Copyright Royalty Board Weighs Mechanical Royalties Increase
The Copyright Royalty Board (CRB) is readying their decision on whether to increase the mechanical royalties on Digital Phonorecording Deliveries or in layman’s terms: paid music downloads. The National Music Publishers Association (NMPA) wants to raise the rate from 9 cents to 15 cents per paid download. The CRB’s decision should be handed down this week.
The DiMA, a online music retail trade group lead by Apple, actually wants to reduce the rate. In fact, Apple’s Ed Cue, who runs the iTunes Music Store, has stated that if the royalty rate increases Apple may pull the plug on the service. Cue’s stance was revealed in his testimony before the CRB that recently surfaced online. “Alternatively, if the iTunes Store were simply forced to absorb any increase in mechanical 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 testified. “Apple has repeatedly made clear that it is in this business to make money, and would most likely not continue to operate the iTunes Store if it were no longer possible to do so profitably.”
The major labels certainly wouldn’t mind seeing iTunes go away since Apple is by far the dominant online retailer, which gives it major leverage. However, if iTunes does decide to stop selling music, the majority of users will most likely turn to file-sharing networks. Cue’s threat of eliminating the music store component to iTunes is most likely saber-rattling. Owning the entire digital music vertical from device (iPod) to download (iTunes) is what gives Apple a huge advantage over their competitors.