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This has been a big issue since the announcement the other day and Engadget has gotten their legal beagle to help answer some of the questions in this article. Turns out it's not illegal to make your own, which I should have realized since I use a program made by Motorola to make my ringtones and load them up for free.
http://www.engadget.com/2007/09/07/know-your-rights-is-it-illegal-to-make-my-own-ringtones/
So instead of a copyright issue, it sounds like it's a contractual issue between Apple and the labels. I would have felt better if it was copyright-related. Because it's contractual, it means Apple could flex their iTunes muscles and re-negotiate with the labels to make them free, but as long as Apple is making money from the deal too, I don't think they're going to lift a finger to try to help their faithful consumers in this case.
I really don't understand Apple sometimes. In the case of TV shows, they're going toe-to-toe with the networks to make shows cheaper for consumers. But in this case, which is much more of a harsh blow to consumers by making them pay for music twice, Apple just rolls over! They pat you on the back with one hand, then sucker punch you with the other.
http://www.engadget.com/2007/09/07/know-your-rights-is-it-illegal-to-make-my-own-ringtones/
Well, the RIAA wanted to be able to distribute ringtones of its artists without having to pay them big money to do so (surprised?), and it won a decision last year before the Copyright Office saying that ringtones weren't "derivative works," meaning they didn't infringe on the copyright of the songwriter.
As long as you're talking about music you've ripped from a CD, go ahead -- no one's trying to stop you. Since making a ringtone doesn't count as a derivative work, you're not infringing any copyrights. Just don't sell or distribute anything, and you should be fine.
Judging from the fact that the iTMS EULA prohibits the use of downloaded files as ringtones, we'd say it's more than likely because Apple's contracts with the various labels represented in the iTMS specifically forbid it. We haven't seen them, but we'd bet that ringtones -- and the licenses for using songs as ringtones -- have their own lengthy section in Apple's contracts, and that Apple isn't allowed to sell files for use as ringtones without coughing up more dough. Steve has said as much, after all. Otherwise the selection would include more than just the 500,000 songs you can get right now.
So instead of a copyright issue, it sounds like it's a contractual issue between Apple and the labels. I would have felt better if it was copyright-related. Because it's contractual, it means Apple could flex their iTunes muscles and re-negotiate with the labels to make them free, but as long as Apple is making money from the deal too, I don't think they're going to lift a finger to try to help their faithful consumers in this case.
I really don't understand Apple sometimes. In the case of TV shows, they're going toe-to-toe with the networks to make shows cheaper for consumers. But in this case, which is much more of a harsh blow to consumers by making them pay for music twice, Apple just rolls over! They pat you on the back with one hand, then sucker punch you with the other.