Apple Threatens to close iTunes Music Store!
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Sanest Florida Man
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Apple Threatens to close iTunes Music Store!
Originally Posted by TG Daily
Chicago (IL) - A new chapter in the standoff between Apple and the music industry has begun: Content owners and publishers are pushing for higher royalties that are paid to composers and songwriters and ask Apple to eat the cost itself or pass them on to music buyers. Apple, however, says it would rather close iTunes than raise songs above the current rate.
The music industry could score a small but important victory against Apple and its iTunes Store (iTS), if the Copyright Royalty Board (CRB) confirms a request by the National Music Publishers' Association (NMPA) to increase the royalties paid to composers and songwriters from 9 to 15 cents per song. Whether approved or not, the forthcoming ruling will, for the first time, set royalty rates for digital sales over the next five years, following a 1997 ruling that had defined royalties for physical music sales until 2007. <br><br><br><b>Apple's reaction</b><br><br>Not surprisingly, Apple does not agree with the request. "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," wrote iTunes Store (iTS) vice president Eddy Cue in his statement to the CBR.<br><br>It is somewhat apparent that music labels are pushing for the increase in royalty rates since they know Apple really has only two choices - eat the increase itself or pass it on to consumers. Both scenarios are unlikely, especially the latter as it would raise the per-song pricing above psychologically important sub-$1 barrier. "If the iTunes 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," wrote Cue. <br><br>According an article <a href="http://money.cnn.com/2008/09/30/technology/itunesthreat.fortune/index.htm?postversion=2008093014" target="_blank" mce_href="http://money.cnn.com/2008/09/30/technology/itunesthreat.fortune/index.htm?postversion=2008093014">published by Forbes</a>, music labels demand that the CBR drops the fixed royalty model in favor of the 8% commission of wholesale revenues, or 5.6 cents, to artists. Apple and other online music stores propose a 6% commission, or 4.2 cents, much to the dismay of artists.<br><br>For each track sold, Apple pays about 70 cents to a record label which then hands 9 cents to artists. Apple and keeps the remaining 20 cents to itself. Apple said that its share covers infrastructure costs (servers, bandwidth, payment processing fees) and marketing. In the early days of the iTS, the company used to claim that the store barely breaks even and was simply a marketing tool to promote iPod sales. This isn't necessarily true today. The five-year old store currently has 65 million active accounts with <a itxtdid="6482536" target="_blank" href="#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important;" classname="iAs" class="iAs">credit cards</a> and currently owns 85% of the digital music market in the U.S. Song sales zoomed past the five billion mark as of this July and Piper Jaffray estimates that the iTS will shift 2.4 billion songs this year alone.<br><br>In the June quarter, Apple's music-related activities raked in $819 million and huge chunk of this revenue comes from iTS sales. We should not forget the fact that the digital-only iTunes Store has become the largest music retailer in any format and <a href="content/view/38740/118/" mce_href="content/view/38740/118/">pushed Wal-Mart </a> down to the second rank. It is now the largest online content store in the world and no-one has succeeded in breaking its <a href="content/view/37180/113/" mce_href="content/view/37180/113/">dominance</a> so far.<br><br><b><br>Artists? It's about the infrastructure.</b><br><br>Common sense suggests that this new argument is another disagreement between two divas that are in a love-hate relationship. While the music industry relies on iTunes as a major revenue source, it does not necessarily like iTunes’ growing dominance. History shows that music labels play the “poor artist card”, as in this case, when they see their traditional role as the middleman between artists and stores being threatened. It happened when Napster (and then illegal downloads) grew too large and it happens now (with legal downloads) again. If you put yourself in the shoes of a music label executive, it isn’t particularly difficult to imagine that Apple might expand its role to become a music publisher one day, signing exclusive contracts with artists that will remove publishers from the entire infrastructure.<br><br>We should not be too surprised if music labels come up with more creative ways to reduce the market share of Apple’s iTunes Store - and drive them to other music service for a more balanced market, in which music labels would have much greater control overall. The problem with iTunes, however, is that it is well-funded and that it can’t be sued that easily.
The music industry could score a small but important victory against Apple and its iTunes Store (iTS), if the Copyright Royalty Board (CRB) confirms a request by the National Music Publishers' Association (NMPA) to increase the royalties paid to composers and songwriters from 9 to 15 cents per song. Whether approved or not, the forthcoming ruling will, for the first time, set royalty rates for digital sales over the next five years, following a 1997 ruling that had defined royalties for physical music sales until 2007. <br><br><br><b>Apple's reaction</b><br><br>Not surprisingly, Apple does not agree with the request. "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," wrote iTunes Store (iTS) vice president Eddy Cue in his statement to the CBR.<br><br>It is somewhat apparent that music labels are pushing for the increase in royalty rates since they know Apple really has only two choices - eat the increase itself or pass it on to consumers. Both scenarios are unlikely, especially the latter as it would raise the per-song pricing above psychologically important sub-$1 barrier. "If the iTunes 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," wrote Cue. <br><br>According an article <a href="http://money.cnn.com/2008/09/30/technology/itunesthreat.fortune/index.htm?postversion=2008093014" target="_blank" mce_href="http://money.cnn.com/2008/09/30/technology/itunesthreat.fortune/index.htm?postversion=2008093014">published by Forbes</a>, music labels demand that the CBR drops the fixed royalty model in favor of the 8% commission of wholesale revenues, or 5.6 cents, to artists. Apple and other online music stores propose a 6% commission, or 4.2 cents, much to the dismay of artists.<br><br>For each track sold, Apple pays about 70 cents to a record label which then hands 9 cents to artists. Apple and keeps the remaining 20 cents to itself. Apple said that its share covers infrastructure costs (servers, bandwidth, payment processing fees) and marketing. In the early days of the iTS, the company used to claim that the store barely breaks even and was simply a marketing tool to promote iPod sales. This isn't necessarily true today. The five-year old store currently has 65 million active accounts with <a itxtdid="6482536" target="_blank" href="#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important;" classname="iAs" class="iAs">credit cards</a> and currently owns 85% of the digital music market in the U.S. Song sales zoomed past the five billion mark as of this July and Piper Jaffray estimates that the iTS will shift 2.4 billion songs this year alone.<br><br>In the June quarter, Apple's music-related activities raked in $819 million and huge chunk of this revenue comes from iTS sales. We should not forget the fact that the digital-only iTunes Store has become the largest music retailer in any format and <a href="content/view/38740/118/" mce_href="content/view/38740/118/">pushed Wal-Mart </a> down to the second rank. It is now the largest online content store in the world and no-one has succeeded in breaking its <a href="content/view/37180/113/" mce_href="content/view/37180/113/">dominance</a> so far.<br><br><b><br>Artists? It's about the infrastructure.</b><br><br>Common sense suggests that this new argument is another disagreement between two divas that are in a love-hate relationship. While the music industry relies on iTunes as a major revenue source, it does not necessarily like iTunes’ growing dominance. History shows that music labels play the “poor artist card”, as in this case, when they see their traditional role as the middleman between artists and stores being threatened. It happened when Napster (and then illegal downloads) grew too large and it happens now (with legal downloads) again. If you put yourself in the shoes of a music label executive, it isn’t particularly difficult to imagine that Apple might expand its role to become a music publisher one day, signing exclusive contracts with artists that will remove publishers from the entire infrastructure.<br><br>We should not be too surprised if music labels come up with more creative ways to reduce the market share of Apple’s iTunes Store - and drive them to other music service for a more balanced market, in which music labels would have much greater control overall. The problem with iTunes, however, is that it is well-funded and that it can’t be sued that easily.
The music industry hates the dominance that Apple has achieved and is trying everything it can to take it back. That's why Apple has a limited selection of DRM-free songs compared to Amazon and it maybe why they don't offer a music subscription service a la Rhapsody or Zune.
Thread Starter
Sanest Florida Man
Joined: Aug 2007
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From: Florida
HAHA! I just read that! That's fucked up. Why do people keep trying that man like that! Some iJournalist for CNN you know the place where anyone can make up their own news and send it in to CNN falsely reported that he had a heart attack. Must've been some PC lover
Last edited by #1 STUNNA; Oct 3, 2008 at 02:27 PM.
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Safety Car
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Reminds me of this from 2000 (NWS for language and adult situations):
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>
The Third Ball
Joined: Sep 2002
Posts: 50,495
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From: Los Angeles, Ca
Reminds me of this from 2000 (NWS for language and adult situations):
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/QWTKpWwuohQ&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>
Pinky all stinky
Joined: Jul 2003
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Likes: 194
^ 
and half the time iTunes craps out on me anyway. I haven't updated mine since the last two times I "updated" it and apple told me I didn't have rights to some of my mp3's. I actually LOST songs from my iPod.
and half the time iTunes craps out on me anyway. I haven't updated mine since the last two times I "updated" it and apple told me I didn't have rights to some of my mp3's. I actually LOST songs from my iPod.
Thread Starter
Sanest Florida Man
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From: Florida
Old Man Yelling at Clouds
Joined: Apr 2007
Posts: 16,973
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From: Seattle, WA
Apple is the one that's bluffing. No way they shut it down. If iTunes broke even, they still make tons of $ off the iEverything they sell. No iTunes, no iPods. I think it's all a front to make them look like they're looking out for us. The music indurstry would love them to shut down. iTunes kills CD sales.
Interesting side-topic is that the new AC/DC album is not only being sold at Wal Mart only, they refuse to let iTunes sell it because iTunes won't let them sell it as an album only. Bit of an interesting battle between Apple and the music industry...
Interesting side-topic is that the new AC/DC album is not only being sold at Wal Mart only, they refuse to let iTunes sell it because iTunes won't let them sell it as an album only. Bit of an interesting battle between Apple and the music industry...
nnInn
Joined: Mar 2006
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No AC/DC CD are on itunes. If music industry wants itunes to shut down, all they have to do it stop letting Apple sell the music. The industry loves itunes, just as NBC realized this year that itunes was making them money for TV shows. They called Apple's bluff last year and came crawling back.
Pinky all stinky
Joined: Jul 2003
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Likes: 194
Apple is the one that's bluffing. No way they shut it down. If iTunes broke even, they still make tons of $ off the iEverything they sell. No iTunes, no iPods. I think it's all a front to make them look like they're looking out for us. The music indurstry would love them to shut down. iTunes kills CD sales.
Interesting side-topic is that the new AC/DC album is not only being sold at Wal Mart only, they refuse to let iTunes sell it because iTunes won't let them sell it as an album only. Bit of an interesting battle between Apple and the music industry...
Interesting side-topic is that the new AC/DC album is not only being sold at Wal Mart only, they refuse to let iTunes sell it because iTunes won't let them sell it as an album only. Bit of an interesting battle between Apple and the music industry...
But there are iPods...millions of them currently out there. People will still get mp3s from elsewhere. The music industry is starving, not Apple. Eventually they will have to cater to Apple because those mp3 seekers will find an alternative source for their mp3's. Free sources. Which means even less royalties paid to the music industry.
And AC/DC ain't going to break Apple's back
Thread Starter
Sanest Florida Man
Joined: Aug 2007
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From: Florida
The reason iTunes is so successful is not only because of it's ease of use but because you don't have to buy the whole album. Most people don't want the whole album they just want one or two songs. Also the price of CD singles are/were ridiculous $6-8 for one to three songs!! You might as well just buy the whole album for that price and that was the whole point behind the single CD. You wonder why Napster was so popular I'm not paying $6 for one song.
Unless something drastic changes (like amazon music store integrated with iTunes) I don't think Amazon or anyone will overtake iTS. It is it's integration with the iTunes program that makes it so successful just like Internet Explorer has a vast market share because of it's integration.
Unless something drastic changes (like amazon music store integrated with iTunes) I don't think Amazon or anyone will overtake iTS. It is it's integration with the iTunes program that makes it so successful just like Internet Explorer has a vast market share because of it's integration.
Safety Car
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I'm privately mourning the death of the album format. Is it people's lack of attention span or is it... hmm. What?
Pinky all stinky
Joined: Jul 2003
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No AC/DC CD are on itunes. If music industry wants itunes to shut down, all they have to do it stop letting Apple sell the music. The industry loves itunes, just as NBC realized this year that itunes was making them money for TV shows. They called Apple's bluff last year and came crawling back.
And iTunes is also making music stars. Feist's song was featured on an iPod ad and she went on to be nominated for a few Grammy awards...as an indie artist. No backing from the major labels. And now I'm a fan.
Thread Starter
Sanest Florida Man
Joined: Aug 2007
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From: Florida
people don't like the band enough to listen to all of their songs. If bands as good as the Beatles were still around then people would enjoy every song but not every song from every band is a hit like the beatles' songs were.
Old Man Yelling at Clouds
Joined: Apr 2007
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From: Seattle, WA
Don't get me wrong, I love my iPods and my iTunes. I just found it a strange bluff for iTunes to make. If iTunes go, so do all those iPods and accessories, and the rest of the business still has outlets (CDs, MP3, etc.). Granted, a lot of artists probably do better than they would have without iTunes. I just found it interesting how quickly Apple said it would "rather shut it down". These iThings print money for Apple...
E92
Joined: May 2007
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From: socal
Don't get me wrong, I love my iPods and my iTunes. I just found it a strange bluff for iTunes to make. If iTunes go, so do all those iPods and accessories, and the rest of the business still has outlets (CDs, MP3, etc.). Granted, a lot of artists probably do better than they would have without iTunes. I just found it interesting how quickly Apple said it would "rather shut it down". These iThings print money for Apple...
E92
Joined: May 2007
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From: socal
Also, a lot of people today could care less about the entire album. They just get the hits and listen to them.
nnInn
Joined: Mar 2006
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I have never purchased a Beatles album or song, hell let me add to this, same for Bruce Springsteen.
nnInn
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Not just the hits, I came across a Dave Matthews song last week I've never heard, You Might Die Trying, I love this song never heard it before. I d/l from itunes.
nnInn
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The Third Ball
Joined: Sep 2002
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From: Los Angeles, Ca
It involved real life interaction...where now, I can say you know what i think I want this song and open itunes.
Or if I have wifi...just order it off my iphone.