This Thursday, there will be another important vote regarding finances going on in Washington DC. True the numbers aren't quite as big, but nonetheless they could have a massive impact on the future of the online music industry.
The Copyright Royalty Board, or CRB, will vote on a request by the National Music Publishers Association to increase the percentage of royalties paid to its members for music downloaded online. Musicians and artists currently receive nine cents from each download and the request is to increase it to 15 cents.
Apple opposes the move as does AOL, MusicNet, Napster, RealNetworks and Yahoo who are all represented by the Digital Media Association and the Recording Association of America.
Apple's iTunes Store is by far the most successful and frequented online destination for music distribution with an 85 percent market share and an estimated 2.5 billion downloads. Apple argues that the costs of maintaining and running the network means that the profits on downloads are already exceptionally thin. Any increase in royalty costs would likely have to be passed onto the consumer to maintain profitability which would likely drive people away to alternative services or pirate sites.
iTunes president Eddy Cue stated that such an increase could force iTunes to become unprofitable which would not be an option, in which case it would cease to be operable.
By Billboard's calculations, iTunes turned a profit in 2007 with $1.9 billion in revenue and a 30 percent profit margin, or $570 million, which seems to be a little more than just a slim margin.
The threat by Apple may just be a case of brinksmanship by Apple but it could cause the CRB to flinch and rethink the royalty increase. A shut down by iTunes, though unlikely, would be bad news for both parties. For Apple the iTunes Store is a key component in driving sales of its iPods and iPhones. As for the CRB an iTunes shut down would have significant implications and dire financial consequences to its members.
As with the $1 trillion bailout package on Capitol Hill it may just have to go back to the bargaining table before a resolution can be agreed upon by both parties.