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Media (Apple) Media Businesses Music The Almighty Buck Entertainment

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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  • by eldavojohn ( 898314 ) * <eldavojohn&gmail,com> on Thursday October 02, 2008 @03:34PM (#25237209) Journal

    Apple has intimated such a change might cause a complete shutdown of the iTunes Music Store.

    More importantly, what of the client software that interacts with the store? You know, the program that allows you to burn/listen/store "your" music?

    As the user who submitted this article, I would like to point out that they removed my DRM fear mongering from my original submission. As a geek it's my duty to squeal like a stuck pig when troubles a brewin' and I think there's a rude awakening looming for a whole ton of iTunes users.

    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. Hell, I have no way of knowing that this isn't already implemented in iTunes and Apple need only stop delivering the other half of keys to the clients to decrypt a user's data.

    And that's why DRM has failed, continues to fail and will always fail. Nobody read the EULA/TOS of iTunes and nobody understands that when you're "buying" the song for a dollar, you're not buying anything but the right to listen to that song for some undetermined amount of time. Here's a simple case: What happens to "your songs" when you die?

    Burn them to discs or convert them to an open format anyway you know possible, folks. That's the only advice I have--especially with this on the horizon. Buy Apple players, Amazon MP3s and look no further than the GPL for your software.

  • by sexconker ( 1179573 ) on Thursday October 02, 2008 @03:36PM (#25237233)

    Yeah, right.
    Call their bluff, require 15 cents.
    iTunes Music Store isn't going anywhere.
    If anything, prices will go up a dime. (Yes, for a 6 cent increase.)

  • by qoncept ( 599709 ) on Thursday October 02, 2008 @03:46PM (#25237407) Homepage
    "they removed my DRM fear mongering from my original submission."
    "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."

    I'm assuming that's because what you said was unfounded, but more importantly completely ridiculous. You can't retroactively revoke access to something that was already sold when using the product doesn't rely on your services. And stretch all you want, you aren't going to find a real life example of where it has happened. It will be shot down.
  • Re:Amazing... (Score:5, Interesting)

    by necro2607 ( 771790 ) on Thursday October 02, 2008 @03:48PM (#25237447)

    Hmm good point. My band's music is on iTunes, as well as that of tons of other bands I know, who are completely independent. We got our stuff onto iTunes through TuneCore who charge a pretty nominal yearly fee. No record label involved. They also don't take any cut of royalties sent from Apple. So, if any of that $0.99 is going to anyone other than either Apple or my band, somethin is screwed up there :P

  • Re:Amazing... (Score:5, Interesting)

    by TheLink ( 130905 ) on Thursday October 02, 2008 @03:51PM (#25237483) Journal

    Yeah. There's this organisation in my country that goes around collecting money from restaurants etc.

    http://www.ppm.org.my/v2/downloads/quoteEN.jpg [ppm.org.my]

    I wonder what happens if a restaurant only plays music that I compose (I'm not a member and the last I checked I am not getting any money or royalties from them).

    I also wonder where the royalties are really going and what the pie slices look like ;).

  • by mcsqueak ( 1043736 ) on Thursday October 02, 2008 @03:55PM (#25237551)

    And by "they" I mean both parties, Apple and the music industry.

    On one hand, I understand Apple's stance. The recording industry would be stupid if they made moves that could shut down what has so far been the most popular online music store to date. In my opinion, it is pretty F-ing stupid to try and pass a royalty hike at this point and time.

    My thinking is this: Apple is doing all the hard work of running the store, and the record industry is profiting off of this additional sales stream. If they pass the royalty hike, they might not get their increased royalty revenues - likely, they'll get NO MONEY AT ALL if Apple goes through with its bluff of shutting down iTunes. Which is better, earning several million dollars a year in revenues from iTunes, or none at all? Stop being so greedy already.

    On the other hand, how wise would it be for Apple to kill off part of what makes the iPod so popular? I'm a iPod owner who has never bought a track from iTunes, but obviously there are a LOT of people out there who use it. I don't think it would be so smart for Apple to shut such a service down... I wonder if their iPod sales would suffer as a result.

  • Problem is (Score:4, Interesting)

    by Sycraft-fu ( 314770 ) on Thursday October 02, 2008 @03:58PM (#25237593)

    That $1 is a magic mental limit. You go over that, many people will no longer be willing to buy tunes. May seem silly but that's how it works. There are various mental limits when it comes to prices like that. There's been research done to suggest that if iTunes songs went up even to $1.10 it would result in a massive drop sales.

  • by b96miata ( 620163 ) on Thursday October 02, 2008 @03:59PM (#25237617)

    I'm honestly a bit confused by all this - Record companies seem to have no problem paying artists less than the statutory royalties via one-sided contracts. Apple has contracts with the record companies saying they get x per track/album sold.

    Near as I can tell, this bill will just change the "default" royalties.

    A direct contract with the copyright holder (nearly always the record company) tends to bypass this sort of thing.

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

    by splatter ( 39844 ) on Thursday October 02, 2008 @04:06PM (#25237695)

    You are correct but there isn't anything magical about it it's called perceived value you study it in microeconomics.

    http://en.wikipedia.org/wiki/Customer_perceived_value [wikipedia.org]

  • by falcon5768 ( 629591 ) <Falcon5768.comcast@net> on Thursday October 02, 2008 @04:06PM (#25237707) Journal
    except 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.

    I am sure the labels realize this and are fearful Apple might actually pull it off.

  • by maxume ( 22995 ) on Thursday October 02, 2008 @04:10PM (#25237791)

    DRM appears to be working fairly well for Apple (it was other players in the market that pushed for removing it, Apple seems happy enough with whatever the status quo happens to be).

  • by 91degrees ( 207121 ) on Thursday October 02, 2008 @04:22PM (#25237959) Journal
    Isn't Apple's agreement with the record labels? Surely the 9 cents comes out of the labels' share. That's what the cnn article implies. So instead of 29 cents going to Apple, 61 cents to the label and 9 cents to that guy who did nothing except all write and perform the song, it would be 29 cents to apple, 55 cents to the label and 15 cents to the worthless waste of space.
  • by cyber-dragon.net ( 899244 ) on Thursday October 02, 2008 @04:49PM (#25238373)

    I buy things from iTunes knowing the risks of DRM specifically because it pisses off the RIAA and MPAA that they have to deal with Apple.

    It amuses me NBC caved and put their TV back on iTunes because they lost so much revenue.

    Am I wasting my money? Yeah probably. But lots of people also pay $10 to go to a movie for an hour and a half. I pay $2 an hour so seems like a half price entertainment deal, and I get to re-watch mine until something happens.

  • Firmware Encryption (Score:2, Interesting)

    by jjm496 ( 1004054 ) on Thursday October 02, 2008 @05:44PM (#25239139)
    Do anyone think there wil be any chance of apple opening up the firmware encryption on 6g units if iTunes goes down?

    If they will no longer be providing music sales, would it not make sense to open it up so others can build fully compatible data loaders?
  • by earlymon ( 1116185 ) on Thursday October 02, 2008 @06:04PM (#25239355) Homepage Journal

    Point taken.

    I find that, despite the bait I may be setting for myself, the iTMS content is sufficiently downgraded in the first place by its low sampling. On a good audio system, you can hear the difference.

    I've spent a few decades of my life writing DSP software and teaching DSP techniques and Fourier and LaPlace math. I already lament sampling and have no choice but to agree that you're right. Fuzzily, however, few people seem to own decent audio equipment, many seem to flame being able to hear a difference, so to those people, the argument is lost - they wouldn't hear it. The others will more likely accept the new artifacts as different - technically inferior - but inferior_a is roughly equal to inferior_b. One would oversample the CD output (creating more digital artifacts) and then downsample the copy in an attempt to lose the new artifacts. There's no basis to belief that this creates lossless transfers, but does up the odds a bit in the user's favor.

    Another guy insisted that Apple would free us from DRM if they went under, but I find no citation for that as of yet.

    Please don't get me wrong - DRM is evil. IMO, Apple's DRM is the least evil - much like being preferred to be shot by a .22 instead of a .357 - it's still a freaking gunshot wound!

    My retort was focused on the fact that the sky is not falling and a single-shot .22 is not an A-10 attack.

  • Re:Amazing... (Score:2, Interesting)

    by donweel ( 304991 ) on Thursday October 02, 2008 @06:27PM (#25239639)
    I wonder how many independents there are on iTunes and if it is growing. What if after this stunt there are only independents on iTunes. Would the other artists start jumping ship, assuming they could get out of their contracts. It could motivate others to go independent too. I would like to see that. Those pigs would really start to squealing when no new artists want to sign with them anymore.
  • This has nothing to do with Apple closing the Apple music store however. Their DRM servers will still be up and running (for movies, TV shows, games, etc) so this issue is simply FUD.

  • by mysidia ( 191772 ) on Thursday October 02, 2008 @07:05PM (#25240173)

    Apple is a unique case, because they're a multi-billion dollar company and in the business of selling both the player and the DRM technology, as well as other consumer products.

    They would be a ripe target for class action regarding them cutting off access to music people had purchased.

    While Apple's storefront may be gone, they can't afford the PR damage to their entire business and tarnishing of the Apple name that would result from screwing their customers so badly.

    Apple is not a fly-by-night operation. Closing their music store is one thing.

    Blocking customers access to their music would likely cost them a hell of a lot more in revenues than closing the store alone would.

    Hundreds of millions; much more costly than the ongoing cost of continuing to maintain the DRM authorization servers and continuing to service already-purchased product.

Exceptions prove the rule, and wreck the budget. -- Miller