The Copyright Royalty Board has frozen the rate digital retailers must pay to artists for the next five years after a showdown with Apple. The largest digital music retailer threatened to shutter its iTunes service if it was forced to pay a higher rate.

At issue is the portion of the price of music downloads that actually gets paid to the artists. The Copyright Royalty Board had been considering raising that rate from 6 cents per song to 15 cents per track. While the actual rate is still relatively low, this move would have represented a 66% increase over the current rate.

However, the board decided to increase the rate that digital retailers must pay for ringtones to 24 cents. Songwriters and publishers see this decision as a windfall as their initial request had been for a rate of 15 cents per ringtone.

Apple has been throwing its weight around as the largest digital music retailer leading up to this decision. The company claims that the increase would interfere with its ability to turn a profit on songs made through iTunes. Eddy Cue, Apple Vice President for iTunes said that, “Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate if it were no longer possible to do so profitably.”

Apple has said that it would neither raise its prices for digital downloads nor absorb the cost increase in royalty rates. Rather than adjusting to market forces. the company threatened to shutter iTunes and cease selling digital content.

The three-judge Copyright Royalty Board ruled to freeze the rates paid to artists for the next five years. At that point, Apple may have no choice but to raise the prices of music in its iTunes catalog or shut it down completely. However for the time being, the massive retailer seems to have won the battle against increased costs.

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Entry was posted on Friday, October 3rd, 2008 at 8:57 am under Apple, Retail.

Read more entries by Dave Jeyes.
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