John Paczkowski

Recent Posts by John Paczkowski

Shut Down iTunes? … and Then What? Refer Former iTunes Customers to Zune Marketplace?

Let me see if I understand this correctly. On Thursday, the Copyright Royalty Board will rule on a proposal by the National Music Publishers’ Association to raise the royalties paid to its members on songs purchased from digital music stores like iTunes. The NMPA currently collects 9 cents a track. It would prefer to collect 15 cents–a 66 percent increase. And Apple (AAPL), the country’s largest music retailer–online and off–would rather shutter iTunes, the digital music storefront through which it has sold over five billion songs, than pay it.

Again, Apple would rather close iTunes, the fulcrum of its iPod/iPhone franchise–and a service that Billboard estimates generated $1.9 billion in revenue last year–than absorb a 6-cents-a-track royalty increase or pass it on to consumers.

Somehow I doubt it. Even if iTunes vice president Eddy Cue did tell the CRB that Apple might do just that if the board agrees to the increased royalty rates proposed by the NMPA. “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 in a statement submitted to the CRB last year. “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.”

But of course it is possible to do so profitably. Especially if you pass the increase in royalty rate along to the consumer and the blame for that increase on to the NMPA with the astonishingly well-timed release of a sensationalist 18-month-old quote.