Long and winding road — Apple deal with Beatles expected

Published: Monday, Nov. 15 2010 12:00 a.m. MST

For the next generation of Beatles fans, the wait could soon be over.

Apple is expected Tuesday to announce that it has finally struck a deal with the Beatles, the best-selling music group of all time, and the band's record company, EMI, to sell the band's music on iTunes, according to a person with knowledge of the private deal who requested anonymity because the agreement was still confidential.

Depending on the terms of the deal, customers for the first time will be able to buy "Please Please Me," ''Hey Jude" or "A Day in the Life" online rather than on a CD and perhaps even as individual tracks. While the move to digital does not quite rival the band's first trip across the Atlantic to appear on "The Ed Sullivan Show" in 1964, it is an acknowledgment that online purchases dominate the music industry's sales strategy.

Apple and EMI declined to comment, and representatives of the Beatles and Apple Corps, the band's company (not to be confused with the technology company), could not be reached.

One of the last major holdouts against selling its music digitally, the Beatles are the ultimate prize for any music company, a group that has held on to blockbuster sales four decades after breaking up — it has sold more than 177 million albums in the United States alone, according to the Recording Industry Association of America — and held on to untouchable cultural prestige.

Since opening its iTunes music store seven years ago, Apple has reshaped the music industry and become the largest U.S. music retailer. But the Beatles catalog had always eluded the company and Steve Jobs, its tenacious chief executive.

Still, while getting access to the Beatles catalog has plenty of symbolic significance, it is unlikely to bolster the company's bottom line.

''It is very symbolic because Steve Jobs is a huge fan of the Beatles," said Tim Bajarin, an analyst with Creative Strategies, who has been following Apple for more than two decades.

But for all the success of Apple in becoming the largest distributor of music on the Internet, the iTunes store is not a major source of profits for the company. Apple executives have said that iTunes is roughly a "break-even" operation.

''The music itself is a vehicle to allow them to sell more iPods and iPhones, which is where they make real money," Bajarin said.

And despite the deal's symbolism, its financial value for the Beatles is uncertain. About three-quarters of all albums sold in the United States are still CDs, and physical albums remain far more profitable for record companies than downloads.

Apple did its best to tease the industry — and Beatles fans — with a mysterious message on its website Monday, saying that an "exciting announcement from iTunes" — one "that you'll never forget," no less — was coming Tuesday at 10 a.m. Eastern time. Sharp-eyed bloggers read the tea leaves on Apple's site — a possible reference to a Paul McCartney song, another to the semaphore symbols on the cover of the Beatles' album "Help!" — calls began to ricochet around the music industry that the deal might be for the digital holy grail. Then, the Wall Street Journal's online edition reported in the early evening that Apple was indeed bringing the Beatles to iTunes.

Jobs has tried to make a deal with EMI and the Beatles many times before, but negotiations have always broken down, usually accompanied by a flurry of online rumors, accusations and conspiracy theories. Further complicating the relationship between the parties, Apple Corps, the Beatles' company, and Apple, the computer company, had been embroiled for decades over trademark disputes.

In the past, Paul McCartney has said that a deal for Beatles' downloads would have to be approved by all the band members or their heirs.

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