Apple Threatens to Shut Down iTunes




Musicians and their labels want Apple to increase the amount they make per digital music download. Apple says they would rather shut down iTunes music store. They are turning down a request for an increase of six more cents per song for music publishers and songwriters.

Apple has insisted on keeping the price at 99 cents per download arguing that any price increase above that will make them unprofitable. The Copyright Royalty Board is scheduled to decide on the proposal by a three-person board appointed by the Librarian of Congress by Thursday. Music publishers want their cut to go from 9 cents to 15 cents per song – a 66 percent increase.

Digital downloads have been at the same rate for 12 years and at the the same rate as the sale of physical albums. The board will also raise royalties on physical albums and ringtones, “for the next five years.” I don’t know if that means in five years they will raise the rates higher.

Wired quotes Apple’s iTunes vice president Eddy Cue as saying:

“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.”

Rather than raising prices to $1.05, running at a profit loss, or closing iTunes altogether, Apple is threatening the latter. Given the popularity of iPods and iTunes, I’m not buying what they’re selling. But Apple is taking a hard line stand – just as they’ve done on the DRM issue.

So far Apple has managed to get their way, despite a lot of challenges – not only from Amazon – but from other countries. A consumer group in Norway is threatening to sue Apple for making it difficult to playing music from iTunes on anything other than an iPod. They’re trying to recruit other countries to join the fight to get Apple to make music downloads available on other products – including mobile phones.

  • http://www.ParadiseValleyLiving.com Max

    I think Apple knows what they’re doing. It probably has a lot to do with consumer perspective on the price, where $0.99 is “less than a dollar”. Even though right now a $15 card buys you 14 songs, after $0.15 raise it will buy only 13 songs. Plus if they raise the price – there might be a shake up in consumer confidence, expectation for future price increase + opens room for competition with iTunes. I don’t know what kind of loss there would be for Apple to shut down the iTunes, but it seems like the music industry would feel it pretty hard since iTunes is expected to hover 85% of the market share. Turn it off for a week and see what music makers will say – that would be an interesting exercise :)

    Max’s last blog post..Paradise Valley Sales Report – August 2008

  • http://www.jordankasteler.com/utah-seo-pro-blog/ Utah SEO Pro

    two words: empty threat.

    Utah SEO Pro’s last blog post..Social Media Expert Quiz

  • http://solinkable.com SoLinkable

    You mention “musicians and their labels” at the beginning of the article… I think you really meant to just say “Labels”.

    SoLinkable’s last blog post..Unprepared For Divide_By_Zero – The Daily WTF

  • http://haiku-poems-blog.blogspot.com/ kouji

    would be good to have more options out there aside from itunes, so that both users and producers will have more choice.

    kouji’s last blog post..haiku poem: nature (sand)

  • http://www.rbmrecordingstudios.com Ryan @ Recording Studio Los Angeles Recording Studios LA

    Now that to me just seems like greed on someone, why would they shut down itunes. I dont believe it what are they going to do stop selling ipods too?
    Crazy people it’s unbelievable.

    Ryan

  • http://seonext.com SEO next

    I dont think apple will actually do it ….
    I tunes is one of their most famous softwares which has a major share in the music industry..
    I think they can try the google way of generating revenues by having some kinda adverts for the itunes…
    Its not always required to take the money from the users for a product which is so damn popular…

  • http://www.jaankanellis.com Jaan Kanellis

    “Empty threat” EXACTLY. love to see the music people go back to living off of just CD sales, LOLOL

    Jaan Kanellis’s last blog post..Search Like It Was 2001 with Google

  • http://topsurveysites.org Paid Survey Guy

    I sincerely doubt that Apple will actually do this, they make far to much money to just close for good – Someone should call their bluff!

    Paid Survey Guy’s last blog post..Take Surveys And Get Paid

  • http://solinkable.com SoLinkable

    In case anyone hasn’t heard yet, the copyright royalty board did… absolutely nothing. The rates stay the same, and iTunes is here to stay.

    SoLinkable’s last blog post..The Hot Room – The Daily WTF

  • http://www.gadgets4nowt.co.uk/ PS3

    Moving over the 99p barrier may be a milestone for some but will it really stop the kids buying. I can’t imagine that it would.

    More to the point, would there be a knock on for hardware sales (iPods themselves) without iTunes?

  • http://hattieann.com Hattie Ann

    I listen to iTunes on my computer at work and at home. I’m so glad to hear that they are here to stay. You had me worried that I would have a heck of a time finding something else to listen to. I hate the radio because of the commercials so when I found iTunes, I was in love.

    Hattie

    Hattie Ann’s last blog post..I felt so very honored

  • Janet Meiners

    @SoLinkable – thanks for the update. No surprise there.
    – Janet

  • http://www.netage.co.za Goran Web Design

    Well it’s basic psychology, the $0.99 is actually a dollar but expressed in cents. So any increase made to it will bring the price up to the dollar expression which will sound like a significant increase and consumer purchase will drop due to that. So the $0.99 is just making it sound cheap but with greater monetory value. Smart ;-)

  • http://ministryofinternet.com kouji

    I am with Apple on this one, any increases will make itune look expensive.

  • http://seologia.com.ar Seologia

    Poor multi billion dollar companies. Hope things pick up for them. :(

    Seologia’s last blog post..Cosas que te pasan cuando sos SEO

  • http://www.greatpriceshere.com Nicole Price

    Someone is trying to hold the price line. I think that what Apple is trying to do here is the right strategy. The Norway story is not likely to result in anything significant.

    Nicole Price’s last blog post..Hypermiling

  • http://www.geekypete.com Pete

    It will be interesting to see what happens with this, will the .99c threshold be broken one day? We will just have to wait and see. I do not see iTunes shutting down anytime soon. With music the way it is today, I think increasing it will just equal less sales.

    Pete

    http://www.geekypete.com

    Pete’s last blog post..Editing Blogger.com Template Part 4: Newsidebar Wrapper

  • http://www.christmas.bg/ Christmas Guy

    No it will do that. No way. I really don’t believe that Apple will fulfill it. They cannot stop operating with itunes as this service is profitable for it.

    Christmas Guy’s last blog post..We Wish You a Merry Christmas Lyrics

  • http://www.xeltek.com Sherif K

    I am by Apple’s side on this issue. I think that increase absolutely would decrease the Apple’s profit they gain from Itunes.
    By the way, I agree with that consumer group in Norway on that we can’t download the songs on other music players :(

  • http://www.sannayak.com San Nayak

    Acting in advance by predicting their coming threats.

    San Nayak’s last blog post..A Wednesday – Best Hindi Movie of 2008

  • http://www.directsaleswebmarketing.com Dennis Edell

    Apple being difficult with their products…now there’s shocking news.

    Dennis Edell’s last blog post..My First Contest! Time To Put Your Thinking Caps On…

  • http://www.permaculture.co.za Jacques Snyman

    Yes! Turn it off for a week and see! I betcha the artists would rather have their current remuneration than zilch!

  • http://www.quickpwn.com QuickPWN

    There’s no way Apple will shutdown the iTunes store, otherwise they would lose a lot of money. Especially with the launch of the App Store.

    QuickPWN’s last blog post..Install Flash Player iPhone App

  • http://checkpagerank.ws Check Page Rank

    Impossible. Not making profit means that they aren’t making billions range. They wouldn’t shut this feature down in the near future at least.Just need a competitor and they will said that $.50 is good enough.

  • http://www.dealgiant.co.uk/ Saz

    I personally think iTunes is a blessing for musicians and record companies in case if they are not aware there are tons of free music download sites out there

    Saz’s last blog post..Virgin Mobile Launches Mobile Broadband – Get Generous 3GB USB Virgin USB Sticks Now!

  • http://deansimpala.blogspot.com magdotcom

    The current pricing for music download on iTune is perfect. I can’t remember the last time I brought a CD. I actually want the pricing of TV episodes and movies to go lower. I think iTune also supports a lot of independent musicians. Apps Store is great.. iTune is easy to use.. I can only see iTune going forward. Don’t listen to those record labels.. they have no idea what consumers want!

    magdotcom’s last blog post..Steve: Get well soon

  • http://www.paidsurveysources.com Paid Surveys Dude

    Apple is big enough to not have to give in to the greed of the music industry. Those people are crazy. They see something making money, bringing them sales that they wouldn’t have gotten otherwise and they still are not happy.