October 2nd, 2008
Apple wins royalty rate showdown
Guess Apple won’t have to shut down iTunes after all. Apple had warned that if the royalty rate for music downloads increased, iTunes would become unprofitable and they might pull the plug.
But the Copyright Royalty Board handed Steve Jobs, as well as Amazon and Real, what they wanted: no change in the royalty rate. Reports News.com:
The three-member board that sets statutory copyright licenses e-mailed the Digital Media Association (DiMA), the National Music Publishers’ Association, Apple, and other download stores with its decision to keep the royalty rate 9.1 cents. The board also set the same rate for CDs and mandated established a 24-cents rate for ringtones. The decision is the first time the Board has established mechanical royalty rates for digital downloads.
How much of a role did iTunes play in the decision? Considering how friendly the CRB was to SoundExchange’s demands for Draconian rates for streaming, probably some.
“Sure it was posturing,” a source told News.com. “That’s what you do in court. I don’t think Apple would have gone out of business but a statement like that from the biggest music retailer is going to carry some weight.”
Despite appearances, it’s a good move for the music industry. Making legal downloads more expensive would make it harder to compete against free, illegal downloads, said a Gartner analyst.
This is still a new and struggling industry and now isn’t the time for a drastic rate increase that will have an effect on pricing.
