Killing the Golden Goose
Apple Inc. is threatening to shut down its popular iTunes service.
The stark warning comes as the U.S. Copyright Royalty Board in Washington, D.C. is expected to rule Thursday on a proposal from the National Music Publishers' Association to raise rates paid to its members on digital songs from 9 cents to 15 cents a track - a 66 per cent hike.
From CNN Money:
Apple (AAPL, Fortune 500) declined to discuss the board's pending decision or its previous threat to shut down iTunes. But it adamantly opposes the publishers' request. In a statement submitted to the board last year, iTunes vice president Eddy Cue said Apple might close its download store rather than raise its 99 cents a song price or absorb the higher royalty costs.
"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."
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My take
The music industry just doesn't get it. If they jack prices on digital music beyond what the market will support, people will revert to piracy. Then no amount of lawsuits will recoup the hundreds of millions of dollars in lost revenue.
