Apple iTunes VP says, “Charge us more and we’ll just shut down”

By on Oct 2, 2008 at 8:26 AM
General October 2, 2008

There will be a ruling by the Copyright Royalty Board (oooh, sounds pretentious) today regarding whether iTunes will have their royalties charges raised from 9 cents to 15 cents per track. Eddy Cue, the VP of Apple iTunes states:

“If [iTunes] 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. Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [iTunes] if it were no longer possible to do so profitably.”

It sounds like he’s saying, “Go ahead, we’d like to see you try… just watch what happens.” Pretty incendiary! Apple is obviously bluffing – it will clearly not just close up shop if the 6 cent increase takes affect. So, if the ruling passes expect to eat the costs every time you click “Buy Song” on iTunes.

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  • Jason

    Amazons MP3 files are 100% better than itunes crap thats locked down and you cant do jack with them

  • Dtest54

    Hate on Apple all you want but they do this right. They have a track record of standing up to the record companies.
    iTunes is #1 for a reason.

  • http://none Andrewm

    Anyone remember back when itunes started and they claimed to be breaking even on it, Claiming it was purely a vehicle to further sales of the Ipod.

    What a bunch of asses.

  • umm ok

    hey BG ever since you got these new bloggers your about two days behind with all the articles…

  • byrd

    Dtest54 – iTunes is number 1 because of the penetration of the iPod, and the realization that people will buy from a single source assuming there is sufficient product rather than go through the annoyance of finding music via alternate paths that may or may not work on their favorite player. I do agree with Jason. Amazon’s files are better and I regularly purchase from them. However, like many of the Amazon customers, I look for the music I want on iTunes, then buy it on Amazon.

  • Blackula

    i love bit torrents:)

  • Dtest54

    Andrewm, its been a longtime since then. They no doubt have more of a profit margin but I’m willing to bet its not much, maybe a few cents per song.

    byrd, I do the same but iTunes works for the majority of its customers. Most people don’t care about DRM as long as they can burn a CD or load it onto their ipod. Obviously its #1 because of the ipod but plenty of people now know recognize iTunes as their online way to get their music, ipod or not.

  • geinge82

    iTunes then pissed me off. Some of my songs that I purchased won’t even load onto my iPod. They have exclamation points in front of them saying track cannot be found. This has been happening to many times. Skip iTunes, I will just go back to buying cd’s.

  • MadMike

    Obviously they aren’t making much on these songs. There profit margin is probably only $0.06 or less per track.

    Now, the CRB does the royalties that go to the artist. Now while I feel somewhat bad (okay, not that much), it’s the artists fault for staying with a record company. If they left, they wouldn’t need to raise the royalty rate.

  • Don Louie

    This is going to affect more than itunes

  • mac-symbian lvr

    @ umm ok – Then go register your own domain, make your own blog, and type of the information before BG does. Don’t forget to develop a website, make sure your servers can handle the load (depending on whether or not you’re even smart enough to market yourself and get your name out there), and make sure you can actually get insiders to trust your dumb ass to send you information before anyone else gets it.

    I personally don’t care if they are 5 days behind because i generally don’t go anywhere else, so it’s new to me. If you don’t like it, go sit on it and rotate.

  • ChrisNYC

    @geinge82

    If you see those exclimation points, you need to reload your collection.

    I had the same problem, and I called Apple and they fixed it.

    Anything in your iTunes can go to your iPod.

  • Jon

    What a load of crap. Apple is trying to call their bluff. If they raise rates, then Apple will just stomach it or they can lose their bread ‘n butter and go under.

  • rattyuk

    Apart from the fact that the group is meeting now to decide rates – why are we using a quote from Eddie Cue that is like OVER A YEAR OLD? A+B does not equal C.

  • http://www.k5live.com Likeabite

    Apple really thinks it rules the world huh. So if they stop iTunes then the Ipod goes under, so does the iTouch and subsequently the iPhone. The idiotic notion that they can afford to shut down their only true dominance in the face of a rate increase. Do they think we’re that dumb or naiive? And if they shut down iTunes, and this is for those that actually do purchse music, don’t we have Rhapsody, the Zune Marketplace and Amazon? It’s not like people did not obtain music before iTunes came around so go ahead…please do us that favor of shutting it down so Microsoft’s Zune can come in and steal everything you’ve ever worked for like they did back in the day. Please do us that favor.

  • Galvatron

    wel a few days ago apples buy rating was downngradedbecaus of the economic slowdown an too many nice poducts

  • Dtest54

    its not a big money maker for them, honestly if they closed it down they could simply partner with amazon and simplify things. They do have some leverage last I checked.

  • umm ok

    @ mac-symbian lvr – why dont you have your mother sit on it? the dirty C*U*N*T could use a hump.

  • Martin Blank

    I’d love to see Apple do this, and then when the masses of iTunes users cry out, have Apple point them to the CRB and the RIAA. It might be what’s needed to get people aware of what has happened to copyright in recent years.

    I’m not an iTunes user. I buy CDs, as the artists seem to get a bigger piece of the pie when that happens (or at least Weird Al does). But there is value in getting the masses involved.

  • http://www.bgr.com Marc Flores

    @umm ok Hey, bud. Take a look at the source, and the links in that source. They’re both dated October 1. Sorry for not anticipating those articles and writing on the topic BEFORE the source was available.

  • OZ

    How can iTunes be that expensive to operate!

    $0.99 – $0.15 = $0.83 for Apple sure there is some overhead to iTunes but come on…

  • http://www.bgr.com The Boy Genius

    @OZ

    The majors take 70% so off of a $0.99 song, that’s approx $0.29 for Apple. Throw in the added expense of them having to pay $0.15 per song, and you’re looking at net profit of $0.14. Maybe that seems like a lot to you, but in my book, that’s pretty shitty. Especially when you add in overhead like credit card processing fees, bandwidth, charge backs, staff…

  • Martin Blank

    Those 14 cents are not profit. It’s closer to net revenue. Profit isn’t calculated until the costs that you mention are factored back in. If they were running 14 cents of profit per song, that would be be a very respectable profit margin.

    Standard credit card costs run between 1% and 2% for the total transaction for large transactors, so figure about 1.5 cents per 99-cent song comes off the top.

  • Magius

    Yeah, read it through. apple is sitting between the real victim, the artist, and the overseer, the publishers. If the publishers are so darn preoccupied about the artist royalties, why not pull it from their own share?

    Earning almost 70 cents for each 99 cents spent and not having to share it is really a sweet deal, huh?

  • http://www.bgr.com The Boy Genius

    @ Martin

    Was in a hurry, sorry. You are right. That’s net revenue, not net profit.

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