In an eagerly awaited decision, the Copyright Royalty Board announced Thursday that it will not increase the royalties paid by online music stores to members of the National Music Publisher’s organization. The decision to keep the royalty rate at nine cents per song is the first ruling by the CRB on digital-music downloads.

The controversy caused considerable controversy online, particularly in the wake of comments by Apple representatives suggesting the company would no longer be able to profitably operate its popular iTunes Store.

The NMPA had asked the CRB to raise the royalty rate from nine to 15 cents, a 66 percent increase. Apple protested, arguing that due to massive infrastructure costs, the profit margins on each iTunes music sale are too slim to absorb the proposed increase.

In fact, Apple has repeatedly pushed to have the nine-cent royalty reduced, saying it is unnecessarily high.

No Margin for Error

Susan Kevorkian, the program director, consumer markets, for

IDC, agreed with Apple’s assessment of the economics of the online music business. “Margins on a la carte downloads are extremely tight,” Kevorkian said, “and Apple has been able to run the iTunes Store profitably due to its high volume.”

How much profit is a little difficult to ascertain, but it’s nearly certainly a respectable amount. According to industry estimates, Apple will sell roughly 2.5 billion tracks of music that year, for an estimated profit that could be as low as $200 million but might be three times as much.

Those estimates do not include the synergistic relationship that the iTunes Store has with Apple’s enormously popular (and profitable) line of iPod devices and its iPhone.

Different Pricing Model

Kevorkian said that even whether the CRB had ruled in favor of the royalty increase, she didn’t believe Apple would shut down iTunes. Instead, she said, the company would finally have considered the…

Original post by dhiram