all the Apple customers react if iTMS got shut down, and they began to lose access to their purchased music (I would presume the music would continue to work on devices for which the songs had already been authorized, so it wouldn't be catastrophic, but still). I suppose if worse comes to worse, they could at least burn their music to CD's, since iTunes does allow that (will that work if the Apple servers were shut down?). Once ripped to CD, they could re-rip to MP3, but the process would be painful if you have many CD's worth of music to burn and re-rip, and would result in at least a small amount of sound quality degradation (though, in their credit, the iTunes aac's are pretty high quality to begin with, so I think if you encode to a high bit-rate MP3, sound would still be pretty good).

    Meanwhile, people who bought unencrypted MP3s (or Oggs if you can find em anywhere) from places like Amazon, Walmart, and Rhapsody, don't have to worry about losing access to their collection (as long as they remember to backup regularly).

  • Re:Problem is (Score:3, Insightful)

    by NormalVisual ( 565491 ) on Thursday October 02, 2008 @07:30PM (#25240449)
    Where else will people by music online for their magic $200 ipod?

    Any place that sells unprotected MP3s. Apple is far from the only source for media that will work with the iPod. Apple is also quite aware that most people are capable of entering "" in their browsers, and more importantly, they know the labels are quite aware of that. Apple had no problem going to the mat with Universal/NBC, and I don't see them blinking here either, especially given the fact that NBC came crawling back to them.

    People keep forgetting that Apple sold a lot of iPods in the year and a half before iMTS was even available, so the loss of the store won't make nearly as much difference to them as a lot of folks seem to think, particularly given that there are so many more outlets for content.
  • Re:Amazing... (Score:3, Insightful)

    by CodeBuster ( 516420 ) on Thursday October 02, 2008 @08:16PM (#25240845)
    I thought that the law (in the United States) says that all royalties must be paid to SoundExchange corporation which then distributes them to the copyright owners (your band in your case) although I have also heard that they are notorious for not lifting a finger to find out where to send the royalties in the case where the copyright owner (who may not even know that they inherited the right to receive royalties) does not show up and ask for them and even then they tend to give individuals and small independents the run around (making you prove who you are, etc). It is like filing a claim on your insurance, the insurance company does everything it can legally to deny the claim or delay payment as long as possible or both. The royalty system in the music business has a reputation for these sorts of practices and they are hated like insurance companies are for engaging in many of the same types of shenanigans.
  • by Arivia ( 783328 ) <> on Friday October 03, 2008 @04:17AM (#25243221) Journal
    One of the articles linked to another article that hammered this point home for me: it is now a revolutionary, wonderful new feature that all your equipment and media will be compatible with each other. Think about it. DRM has fucked things up so much that the new carrot is "You can play this on your TV, and your computer, and your mp3 player." That's just fucked.

Someday somebody has got to decide whether the typewriter is the machine, or the person who operates it.