Royalties Dispute Could Force Apple To Suspend iTunes

Royalties Dispute Could Force Apple To Suspend iTunes
Apple has threatened to pull the plug on its iTunes store this week, if the U.S. Copyright Royalty Board forces the company to pay out higher royalty fees to music publishers.

The board is to rule Thursday (October 2) on whether to grant a request from the National Music Publishers' Association to raise royalty fees for songs bought from online music stores such as iTunes. The association wants to raise rates to 15 cents a track from nine cents, which translates into a 66 percent increase. Apple, on the other hand, wants to decrease the royalty fee to 4.8 cents per track, CNN reports.

Apple refused to comment to CNN on the board’s expected decision or if the company would indeed shut down the iTunes store. But in a statement submitted to the board last year, iTunes vice-president Eddy Cue said the store would not be able to continue if the company had to pay higher royalties.

"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," Cue wrote. "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."

The Copyright Royalty Board’s decision will be its first dealing with digital sales and its decision will set the royalty rates for the next five years. It is unclear what impact its ruling will have only non-U.S. iTunes stores.