Will Apple close iTunes rather than pay composers?

Apple is threatening to close the iTunes Store if music publishers, singer/songwriters and composers manage to get their royalty level raised – in fact, the company is fighting to depress that royalty even more.

The Copyright Royalty Board in the US will make its decision tomorrow. The National Music Publishers’ Association wants rights-holders to be paid 15 cents per track, which Apple (and the ever-friendly music labels, come to that) vehemently opposes.

In a statement filed with the board during the investigative phase of the process, iTunes head Eddy Cue said: “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.”

He added that Apple, “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.”

Apple pays 70 cents in the dollar to music labels who then hand over 9 cents of that 70 to music publishers.

Labels, shedding CD sales almost fast as they shed public support with their litigious ways, just aren’t prepared to hand across any more – they have been fighting to have the cash paid to songwriters and composers stripped to just 6 per cent. Apple may be forced to foot the bill, meaning higher music prices.

Will Apple shut the store? Highly unlikely, let’s face it – but a quick think says the company could cease music sales with very little impact on its business. With consumer groups in Norway demanding it make FairPlay DRM interoperable and the royalty hike, the company could just stop the service, but I don’t think that’s likely.

After all, when Apple launched iTunes in 2001 there was no viable alternative to file-sharing around, well, not that people would use. Today, thanks to labels moving to sustain a more diverse market, there’s lots of places an iPod user can get hold of music in a compatible format. Where the store was needed to sell iPods at its inception, nowadays it’s a service in its own right, iPod or no.

But will Apple shut it down? I can’t imagine the company would – after all, it just recently invested cash in developing that all-new Genius music recommendation feature.

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