The house that Apple built

[digg-me]For the last couple years, Apple’s iTunes Store has taken center stage as the Internet’s most used online music store. After the rise and fall of such “illegal” online music sources such as Napster and other P2P networks, Apple decided to give the rough, uncharted market of online music purchasing a shot.

You see, Napster and other peer to peer file sharing networks either charged no fee, or a low monthly fee, and none of that money made it back to the music labels, publishers, and producers. But in its usual pioneering way (see the Apple II, iPod, iPhone, etc…) Apple came up with a solution that would please the record companies, and the consumers who sought cheaper alternatives to buying music other than their local record store.

Enter The Apple iTunes Store! All songs were available for download at $0.99 from a library big enough to make CD Warehouse jealous. And from then on, it was an unstoppable monster, gaining momentum when the video iPod was released and agreements were made with movie and television production studios, giving users the option to download their favorite TV shows, and movies as well.

Then came application and game downloads for your iPod and iPhones, another revolutionary online method of distribution, and made Apple and a lot of small time developers fairly wealthy (well, wealthier in Apple’s case). Nothing seemed like it could stop the download colossus until the National Music Publishers Association started kicking up dust around Washington asking that its record companies and producers receive more royalties than it’s current $0.09 a track from Apple’s iTunes profit.

Apparently they made enough noise for the Copyright Royalty Board to hear them, and the three judge panel is expected to make a ruling very soon. Now, what does that mean to all of us outside of the industry politics? There are a few possible scenarios if the board votes in favor of the NMPA.

The $0.99 standard price tag on mp3s would have to be raised to keep up Apple’s profitablity while giving the Music Publishers a raise in the royalties. Or secondly, and hopefully this could only happen in another demension, Apple would shut down iTunes, explained fairly well in this comment by Eddie Cue in today’s CNN Money article by writer Devin Leonard:

If the [iTunes music store] was forced to absorb any increase in the … royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss – which is no alternative at all, Cue wrote. Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably.

Once again, only time can tell what will be decided, or if Apple really has the gall to upset millions of iTunes users in shutting down the Internet’s largest online media download store. How would that effect their iPod/iPhone sales? What would the rest of us do to quench our thirst for cheap media downloads? Start using Amazon’s music service? Rhapsody? [shudders] Maybe Apple needs to just start its own record label and hire the top talent in the industry and cut out the middle man. Then they’d probably have an anti trust lawsuit on their hands. Oh the tangled webs we weave…