The Apples Come Together
The 30-year legal battle between the two companies known as Apple—the Calfornia maker of computers and iPods, and the London guardian of the musical legacy of the Beatles—has come to a close.
Having fought intermittently over the appropriate way to divide the rights to the Apple name on each of its products, the two companies say they have reached an amicable settlement that will assign all trademarks to Apple Inc. (AAPL). The deal calls for certain trademarks to be licensed back to Apple Corps for continued use. Financial terms were not disclosed, but the two companies say each will pay its own legal fees, which have amounted to around $6 million.
Apple beat Apple Corps in court in mid-2006 (see BusinessWeek.com, 5/9/06, "Apple Finds It Can Do That").
Rumors have been flying in recent weeks that a settlement of their latest legal spat may pave the way for the arrival of the Beatles' musical catalog on Apple's iTunes Store, but no details were released on whether that debut was imminent. However, Apple Chief Executive Steve Jobs has been hinting that a deal for Beatles music on iTunes may be near. In a speech last month when he first unveiled the iPhone, he very pointedly showed the phone playing Beatles music.
Along with Led Zeppelin, the Beatles is the most visible major group of the 1960s and early '70s still refusing to release its music for digital distribution. During the trial, Neil Aspinall, head of Apple Corps, disclosed that the company was in the process of remastering the Beatles catalog for digital distribution. Apple's iTunes would appear to be the most likely candidate to maximize sales. However, RealNetworks (RNWK) has secured the rights to distribute the solo works of John Lennon.
Additionally, new Beatles material has been generating interest, proving that despite not having recorded together since 1970, and the death of two members, fans are still eager to open their wallets. Love, an album of remixed music launched in connection with a Beatles-themed Cirque du Soleil stage show—recently topped album charts in both the U.S. and Europe. That followed the 2003 release of Let It Be…Naked, which stripped away some of the studio work of the original 1970 album. The 2003 release went multiplatinum.
Copyright Protection Could End
But bringing the music to iTunes isn't as clear a proposition as it might seem on first glance. Many of the distribution and publishing rights to the songs are controlled by Sony/ATV, a holding company that had been partially controlled by the singer Michael Jackson. He acquired the rights to some 250 Beatles songs in 1985 when he paid $47 million for ATV, a music publishing company that owned the rights to the songs. Jackson later merged those songs into a joint venture with Sony (SNE). The catalog is now thought to be worth more than $1 billion. Last year, Jackson, as part of a major restructuring of his personal finances, gave Sony the option to purchase his portion of the Sony/ATV joint venture, rather than see his stake go up for auction. Sony has yet to decide whether to buy Jackson's stake.
Meanwhile, the clock is ticking on the rights to Beatles music. Former Beatle Paul McCartney has been quoted as saying that rights for the songs will revert to him at a date "in the not-too-distant future." Additionally, only six years remain on British copyright protection on the first batch of Beatles tunes released in 1963, unless the British government reverses its position on extending copyrights beyond 50 years after a work's release.
If left unchanged, British copyright protections on Beatles songs like Please Please Me and Love Me Do will expire in 2013 (see BusinessWeek.com, 11/28/06, "Beatles Could Lose EU Copyrights in 2013").
It appears that the time to cash in on digital sales via services like iTunes is starting to evaporate, especially if the music is set to start leaking into the public domain in the country where it was originally produced. And while another digital music competitor to rival iTunes could emerge over the course of six years, that's a long time to wait for revenue from digital sales.
A Defining Digital Alliance?
Speculation has been rife about what Apple might do were it to sign a deal to add the Beatles catalog to iTunes. In one notable example, Apple released a special edition iPod music player to coincide with the addition of the works of the Irish rock group U2 to the iTunes lineup. The release included a major advertising push for the iPod that included a TV spot showing U2 performing its song Vertigo.
Clearly Apple's high-impact advertising machine could structure a campaign designed to make an Apple-Apple digital music tieup a major event. Apple's iPod-fueled marketing prowess powered the company to nearly $20 billion in revenue for its 2006 fiscal year, and in its most recent quarter ended Dec. 31, it said it sold more than 21 million iPods. It further claims to have sold some 2 billion songs on iTunes (see BusinessWeek.com, 1/18/07, "Apple: What Options Scandal?" and 10/19/06, "Apple's Big Mac").
What's more, a digital media alliance with the Beatles might not only entail music, but a good deal of video content. The Beatles starred in several feature films, including A Hard Day's Night in 1964, Help! in 1965, and the animated Yellow Submarine in 1968, among others. In addition to movies, there are several concert performances and TV appearances that could be released on iTunes if rights agreements are reached.
There's also the prospect of future releases of as yet unknown archival material. In 2003 some 500 tapes containing approximately 80 hours of unreleased Beatles material stolen in the 1970s were recovered in the Netherlands. The tapes are said to contain music recorded during the sessions for the album Let It Be, originally to be called Get Back. Clearly, the long and winding road connecting the two Apples hasn't come to an end.