An Apple for an Apple

It’s been a bloody thirty years’ war between The Beatles and Emperor Steve Jobs, and over something as simple as an apple.

Apple Corps was conceived by Beatles manager Brian Epstein as a way to deflect a horrific impending tax bill. A record label seemed like a fun idea to the moppy-headed ones, and so it began. But within two years, Apple Corps (whose name is a pun on apple core) had turned into an unmanaged free-for-all with employees lavishly spending every pence and pound in sight. As it neared bankruptcy a real manager was brought in. And overnight, the apple grew up.

In 1978 the corporation behind the world’s most famous rock band decided to sue a tiny computer company in California for trademark infringement. Apple Computer managed to escape with an $80,000 fine in exchange for their identity. But the settlement stipulated that the two companies were to forever stay off each other’s turf — the record label wasn’t allowed to peddle computers, and the computer outfit had to steer clear of all things music-related. Back then such demarcation seemed absolutely reasonable. Music and computers? Surely the two would never cross paths.

Apple Corps (remember, that’s the Beatles) flared up again in the mid-80’s when the company from Cupertino snuck MIDI drivers and basic music recording features into the Apple IIG. More lawsuits. And again in the early 90’s when they added chime sounds to their Macintosh computers. Jobs, et al, paid handsomely for the infraction — around $27 million. I’m sure you can see where this is headed. You have an iPod, right?

When iTunes debuted in 2003, the lawyers rallied for an explosive showdown. Many insiders feared for the future of the California-based empire. They did sign that pact back in the 70’s after all. At stake, the company itself. Would Yoko and Sir Paul McCartney seize a majority ownership of Apple Inc.? Speculation reached a fevered pitch. Then in 2006, a judge — an iPod-owning judge, no less — ruled in favor of Apple computer. The ruling concludes that iTunes is neither a music producer nor a record label; they’re a distributor and therefore do not compete directly with the Beatles record label. The final terms remain sealed, but in the tradition of all Apple secrets, it has since been leaked. In a nutshell, Apple Inc. took control of the Apple trademark in its entirety, silencing any future claims by Apple Corps. The Beatles in exchange received a $500 million pay out. From now on, Apple Inc. will license to the Brits “use” of apple imagery for its business without risk of recrimination.

With calm finally settling across the two kingdoms of Apple, a burning question remains: When will The Beatles digitally release their catalog to iTunes and others? For a band whose lifetime sales exceed one billion units, a boycott of digital formats seems outrageous. Then again, Apple Corps has quite a knack for conflict. Not surprisingly, this apparent digital stubbornness is rooted in yet another dispute, this one with British music company EMI. Unlike the recently-resolved Apple trademark issues though (which previously played a part in all this), the squabbles with EMI over royalty allocation and piracy concerns have turned truly siege-like.

EMI signed the Fab Four in 1962. Typical of most recording contracts, it gave the label ownership of the master recordings and thus all distribution rights (not to be confused with the songwriting/publishing rights, currently controlled by Sony/AVT, part of the Michael Jackson estate). After the band broke up in 1970, Apple Corps and EMI settled into a long-running legal tangle over royalties. When the last of these cases settled in 2007, press releases hit the streets harkening a digital future for the catalog. But once again it stalled. Mr. McCartney in a recent 2010 interview (“Zane Meets McCartney”) grimly responded to the question “When are The Beatles going digital?” While he voiced enthusiasm for iTunes itself, he referred to the conflict with EMI as the primary hold up and one that didn’t have a clear resolution in sight. EMI recently offered equally vague wording “Conversations between Apple and EMI are ongoing and we look forward to the day when we can make the music available digitally. But it’s not tomorrow.” Not helping matters, EMI faces bankruptcy. In an effort to raise cash, and one that speaks volumes about this situation, they just announced the sale of Abbey Roads Studios, which besides being the famed location of all those great Beatles albums, is also the studio that brought us Dark Side of the The Moon and countless motion picture soundtracks.

In Dec 2009, in what had to be a response to mounting criticisms, EMI and Apple Corps released a USB Green Apple flash drive stocked with the entire shebang, all 200+ tunes from the Beatles 12 studio albums in mp3 format (not AAC, the iTunes codec). This $275 peace offering also holds outtakes and an assortment of video clips. A start, but still a physical product.

Dhani Harrison, son of George, has been a vocal opponent of these digital delays saying “we’re losing money every day”. But he also argues against giving iTunes control over pricing. He and others across the estate have even considered an independent delivery system outside of iTunes, this provided they can reach terms with EMI.

Should this standoff end, few doubt that digitized Beatles tracks will be anything less than long-lasting top sellers with a tolerance for premium pricing. At the same time with downloads accounting for 40% of all music sales in 2009 and with iTunes as the nation’s largest music store, their catalogue risks a tremendous drop in future revenue should they continue to withhold the goods. And while it seems certain that their brand is an evergreen, that it has a long tail for money-making opportunities, they shouldn’t wait indefinitely either. People are fickle. Who’s to say how long their successes will last once the Baby Boomers fade away?

My prediction: The Beatles on iTunes by the end of the year. It’ll be the biggest Christmas seller in the store’s history.

2011 FOOTNOTE: This prediction finally came true. You can buy the complete Beatles catalog on iTunes now.