The Copyright Royalty Board is scheduled to vote whether to increase royalty rates on digital downloads this Thursday. The outcome of the vote is likely to have a major impact on such digital retailers as Apple iTunes and Amazon.com as its hike on Internet radio royalty fees still impact the webcaster community.
In fact, the Internet is awash in links to a Fortune article that dug up a filing Apple submitted in the case last year that threatened to shut down iTunes should the hike be achieved.
Now, of course, it is quite unlikely that iTunes will shut down anytime soon regardless of the result. But the case highlights how serious digital music outlets view these royalty proceedings.
The pending vote will determine whether the National Music Publishers Association will be granted their request to increase royalty rates on paid downloads from 9 cents a track to 15 cents. That’s an almost 66% rate hike.
In the world of a la carte digital downloads, where profit margins are razor thin, a 66% jump in costs would have an immediate and dramatic impact. There would be no way around raising costs, effectively eliminating the now-standard 99-cent fee placed on single downloads today.
Unless of course the labels agree to pay the extra cost out of the 70% share of each sale they take from iTunes and other retailers. Don’t hold your breath on that. In fact, record labels not only oppose the move, but have asked the CRB to eliminate fixed payments altogether and replace it with an 8% charge on their wholesale rate. The Digital Media Association, meanwhile, proposes lowering the rate to 4.8 cents a track, or 6% of revenues.
The Internet radio fee hike that the CRB granted is still swirling around Congress as both sides work on a compromise to that situation. Should it grant publishers a full 66% hike in download fees, expect another round of protests and legislative lobbying to ensue.