by Mike Masnick
Wed, Oct 1st 2008 7:03am
According to Fortune, Apple threatened to shut down iTunes if copyright royalties were raised by the Copyright Royalty Board. I tend to share Greg Sandoval's skepticism about the seriousness of this statement. Apple makes most of its money from selling hardware platforms, and iTunes is mostly designed to make those platforms more valuable. While some reports suggest that Apple ekes out a tiny profit on iTunes, others have reported that it's already something of a loss leader for the company, with razor thin margins. You can certainly understand why the company would be upset about the idea of increased royalties, which would shrink those margins even further, but the idea that the company would shut down iTunes, seems like a case of cutting off your nose to spite your face. Even at a small loss, iTunes makes iPods and iPhones much more valuable, and Apple should be able to absorb the hit on the iTunes side via the hardware side. The same is probably not true for other digital media sellers, however.
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