Apple Inc's settlement with The Beatles over the rights to the company name will see the money rolling in - but fresh wrangles are around the corner, writes Brian Boyd
Love is all around. The long-running legal trademark dispute between Apple Inc and The Beatles over the use of the Apple name and logo was settled earlier this week. Apple's chief executive, Steve Jobs, said of the settlement: "We love The Beatles and it has been painful being at odds with them over these trademarks."
Neil Aspinall, the manager of The Beatles' Apple Corps business, was similarly loved up, saying "We wish Apple Inc every success and look forward to many years of peaceful co-operation with them".
You wouldn't think from these group-hug comments that The Beatles and Apple Inc had just been through a bitter 27-year legal battle, but love has got a lot to do with it. The Beatles' current Love album is widely expected to hit number one on the Apple iTunes online music store on Wednesday, St Valentine's Day.
Because of the ongoing legal dispute, The Beatles would never allow Apple to sell any of their music on iTunes, but it now seems that the band's entire, and very lucrative, back catalogue will be released on a drip-feed basis. In anticipation of the huge demand expected for the group's music on iTunes, bookmaker William Hill is offering 8-1 odds that Hey Jude will be the first Beatles number one of the digital era, followed by Yesterday at 9-1 and She Loves You at 10-1. Welcome to Beatles 2.0.
Of course, iTunes could never call itself the "complete music store" without having any Beatles material and this was particularly galling to Steve Jobs, who has said that he named the company after the band's Apple record label. Something that would come back to haunt him during the many court cases.
The Beatles were never happy with the name the computer company used. The band had set up the Apple Corps label back in 1968 to release their songs and manage their creative affairs. The dispute began in 1980 when George Harrison was flicking through a magazine and noticed an advertisement for the new Apple Computer. A legally-binding deal was struck at the time whereby The Beatles allowed the computer company to use the name Apple as long as they stuck to computers and stayed away from music. There have been a number of court hearings over the years as The Beatles argued that Apple Inc was in breach of the original deal because of the musical capabilities of their computers.
The Beatles last sued when Apple Inc unveiled its iTunes store but lost the case after the judge found that Apple Inc was merely distributing music and not creating it. It was a distinction, the judge noted, that even "a moron in a hurry" could make.
ALTHOUGH THE TERMS of the now settled case between the two parties remain confidential, it is believed that Apple Inc paid The Beatles somewhere in the region of $100 million (€77 million) for full use of the Apple name and logo. It is highly unusual for the original owner of a trademark to relinquish ownership and it would have taken this amount to convince The Beatles to loosen their grip. It is also understood that Apple Inc will license back the Apple name and logo to The Beatles so that Apple Corps can remain in existence. The final part of the deal is believed to be a special inflated royalty that The Beatles will receive for the sale of their songs on iTunes.
There will be a bizarre side-effect of Beatles music being made available on iTunes. Recent changes in how the UK and Irish popular music charts are compiled mean that download sales are now eligible. Previously, to qualify for a chart position, a download had to have a physical equivalent (a CD) available in high-street shops. What this means is that it is conceivable that The Beatles could hold all top 10 places in the singles charts sometime this year.
There is even talk that the iTunes store might crash due to overwhelming demand when The Beatles' songs make their first appearance. The store has crashed before - the last time was on December 27th last year, when swarms of online shoppers with iTunes gift cards overwhelmed the site, leading to error messages.
There are already advanced plans for a special edition Beatles iPod, similar to the U2 iPod of a few years ago.
This year could well turn into the year of The Beatles. This July sees the 50th anniversary of the epochal first meeting of Paul McCartney and John Lennon at Liverpool's Wootton Parish Church Garden Fete with a whole series of events planned to commemorate the anniversary.
There had been some wonderment as to why the group kept the legal battle with Apple Inc alive for so long. Apple Corps is now just a heritage label and, given Apple Inc's global recognition factor, there was no way they were ever going to stop the company using the Apple name or the Apple logo. For Paul McCartney, Ringo Starr, Yoko Ono and Olivia Harrison (who are, legally, The Beatles) it was all about "integrity". The band, aware of their musical legacy, have always jealously guarded their work. Which is why they never allow their songs to be used on compilation albums or as background music on TV or film. However, always keen to bring the music to a new generation, they did want an online presence but could only counter this once a settlement had been reached with Apple's iTunes.
Cynical observers might point out that this week's settlement was carefully choreographed to maximise the public relations opportunities for the Love album going up on iTunes early next week in time for St Valentine's Day. Last month, and weeks before the settlement was announced, Apple Inc's chief executive officer Steve Jobs was demonstrating the company's new iPhone to the world's media. To show off the phone's musical capabilities, he got it to play Lovely Rita from Sgt Pepper's.
All Jobs did to get a Beatles song on to an Apple device pre-settlement - as any teenager could tell you - was to transfer Beatles music from one of their CD's onto iTunes and then on again to the iPod or, in this case, the iPhone. Surprisingly, few people over the age of 30 know how to do this. The technical term for these people is "iTunes customers".
THE PREDICTED BEATLES bonanza that Apple's iTunes will enjoy over the next few months has come at a crucial time for the company. Just this week, the Norwegian Consumer Council threatened Apple Inc with legal action if it didn't open its iTunes music store to MP3 players other than their own iPod players. As it stands, if you buy music on iTunes, you are "locked in" to buying an Apple iPod MP3 player in order to play it. Norway is leading a European campaign to force Apple to make iTunes compatible with its rival's MP3 music players. This is important because four out of all five music downloads are from the iTunes store.
Steve Jobs has indicated that he is ready to open iTunes to players other than iPods, but there is a bigger issue at stake. The songs on iTunes are owned by record companies (EMI, Sony-BMG and so on) and not by Apple. The record companies use a controversial piece of technology called DRM (Digital Rights Management) on their records. The record companies argue - and they have a point to an extent - that DRM is an essential anti-piracy measure.
What DRM means for the consumer is that CDs can only be played on certain CD players. For example: the CD you buy in a record shop will play on your CD player at home but it may not play on your car stereo or your computer. This is to prevent unauthorised copying.
Jobs argues that, due to the use of DRM by record companies, music sold on the iTunes store simply won't play on rival MP3 players. He has advised consumers to call on the four major record labels (Sony-BMG, Warner, Universal, EMI) to drop DRM restrictions on the albums they sell.
Norway's Consumer Council countered that Jobs had merely "turned the whole issue on its head", saying that Apple were skirting key issues and passing total responsibility to the record companies. The council found that Apple's own DRM system, known as Fairplay, which locks iTunes into the iPod, is illegal, and that unless the company removes this lock-in technology, it will appear in court. Germany and France are now joining Norway's action against Apple.
The rumoured $100 million that Apple paid The Beatles may seem a bargain considering the revenue it will generate on the iTunes store from selling the group's songs - but how much of Apple's Beatles profits will be eaten up fighting a fresh batch of legal cases?