While the perceived price of music continues to fall, the actual retail price of a song could face upward pressure this week. That's because the Copyright Royalty Board, a division of the U.S. Library of Congress's copyright office, is expected to decide Thursday whether to accept a proposal that would raise publishing royalties on paid downloads from 9.1 cents to 15 cents per song, potentially forcing retailers such as Apple Inc.'s [AAPL] iTunes to reconsider the relatively standard maximum charge of 99 cents per song.
The request, entered by the National Music Publishers' Association, is one of several proposals, including another that would reduce the royalty rates and a third that would replace them with a cut of wholesale revenues. Apple itself supports the Digital Media Association proposal that would lower publishing royalties to 4.8 cents per song or 6% of applicable revenues, while the major record labels support pegging the rate to 8% of wholesale revenues with no per-track figure.
While some observers have suggested that Apple might respond drastically to a rate hike by shuttering the iTunes store, based on an old piece of testimony [here's the pdf] from iTunes vice president Eddy Cue, such a reaction seems unlikely. Apple maintains an 85% share of the digital music market, while continuing to garner massive revenues from the sales of related iPod and iPhone devices. At that market share, the company could probably get away with treating music as a loss leader, but it continues to make relatively meager profits on music sales.
The CRB's imminent ruling will accompany its other key decision that could set royalty rates for interactive streaming-music sites at 10.5% of revenues. That current proposal standing before the CRB enjoys the support of DiMA, the RIAA, NMPA and other songwriters' organizations. -- Paul Bonanos
See Sept. 23 post from Tech Confidential concerning streaming royalty rates
For more, see Fortune
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