Update: Apple gets its way on royalty payments

Apple could shut down iTunes, the world's biggest online music store, if a ruling expected tomorrow forces the company to pay more to music makers for each downloaded track.

The Copyright Royalty Board (CRB) in Washington DC will decide whether to grant the request of American music publishers to increase royalty rates on songs bought from online music stores such as iTunes.

The National Music Publishers’ Association, which represents the interests of music makers and songwriters in the US, want rates to be increased 9 cents to 15 cents, which represents a 66 per cent rise.

Apple have vehemently opposed the move. In a statement to the ruling body last year, the company threatened to shut down iTunes rather than raise the price of songs in order to afford the higher royalty rates.

"If [iTunes] 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," iTunes vice president Eddy 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 [iTunes] if it were no longer possible to do so profitably."

It remains unclear whether Apple will follow through on its threat to shut down iTunes, as bosses have consistently refused to discuss the upcoming decision.

Analysts said it was hard to imagine Apple closing iTunes and abandoning millions of customers worldwide who own iPods and rely on the online store to download music. But Apple’s statement still leaves this “nuclear” option open.

Instead of a shutdown, Apple may be forced to swallow any royalty rise, as the CRB’s decision – the first regarding the sales of digital music – would set royalty rates for the next five years. It is believed that the decision could mean the higher cost of music is more likely to be passed on to the customer.

In Britain, it currently costs music fans 79p to download one track from iTunes. Analysts have estimated that iTunes will sell close to 2.5 billion songs this year worth around £1.1 billion.

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