Congress has historically set the mechanical rates and the fees are paid to the song writer/publisher of the underlaying composition. Often major labels only record music in their catalog which means they can waive paying themselves. Its when they record the music in someone else's catalog where these fees typically are a factor.

Previously when rates to cover songs have increased, record labels absorbed it – the price of CDs does not rise due to an increase in mechanical royalties. They just stop recording music that they don't have any publishing rights to.

When selling digital content – the labels are making a larger percentage of profit – they don't have to press a disc and print inserts and then warehouse and ship them to different locations.

The split typically on iTunes with major labels is .70 going to the label – .29 to iTunes. I work with an independent download site http://www.austinmusicdownload.com and our clients/labels must pay their own mechanical licenses from the funds they receive. No different than iTunes or any store that sells physical CDs.

To suggest that iTunes absorb the increase is a new dynamic and one that historically has no precedence of which I am aware.

So this would seem to be a tempest in a teapot. The labels would appear to really have a “beef” with Congress and would perhaps want to someone else buy their dinner.

The iTunes Store's market share maybe 85% of LEGAL music downloads as you claim. That translate to less than 28% of total music downloads.

The reason Apple might be forced to absorb the rate hike is that the alternative, raising prices, will just lower LEGAL downloads share of total music downloads.

Also, in order to pass on a 6 cent cost to consumers, Apple would have to raise the price 20 cents, as 70 percent of any price increase would go to music publishers. A consumer price increase could also trigger additional costs – a 20 cent increase might increase sales tax by 1 cent, credit card transaction fees by 1 cent, etc. Apple would have to increase prices by 8 cents in order to recover those two cents, unless a 28 cent price increase results in a 2 cent sales tax increase.