This morning, iPod and Mac maker Apple announced that it had reached a new agreement with The Beatles’ record label Apple Corps regarding use of the “Apple” trademark, substantially revising a fifteen-year-old legal settlement that in 2003 landed the companies in court, and seemingly precluded The Beatles’ catalog from appearing on Apple’s iTunes Store. While most of the terms of the new agreement were not disclosed in a short statement from the two companies, one major change was announced: Apple now owns “all of the trademarks related to ‘Apple’ and will license certain of those trademarks back to Apple Corps for their continued use.” What will this likely mean for Apple and the iPod going forward?
(1) Apple Could Sell CDs and Bundle Music with iPods: The old agreement (at Sections 1.3 and 4.3) seemingly prevented Apple from selling music on physical media, such as CDs, even though it could sell music through the iTunes Store. On paper, this seemed like a simple limitation: Apple could sell music-playing hardware like iPods, but it couldn’t sell you the discs full of music to play on the iPod.
Apple’s iTunes Store – the subject of the 2003 lawsuit – successfully stepped around this limitation by using the Internet to distribute music, but it left Apple with two major limitations: Apple couldn’t pre-install music on iPods, or otherwise sell it on any physical medium, such as discs. This was one of the reasons that the prior U2 Special Edition iPods didn’t actually include U2’s music – Apple’s contract with The Beatles forced you to buy it separately online.
Most likely, since Apple now controls the Apple trademarks with limited license rights going to The Beatles, the new agreement will allow Apple to sell physical copies of music – whether they’re sold separately from an iPod, bundled in compact disc form with an iPod, or pre-installed on the iPod’s hard disk. An obvious strategy for Apple would feature artist-customized iPods akin to current iTunes Store Gift Cards. But this could also lead to a huge change in Apple’s iPod business going forward: if someone’s at the airport and thinking of buying an iPod from a vending machine, all they’re getting is an empty hard disk. Now, they might be able to buy an iPod filled with music, and enough battery power to last for the flight back home. Apple could conceivably also sell pre-loaded iPods at concerts, movie theaters, and record stores, preloaded with live performances, soundtracks, the latest releases, or box sets of music.
(2) The Beatles and iTunes: Rumored for months, The Beatles’ appearance in the iTunes Store seems a natural at this point. Apple CEO Steve Jobs nonchalantly displayed a wide variety of Beatles music content on the screen of the upcoming iPhone, a deliberate and extended tease he probably wouldn’t have risked under the 1991 settlement agreement. As The Beatles have already announced that their music is in the process of remastering for digital distribution, it would be highly surprising if the band’s music wound up on a distant second- or third-tier music download service rather than iTunes.
Right now, there’s a very small section of the iTunes Store devoted to The Beatles, and it doesn’t contain any true releases by the band; similarly, there are many unauthorized tribute versions of Beatles music in the store if you use the Store’s search feature to hunt for Beatles. We’ll be interested to see whether the band will be willing to release its songs in low bitrate AAC form like all of the existing iTunes Store content, or if it will insist on the higher-quality Lossless format for its music, as a group of hard-core vinyl fans have been suggesting for years.
(3) The Beatles’ iPod Special Edition: Since Apple introduced the iPod U2 Special Edition back in 2004, and despite numerous guesses and prayers from fans, no other artist or band has received a similarly redesigned custom iPod. Clearly concerned about manufacturing hundreds of thousands or millions of iPods that might wind up sitting on store shelves, Apple has instead offered only modestly customized, Apple Store- and contest-exclusive models such as the engraved Harry Potter Collector’s Edition iPod and Red Hot Chili Peppers Limited Edition iPod. A band with the worldwide popularity of The Beatles is the most likely next step in Special Edition iPods, if Apple intends to continue the concept at all.
Because the new agreement’s terms are confidential, it’s currently impossible to know for certain what has changed between Apple and The Beatles, so consider the three points above to be “quite possible” rather than definite. Friendly press release language aside, there may still be some acrimony between the companies that isn’t apparent from their public statement. But as Apple fans – and as Beatles fans – we were thrilled to see the band’s releases on the iPhone’s screen last month, and are hoping to see them on the iTunes Store very soon.