iTunes Scare Fades as Royalties Hold Steady

Anyone who believed that Apple might actually shut down iTunes if it had to pay songwriters more money for the songs it sells can breathe a sigh of relief.

In a highly anticipated decision, the three-judge council that oversees music royalties and copyright-licensing issues held the royalty rate that copyright owners receive from digital music sales steady.

The Corporate Royalty Board (CRB), which began its review of the issue in January 2006, faced pressure from groups representing songwriters — who wanted the “mechanical” royalties from music downloads increased — and retailers such as Apple (NASDAQ: AAPL), which had lobbied for a reduction in rates and even threatened to close its popular iTunes store if it couldn’t turn a profit through its music sales.

With its decision to hold the single-song rate for a downloaded song at 9.1 cents, the board elected to keep digital music royalties on par with the physical product. The board also set its first-ever rates for ringtone sales at 24 cents.

In choosing to uphold the status quo for online sales, the board seems to have struck a compromise that satisfied both groups.

The Digital Media Association (DiMA), the group which represents music retailers such as Apple, Amazon and Best Buy and had been calling for a reduction in rates, praised the CRB’s ruling.

“During this challenging time for the music industry and digital stores and services, we are pleased with the CRB’s decision to keep royalty rates stable for the next five years,” Jonathan Potter, DiMA’s executive director, said in a statement. “Keeping rates where they are will help digital services and retailers continue to innovate and grow for the next several years, which will benefit songwriters, artists, labels and publishers.”

Separately, an Apple spokesman said that the company was “pleased with the CRB’s decision to keep royalty rates stable.”

Likewise, the National Music Publishers’ Association (NMPA), which represents songwriters and had lobbied for a 66 percent increase in royalty rates, also applauded the board’s decision.

“We are happy that the judges recognize the importance of songwriters and music publishers to the music industry,” David Israelite, the NMPA’s president and CEO, said in a statement.

The decision follows a previous agreement reached two weeks earlier among songwriters, record labels and online vendors about how copyright holders should be compensated for digital music sold through subscription services or as limited-use downloads.

“Coupled with the historic agreement announced two weeks ago, this decision represents an important milestone for the music industry,” Israelite said. “These events will bring clarity and order to an environment that for the past decade has been hampered by litigation and uncertainty on all sides.”

News Around the Web