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Wednesday, September 22, 2004, 10:00 am PT (01:00 pm ET)

Apple earns less than a nickel per iTunes track

Record labels are demanding such a large cut from online music sales that several existing online music stores will eventually be forced to go under, The Independent cautions today.

According to figures obtained by the publication, the labels are profiting more per digital sale than they would by selling the same music on CD.

"Figures from the US show that Apple Computer, the dominant legal download business in Europe and the US, retains just 4 cents from each 99-cent (55p) track sale while 'mechanical copyright' holders - generally the record labels, who own copyright in the song's recording - take 62 cents or more. Music publishers take the rest - about 8 cents," The Independent says.

Meanwhile, copyright owners have reportedly doubled their share of royalties, even though the marginal cost of manufacturing has fallen to almost zero.

The Independent also notes that Apple has somewhat of an advantage, as tracks sold from its iTunes Music Store play only on its profitable iPod digital music player.

iTunes Music Store sales accounted for about half of the 500,000 digital music tracks sold online in the UK last month. In the United States, sources say that Apple is selling around 15 million songs per month, at a rate just shy of 200 million tracks a year.