Apple wins royalty rate showdown

Apple wins royalty rate showdown

Summary: Guess Apple won't have to shut down iTunes after all. Apple had warned that if the royalty rate for music downloads increased, iTunes would become unprofitable and they might pull the plug.



Guess Apple won't have to shut down iTunes after all. Apple had warned that if the royalty rate for music downloads increased, iTunes would become unprofitable and they might pull the plug. But the Copyright Royalty Board handed Steve Jobs, as well as Amazon and Real, what they wanted: no change in the royalty rate. Reports
The three-member board that sets statutory copyright licenses e-mailed the Digital Media Association (DiMA), the National Music Publishers' Association, Apple, and other download stores with its decision to keep the royalty rate 9.1 cents. The board also set the same rate for CDs and mandated established a 24-cents rate for ringtones. The decision is the first time the Board has established mechanical royalty rates for digital downloads.

How much of a role did iTunes play in the decision? Considering how friendly the CRB was to SoundExchange's demands for Draconian rates for streaming, probably some.

"Sure it was posturing," a source told "That's what you do in court. I don't think Apple would have gone out of business but a statement like that from the biggest music retailer is going to carry some weight."

Despite appearances, it's a good move for the music industry. Making legal downloads more expensive would make it harder to compete against free, illegal downloads, said a Gartner analyst.

This is still a new and struggling industry and now isn't the time for a drastic rate increase that will have an effect on pricing.

Topics: Apple, CXO, Enterprise Software, Hardware, Legal, Mobility

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  • higher Rate?

    the Real price for a song should about 25 cents (this will make it more competive agains "free") but guess the RIAA's members just want more money no matter what. that is why the RIAA must be shutdown as it is the most anti-consumer criminal organisation in the world today. Lower the price of music to 25 cents a track and movie for arround 2$ and piracy will drop down the single digit level.

    The digital revolution is here... but as long as openly criminal organisation such as the MPAA and RIAA are allowed to operate in broad daylight... "Free" is the only to get enterteiment as a good and not infected with maleware (aka: Illegal DRM)
    • Legitimate vs Piracy...

      While I agree with some of what you said, I have to
      argue that dropping the price too much is just as bad
      as piracy. Yes, the RIAA and MPAA have gone too far in
      the wrong direction in their efforts to stem piracy, but
      to shut them down would eliminate the standardization
      that makes the music and movies viewable in the first
      place. Rather than accusing private individuals and
      hitting them with brobdingnagian fines, they should be
      seeking out the true pirates; the ones who do more
      than "make available" the work and actually copy and
      distribute the work. Not only would this help their
      bottom line, but would actually make them out as
      heros rather than the villains they have become.

      "Free," as you describe it, would open an all-new can of
      worms that would make the battle between Blue-Ray
      and HD-DVD look like a spat between siblings. It
      would permit each studio to release the work in a
      proprietary format incompatible with any other, forcing
      manufacturers to either design players able to decode
      all formats, or release a different player for each
      format. In the end, the consumer would be an even
      worse loser than we already are. After all, the RIAA and
      MPAA are the organizations that originally set the
      standards the production companies operate by.

      The issue with the RIAA and MPAA today is that while
      they claim individual piracy is sapping sales and
      shorting the artists, each agency is essentially a
      consortium of executives from their separate industries
      who are seeing a loss of income and are using the
      agencies to represent them in their efforts to restore
      the status quo, rather than establish new technologies
      to circumvent the pirates. Rather than seeking out the
      worst offenders, they are charging any individual they
      can find who uses a certain kind of software that
      happens to display a protected title's name. All this as
      managed to do for them is get a few victims to settle
      out of court for exorbitant amounts and now two
      major losses which could result in countersuits that
      would cost them everything they have gained so far,
      and more.

      So yes, I agree that the RIAA and MPAA have gone
      about stopping piracy the wrong way, what you
      suggest would essentially be piracy in another way,
      costing the artists and their producers money that they
      have actually earned. While the two agencies are
      effectively abusing their monopoly power, the purpose
      behind them was originally a regulatory one rather than
      a litigious one. The only way to stop this problem is to
      analyze the money flow and find out just who is really
      being cheated by whom. Follow the money, and you
      find the criminal.
      • Not piracy to charge less

        If you look at the breakdown, the record companies are getting the lion's share of the money. Apple gets paid for their storage and proprietary software (which is another issue) and the artists are still getting hosed.

        If you halved the record companies' shares without touching the other fees, there would still be a profit all around. I would prefer an increase to the artist, but so many got hooked into contracts where the fees still end up with the label and not with them.

        I remember the days where we held cheap little GE recorders up to the radio to tape our favorite songs. It never stopped us from buying the albums or supporting the artists by going to their concerts. In fact, because we had the songs we liked playing all the time, we probably helped increase sales. Why? Like another poster said, we could hold the packaging in our hands and interact via lyrics, pictures and other inserts.

        Would I buy the White Album in any other form but the original vinyl? Hell, no! I still have the inserts and pics from all those years ago--something I would never have gotten if it came out today. Well, I might have, but it would then cost about $100. Back in the day, I paid the standard double LP price.
        • A more open concept

          I read quite a few e-books and there is the same problem with many e-books in regards to royalties and DRM.
          Luckily I like Sci-fi and one of my favourite publishers is Baen books. They have a very refreshing view of providing material DRM free e-books as well as free copies of books to allow readers to see if they like a particular author before purchasing.
          As one of the authors writes, "...the major obstacle which little-known writers face is their obscurity. (And almost ALL writers are little known.) Readers are hesitant to spend money on an author they are not familiar with...I can say with great confidence, based on these 123 letters, that I've sold four or five times as many books of my own because of the exposure which the Free Library and Webscriptions have given me than I've lost through putting the books up online for free."
          You can read more about their ideas on their website including two speeches given by Thomas Macaulay in Parliament in 1841, when the issue of copyright was being hammered out. Go to also check out and
          These same ideas can easily be applied to music and movies if the big movie houses and record producers could only get their heads around the new technology and the opportunities it offers for wider distribution and exposure rather than greater and greater control and restrictions.
  • RE: Apple wins royalty rate showdown

    I think iTunes is awesome, but regulation and greed by the
    record labels is always going to be a factor. In some ways, I
    think Apple need to make iTunes become a separate
    business altogether and allow it to become the
    of the music world.

    its restriction to iPods will always be its achilles heel.
  • RE: Apple wins royalty rate showdown

    You know when albums were king we would sit down and put the record on and read the record jacket full of content. (Liner notes, producer names, engineer names, dedications and most of all lyrics. (And more)) This gave your purchase added value above and beyond the price of the music.

    Now for 99 cents you???re lucky to get the artist, song and album title. Oh and of course the vacuous blank spaces in the track tag.

    If the music industry wants to entice the music listening public not to download music illegally......Give them something of value, besides the music.
  • Ringtone rip-off

    I can't understand the logic that sets the value of a 10% portion of an item (30 sec ringtone of a 5 minute song) at nearly 3 times the value of the whole item. Why would anyone buy a ringtone, vs. simply buying the full song, and exercising their fair use rights to create a ring tone from it? It's trivial to do if you have an iPhone and the latest version of GarageBand.
    • Re: Ringtone rip-off

      I honestly can't disagree with you. The problem is, too
      many people who pay such exorbitant rates for their
      ringtones are simply too lazy to make their own.

      I don't even have an iPhone and I made separate
      ringtones for calls and texts that let me know what I'm
      receiving no matter where I am, with no confusion
      from anybody else as to who's phone is ringing.
  • RE: Apple wins royalty rate showdown

    Wait..wait..wait a minute! The story here on ZDNet seems to be saying the industry is recognizing the illegal trade as a viable competion to be delt with? Are we China?

    By recognizing anything illegal as a viable marketing force is to give it legitamacy. Are we saying we can't...or won't enforce the legality of downloading?

    Looks like society has given up on the whole free download thing. Also looks like the "legitimate" side is going to have to find a real marketing concept that works, huh?