The Music Royalty Board Blinked

Last year, Apple was blustering about potentially shutting down the iTunes music store. Yes, that's right... The world's largest music retailer said that an increase proposed by the Copyright Royalty Board to sweeten the cut of music track sales for songwriters from 9.1 cents to 15 cents would potentially cause Apple to cease iTunes operations. Really?

This week the Copyright Royalty Board decided to keep the rate unchanged. Whether you agree with the increase or not, the issue is concerning because of Apple's flair for the dramatic. We're expected to believe that Apple would really shut down the top-selling digital download site, which also happens to be the catalyst for iPod and iPhone sales, in the middle of an economic downturn. Stop and consider the consequences for Apple's battered stock for just a minute.

Shutting down iTunes is the closest thing to a "nuclear option" in the digital download world, and it should be used with caution. Ironically, if anything, the increase probably would've helped Apple. While most companies (amazon, rhapsody, etc.) would have to find a way to absorb the cost, Apple would more than make up for it in hardware sales. Considering there are roughly 50 tracks sold for every iPod purchased, Apple would've needed to absorb $3.00 more per iPod. I know electronics margins are close, but they're not that close.

Power in a market is a funny thing. Sometimes, once your the biggest, you actually have less freedom to do what you want to. While Apple may think users would've rallied around them if they actually went through with the threat, the reality is the lawsuits that would've sprung up, aimed at Apple, could be devastating.

Apple will never shutdown the iTunes store. Ever.