Apple Threatening iTunes Shutdown

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This past week has been one of bluffs. First, Republican presidential hopeful John McCain threatened to be a no-show for last Friday night’s debate, and now Apple is touting the possibility of closing their wildly successful iTunes music store.

This past week has been one of bluffs. First, Republican presidential hopeful John McCain threatened to be a no-show for last Friday night’s debate, and now Apple is touting the possibility of closing their wildly successful iTunes music store.

The threat is Apple’s reaction to the National Music Publishers’ Association request that iTunes (along with other online music retailers) increase their per-song royalty rate. The current royalty rate for iTunes is nine cents, but the Board wants a raise to at least fifteen cents.

Apple’s reaction was not one of negotiation—executives at the company see no room for increase and claim to be willing to shut down accordingly.

“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,” iTunes vice president Eddy Cue explained. “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.

“I have no doubt that an increase in the per track price would lower total music purchases at the store.”

On Apple’s side are record companies, who do not wish to foot the bill of an increased royalty rate. Both Apple and record companies actually want to cut royalty rates to 4.8 cents a track.

The Washington DC-based Copyright Royalty Board is to make a decision on the matter Thursday. iTunes fans, let’s hope Apple goes the way of McCain and calls their own bluff.

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