iTunes Not Closing After All!

If there is one thing that everyone can agree on about the music business is that it is going through a very uncertain, transitional phase even as we speak! Take for example this past week:

Apple threatened to call closing time for iTunes, the world's leading online music store.

According to Times Online, The Copyright Royalty Board in Washington, D.C. held a meeting to decide whether to grant American music publishers to increase royalty rates on songs sold through online music stores, like iTunes and Amazon. Their request was to up the rate from 9 cents per song to 15 cents, a large 66% increase. iTunes, who has been adamant about not increasing song prices over 99 cents, didn't take the news lightly and threatened to pull the plug on iTunes. According to Apple, 65-70 cents of each song usually goes to the artist with the rest going to Apple. Take network and transaction fees, Apple only makes about 10 cents per song. If the request were to be granted, they'd only make about 4-5 cents per song, basically making iTunes non-profitable.

But don't worry guys, The Copyright Loyalty Board decided to leave the fee unchanged.

Nonetheless, this week had me on the edge of my seat for a couple days eagerly awaiting the decision. Do I think iTunes would have closed down? From a strategic stand-point, I think Apple may have been bluffing to some extent. Just look at how widely popular iPods and iPhones are now. Do you think they really would have hung all its customers out to dry? If anything, the iTunes stores is a driving influence for iPod and iPhone sales. Just like the new App Store that opened during the summer, Apple uses these items to sell more of their products.

But at the same time, I don't blame iTunes for making such a serious threat. It would make running the iTunes store too expensive and they would end up losing more than gain, especially with free streaming music sites out there now. Also, if the price did get hiked up, what would stop music publishers or labels from requesting another increase. Certainly, more money also breeds more greed.  Where will it end? In the near future, music is probably going to be free. What are labels and publishers going to do then?

It's amazing how close the industry came to closing a legit alternative to pirating music. Will we ever learn? Like the saying goes for love, it's like a handful of sand, the tighter you squeeze, the more you loose.