Anger over iTunes 'shutdown threat'

A British internet entrepreneur accused software giant Apple today of “holding its customers to ransom” by apparently threatening to shut down its iTunes music download site.

Gary Morris, the chief executive of iLoaded, which is one of the UK’s largest video download sites, claims Apple is putting “the bottom line before its customers”.

His comments follow a row which has broken out in America over plans to increase online music royalty payments from 9c to 15c a track (6.5c to 11c) – a 66% rise.

The extra cost would be met by music download sites like iTunes, the record companies or passed on to the consumer.

Today the US’s Copyright Royalty Board (CRB) meets to decide whether to agree to the request for the rise from the National Music Publishers’ Association (NMPA), which is the largest US music publishing trade association.

Last night the BBC website reported a statement made by Apple’s vice president for iTunes, Eddy Cue, in April 2007 to the Library of Congress, which is the research arm of Congress, the US legislative body.

The popular iTunes download site is the driving software behind the iPod music player.

In his testimony, Mr Cue said: “If iTunes Store (iTS) were forced to absorb any increase in the mechanical royalty rates, the result would be to significantly increase the likelihood of the store operating at a financial loss - which is no alternative at all.

“Apple has repeatedly made clear that it is in this business to make money, and would most likely not continue to operate iTS if it were no longer possible to do so profitably.”

If the iTunes music download site were to be shut down, then people would not be able to download any more tracks on to their iPods from the internet, effectively making the music players redundant.

iTunes is the world’s most popular online music store with eight million different tracks to choose from.

Mr Cue’s veiled threat – the timing of the publication of which is being seen by some as an attempt to influence the CRB’s decision – has angered Mr Morris, who says: “Apple has thrown its toys out of the pram – it doesn’t care about the customer who has just spent £300 on a new iPod.”

But the NMPA defended its call for a royalty rise, telling the BBC: “Apple may want to sell songs cheaply to sell iPods. We don’t make a penny on the sale of an iPod.”

Greg Sandoval at CNET, a firm which offers information on the latest technology, told the BBC the timing of the emergence of the Apple document was interesting.

“When it comes down to mass appeal, Apple holds all the cards. If word gets out that music publishers are trying to stick it to consumers, and Apple is fighting to keep prices down on their behalf, well, there’s liable to be public backlash against the labels.

“If this thing follows the normal course, there would be calls for boycotts, protests and so on.”

Piper Jaffray estimates that Apple will sell 2.4 bn songs this year, giving it an 85% share of the digital music market.

Apple declined to comment today.

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