Apple Wins Royalty Fight: No Rate Hike Means iTunes Is Saved

October 2, 2008 5:25 PM ET

The Copyright Royalty Board decided Thursday not to raise the online royalty rates for song publishers, meaning much-publicized April 2007 threats by Apple to shut down the iTunes Music Store have become irrelevant. Had the board followed the National Music Publishers' Association's recommendation and hiked the rate on song downloads from 9 to 15 cents, it might have cut into Apple's profits to the tune of $300 million over the next five years.

To lobby against this scenario, Eddy Cue, iTunes' director, had given a hyperbolic statement to the Library of Congress board. "The result would be to significantly increase the likelihood of the store operating at a financial loss," he said in part. "Apple has repeatedly made 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."

But even if the board had raised the royalty rates, giving songwriters and their representatives that potential $300 million rather than Apple, the iTunes Store was never under serious threat. "It's gamesmanship," says Aram Sinnreich, a music-industry analyst. "Apple doesn't make its money from selling iTunes songs, and it's a break-even business anyway. Let's say Apple agreed to keep half of it and [publishers] agreed to keep half of it — it would make a dent, but it wouldn't cause them to go out of business." According to The NPD Group, iTunes overtook Wal-Mart this year as the top U.S. music retailer.

Related Stories:
iTunes Passes Wal-Mart As Top U.S. Music Provider
Kid Rock's Hot Summer; No iTunes Required
AC/DC's Angus Young on Snubbing iTunes: "We Don't Make Singles, We Make Albums"

To read the new issue of Rolling Stone online, plus the entire RS archive: Click Here

Music Main Next
Around the Web
Powered By ZergNet
Daily Newsletter

Get the latest RS news in your inbox.

Sign up to receive the Rolling Stone newsletter and special offers from RS and its
marketing partners.


We may use your e-mail address to send you the newsletter and offers that may interest you, on behalf of Rolling Stone and its partners. For more information please read our Privacy Policy.

Song Stories


The Pack | 2006

Berkeley, California rappers the Pack made their footwear choice clear in 2006 with the song "Vans." The track caught the attention of Too $hort, who signed them to his imprint. MTV refused to play the video for the song, though, claiming it was essentially a commercial for the product. Rapper Lil' B disagreed. "I didn’t know nobody [at] Vans," he said. "I was just a rapper who wore Vans." Even without MTV's support, Lil' B recognized the impact of the track. "God blessed me with such a revolutionary song… People around my age know who really started a lot of the dressing people are into now."

More Song Stories entries »