Apple Inc. is preparing to disclose that its iTunes Store will soon start carrying music by the Beatles, according to people familiar with the situation, a move that would fill a glaring gap in the collection of the world's largest music retailer.
The deal resulted from talks that were taking place as recently as last week among executives of Apple, representatives of the Beatles and their record label, EMI Group Ltd., according to these people. These people cautioned that Apple could change plans at the last minute. Spokesmen for Apple and EMI declined to comment.
Apple on Monday posted a notice on the home page of its iTunes Store that it would make "an exciting announcement" on Tuesday morning.
EMI has been under financial strain following an ill-timed leveraged buyout by Terra Firma Capital Partners LP in 2007. If the iTunes tie-up generates significant cash advances or sales, it could delay breaches in the company's loan covenants. Terra Firma borrowed £3 billion ($4.9 billion) from Citigroup Inc. to finance the deal, but has fallen into breach of those covenants, forcing it to add millions more to its equity position last year.
Even as recorded-music sales have plummeted, the Beatles have remained one of the most reliable franchises in the business. In 2009, 39 years after breaking up, they sold the third-highest number of albums of any act in the U.S., according to Nielsen SoundScan, with 3.3 million copies sold.
The Beatles aren't the only big iTunes holdout. AC/DC, Bob Seger and Kid Rock all have withheld their music from the online store. Other longtime digital wallflowers such as Metallica and Led Zeppelin have relented in recent years.
The Beatles' deal with iTunes was delayed in part by ongoing trademark litigation, the most recent round of which was resolved in 2007.
The Fab Four's arrival in the digital age comes very late compared to most other major acts'. The group also was a latecomer to the CD era, waiting until 1987 to issue their main body of work on a medium that the industry had embraced in the early to mid part of the decade.
People who have done business with the group and its corporate entity, Apple Corps Ltd., describe a very slow-moving process in which the two surviving members, and the heirs of the other two, can take a long time to reach consensus.
The group started moving with a bit more alacrity following the 2007 death of Neil Aspinall, the long time Beatles confidant who ran Apple Corps for many years. Founded in 1968, Apple Corps controls certain rights related to the Beatles recordings, although the recordings themselves are owned by EMI. Mr. Aspinall was replaced as Apple Corps' CEO by Jeff Jones, a former executive of Sony Music's well-respected Legacy division, which handles back-catalog releases for Sony Corp.'s various record labels.
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After the arrival of Mr. Jones, the Beatles started modernizing their affairs more quickly. In 2009 the group issued remastered CD versions of their studio albums with improved sound quality, something for which fans had been clamoring for years. The band struck a deal to release a videogame, The Beatles: Rock Band, last September. That title has seen mixed sales.
Even the solo catalogs of the members of the Beatles have become available via iTunes and other online music services for varying lengths of time, prompting headscratching in the music and technology worlds about why the Beatles albums proper still weren't available.
The Beatles-iTunes agreement represents a watershed in a fraught, decades-long relationship between two of the biggest icons in their respective fields.
The two sides have traded lawsuits since 1978, when the Beatles alleged that the computer maker, incorporated as Apple Computer in 1977, infringed on the band's trademark in the name and logo of Apple Corps.
The lawsuit was settled in 1981 for an undisclosed sum, plus an agreement that the Cupertino, Calif., computer maker wouldn't compete in the music business.
But in 1989 Apple Corps sued again, charging that Apple Computer had violated the terms of the earlier settlement by giving its computers increasingly powerful musical abilities, such as hardware that enabled its computers to control synthesizers.
The two sides announced a settlement in 1991, after 100 days in court, with Apple Computer paying roughly $29 million to the band.
Then in April 2003, Apple Computer again raised the band's hackles by launching what was then called the iTunes Music Store. Two months later, Apple Corps sued Apple Computer in High Court in London, alleging that the online music store violated the 1991 agreement.
In 2006, after a one-week trial, the court handed the computer maker a rare victory in the long-running legal saga, dismissing the claims of the musical entity. Judge Edward Mann ruled that the Apple logo on the iTunes Store doesn't appear "in connection with" any particular music being sold, and instead is simply an icon for the store itself.
The two sides announced a settlement in early 2007 under which the computer maker took control of the trademarks at issue and licensed them back to Apple Corps Ltd. Financial terms weren't disclosed.
Wall Street Journal