Report: Apple Beat Google & Amazon to Land Beatles

Apple wasn’t the only megacompany pursuing the rights to sell The Beatles’ catalog as digital downloads. The New York Post reported that EMI had approached Apple, Google, and Amazon to work out a deal, but that Apple CEO Steve Jobs was able to offer the record label, and by extension Apple Corps and the surviving Beatles (and heirs), the best deal.

The effort was spearheaded by EMI CEO Roger Faxon, who came to his new position in June of this year. He reportedly hammered out a deal (detailed below) with The Beatles and its management company, Apple Corps, and then set out to win the best deal from one of the major players in digital downloads.

The Post cited unnamed industry sources for its story, one of whom told the newspaper, “Who else are they going to do a deal with? Apple dominates the digital market.”

Those sources also said that Apple didn’t offer an up-front payment to EMI. It’s at this point that one should take the report with a grain of salt, as the newspaper did some back-of-the-napkin math on the deal that begins with the assumption that Apple keeps $0.30 for every $1.29 download, a figure the newspaper said was Apple’s usual deal with labels.

The figure most commonly associated with Apple’s deals, however, is 30%, not $0.30. On a $1.29 song, that would be $0.387. Be that as it may, using that starting point, the newspaper’s sources said that EMI offered Apple Corp 50% of its take after paying $0.09 to Sony for the rights it owns (with Michael Jackson’s estate) on 200 Lennon/McCartney songs. At $0.90, that would represent some $0.44 to Apple Corps, or $0.11 per Beatle (or heir).

Few bands command such percentages, even in the era of digital downloads, where distribution costs are next to nothing compared to the cost of manufacturing and distributing CDs.

So if Apple is keeping $0.30 for each $1.29 song sold, it would actually represent a rare exception for Apple, which has reportedly always insisted that developers and labels and publishers and studios all get the same 70/30 deal. Note, however, that Apple has never commented on the leaked deal details that have come out over the years so it is possible that Apple cuts individual deals all the time.

Just as it’s possible that 30% got confused with $0.30.

Be that as it may, we feel compelled to point out one more area where The Post’s reporting was even sloppier, as reporters Claire Atkinson and Mark DeCambre wrote, “In an indication of just how much the economics of the music business have changed, back in the Eighties when the Beatles finally agreed to make their music available on CD, each Beatle got a dollar for every CD sold.”

Our own back-of-the-napkin math suggests that for every ten singles The Fab Four sells through iTunes, each member gets $1.10. As each single album has 12 or more songs, The Beatles would be getting more from iTunes, not less, than in the CD era. For albums, which are priced at $12.99, each band still get $1.10, according to math presented by The Post, which is still more than $1.00.

So, while the recording industry is in the midst of major turmoil and economic hard times, the deal the band secured with EMI, and subsequently Apple, isn’t representative of those hard times. That is, of course, if The Post’s sources were right in the first place about any other aspect of this whole process.