There is a battle going on in the music industry, and this time it involves the future of Apple’s iTunes Store! The debate, as in many other cases lately, is over the increase in royalty fees from 9 cents to 15 cents on behalf of copyright owners. The big question is: who is going to pay for that, and is Apple really going to terminate what has become the biggest music retailer in the U.S.?

Apple is not the only music retailer to be affected by this, as Amazon.com, Rhapsody and others are also waiting patiently for the decision. But Apple is the one making the clearest statement of all: if the new royalty rate will affect their ability to invest and remain in the business, they will discontinue it.

“Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate iTS (iTunes Store) if it were no longer possible to do so profitably,” as Eddy Cue, Apple’s global vice president of iTunes, confessed in a letter to the Copyright Royalty Board.

Furthermore, he admitted that while Apple has invested tens of millions of dollars in launching and growing the iTunes Store, its preservation and growth is not an easy process. While digital distribution of music is just beginning to take contour, the business continues to remain fragile, while the competition gets tougher.

In addition to ensuring quality customer services, security and viability for the business, they also need to watch out for “unlawful competition,” referring to pirate services that distribute music for free. So while the iTunes Store is struggling to maintain a competition with free music alternatives, “the $0.99 per track retail price point is key to making the overall consumer value proposition compelling,” Cue explained.

This means that any increase in royalty rates will either impose a retail price hike that will result in the reduction of the overall industry revenues, or will limit iTunes ability to remain in the business, by reducing its ability to invest, he added.

The dispute is likely to continue, but some analysts believe the board is likely to leave the current royalty rate unchanged. While the matter is yet to be settled, there is one question that still remains: if the royalty fees do increase, who will pay for it, labels or retailers? The rule so far has been: 70 cents out of the 99 cents per song for labels, out of which the labels pay royalties to publishers.

A new royalty rate will not only dissatisfy Apple and other retailers, but it will also go in the completely opposite direction of what labels intended in the first place, which is diminish the royalties for publishers by over 50 percent. According to record labels, increasing royalty rates should not be an option, considering the fact that they are forced to compete with free music distribution.