Apple Threatens to Shut Down iTunes Over Royalty Hike

Andrea Chalupa reports: Apple is threatening to close down iTunes if music publishers win their day in court today.

Three Washington judges are set to rule today on whether music publishers are owed a bigger cut from sales through online music retailers like iTunes.

Right now iTunes hands over 9.1 cents per song in royalty fees and publishers are hoping to raise them to 15 cents per song. Publishers argue that the lower cost of producing digital goods means greater revenue to go around that should be shared.

Meanwhile, the Digital Media Association (DiMA), major labels, and Apple are fighting to lower royalty fees to 4.8 cents. Apple says that their 99 cent price point cannot absorb the 6 cent hike.

Eddy Cue, vice president of iTunes, said in a written statement to the Copyright Royalty Board back in April of 2007, "Apple has repeatedly made clear that it is in this business to make money, and most likely would not continue to operate (iTunes) if it were no longer possible to do so profitably."

Cue further argued that a fee hike would hurt sales, scare away customers and lower payments to artists. Apple has sold over 5 billion songs through iTunes. Fans of the store are hoping this is an empty threat in a PR battle against the court case. Everyone knows C.E.O. Steve Jobs is a big music fan and wouldn't want to leave his iPod customers out on a lurch with no place to buy music online except for Amazon.