Beatles being paid directly by iTunes in deal

Wed Jan 5, 2011 9:20pm EST
 
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By Ed Christman

NEW YORK (Billboard) - It seems that the EMI/Beatles deal that finally brought the Fab Four's catalog to iTunes may be more groundbreaking than originally thought.

According to industry sources, iTunes is paying the Beatles' royalties from digital download sales in the United States directly to the band's company, Apple Corps, and is paying the songwriting mechanical royalties directly to Sony/ATV Music Publishing, which controls most of the Beatles' song catalog.

That suggests the royalty split could be more lucrative for the Beatles than it would be under the typical provisions of a standard artist contract, which treat digital downloads as a retail sale.

Under a standard contract, a label issues an album, licenses the songs from music publishers, collects all wholesale revenue from the retailers and then distributes royalties to the artist and the publisher.

For superstar artists, the royalty typically equals about 20%-25% of retail revenue. So in the case of iTunes' Beatles sales, where tracks are sold to the merchant for about 90 cents and are retailed for $1.29, a standard contract with a typical superstar royalty rate of 20%-25% would pay the Beatles about 18 cents to 22.5 cents per track sale.

But because iTunes is making royalty payments to the Beatles and Sony/ATV, EMI may be treating its deal with the digital retailer as a licensing pact.

Under such deals, the licensee pays mechanical royalties directly to a publisher and revenue from use of a master recording is split evenly between an artist and a label, making it far more lucrative for the artist than a standard artist contract.

An EMI spokesman declined to comment, as did Sony/ATV and representatives at Apple Corps and iTunes. And a high-placed source familiar with the deal insists that it's "absolutely incorrect" that the agreement between EMI and Apple Corps is a licensing deal.   Continued...