Royalty Board To Rule. iTunes Threatens Shut Down

Apple has filed a brief with the Copyright Royalty Board to fight a proposed increase in mechanical royalty rates from 9 to 15 cents. In the brief first reported by Fortune Magazine’s Devin Leonard, Apple threatens a shit (I meant shut, sorry about that…) down if rates rise. This increase, proposed by publishers would force iTunes to raise prices, according to Apple. And when the alternative for many consumers is free, raising prices above $.99 cents would only drive them towards P2P.

But it seems unlikely that the Copyright Royalty Board will increase rates paid to songwriters so dramatically when it meets today. The music industry is struggling, new revenues streams are just beginning to emerge, and some publishers are reporting record revenue.

Will Apple shut down?  Never. iTunes is too important to Apple’s iPod and iPhone ecosystem to close it.  Prices could rise despite Apples protests to the contrary. But more likely, an royalty increases will be small enough for Apple to absorb them.  After all, WalMart and Amazon already sell down loads at 5 to 11 cents less than $.99 suggesting that there is room for tighter margins at iTunes as well.

MORE: PDF of Apple’s brief, Fortune Magazine