I’ve written before about the mysteries of why the Beatles haven’t allowed their catalog to be sold digitally. With the songs being ripped by the billions in any case, why isn’t the band getting a piece of the action?

Here’s a hint, from a Billboard interview with George Martin:

Billboard; Speaking of iPods, do you know when the Beatles will make their catalog available online?

Martin: It’s still under discussion, and nothing has been determined yet. I think it’s inevitable that sooner or later the Beatles will be available, but it’s got to be on their terms, really. I think that’s the essence of it. There’s so much piracy, there’s so much illegal downloading. In that way, we’re devaluing our history. Young people now say to themselves, “This stuff is free and it should be free. Why should we have to pay for music? Music is free, isn’t it?” And that in itself is a belief that shouldn’t be there and is encouraged by Internet downloading.

Emphasis added. Isn’t Martin betraying a fundamental misapprehension of the issue? Of course there’s illegal downloading. What is the band doing—petulantly sitting the transition out in retaliation?

The key, I think, is that line about “on the band’s terms.” He and by extension the band is still living back in the CD age, where holding the catalog back built up demand. That’s not true any more.

Martin’s lack of understanding doesn’t make this likely, but here’s an alternative argument: It’s possible some high-level calculations are going on behind the scenes. The group’s last repackaging, the 1 album, sold more than eleven million copies in the U.S. alone. Accountants for the band and EMI could have crunched the numbers about digital sales versus another bonanza like that and concluded that iTunes would cannibalize the income for the next such outing in a way that made it the lesser option.

It could be that the band at this point makes more money from hard-copy sales than it would from digital ones. (Or it could be the label figured out that CD sales are more profitable for it.) As I’ve noted before, the band sells about a million and a half CDs in a normal year.

(All of this speculation, incidentally, takes it for granted that both EMI and the Beatles or their respective estates have an equal say in the decision-making. Even if by the letter of whatever contracts are at issue in making the recordings available digitally EMI can basically do what it wants, which is probably true, one assumes that to avoid a public battle the band members have effective veto power.)

Anyway, even if all of that were true about the calculations it’s likely the people involved are not taking into account the myriad new business opportunities in the digital sphere. They could sell special editions, complete digital catalogs with some physical crap souvenirs, various assemblages (John songs! Ringo songs!), new graphic covers that come up on your iPod screen … and all sorts of other things.

And then they can remaster the songs and up the bit rate to a lossless format and sell the darn things all over again. Slogan: “The greatest music ever made, finally available digitally the way they were meant to be heard.”

Speaking of which, Martin’s a pro, so it’s unlikely he would give secrets away, but it sure didn’t sound like he was involved in a remastering effort of the band’s catalog.

The Radiohead catalog has never been on iTunes because of one of those impasses that occur when the implacable prejudices of two artistes collide. Radiohead wanted it albums to be available in full—only. Apple wanted the individual songs available for download as well.

Neither position made any sense. (I would explain why, but who, really, frickin’ cares?) At any rate, Wired reports that the band finally backed down, and the band’s presence, as I write, is heralded on the front page of the iTunes store.

As I’ve mentioned before, the only interesting aspect of such stories is how much money the band has lost by forgoing official (i.e., remunerative) digital distribution of its work earlier. The Beatles are the poster child here. Back at the dawn of the CD era, making the band’s work available on disc was a big, hullabalooed deal, and paid off handsomely.

But fans of the Beatles have now been merrily digitizing the music from their own CDs or those of friends for a decade.  When the Beatles’ work comes to iTunes, there will be hullabaloo, all right, but it will also represent not a big financial payoff but the long-delayed staunching of a financial wound.

Yet again the British press, led this time by the Daily Mirror, is saying that the Beatles catalog will be available on iTunes. The Mail said that Paul McCartney had ok’ed the deal, and many other online news outlets, and U.S. sites like Ars Technica and Slashdot, are on the story again.

As with the same rumor two weeks ago, and the ones that have been popping up regularly over the past year, the stories raise more questions than they answer, which of course lead the aggregating sites to go even farther afield.

The Daily Mail story isn’t online for some reason, but the stories that quote it say that Paul McCartney had “signed a deal” worth £200 million, or almost $400 million. That leads Ars Technica to say this:

While McCartney will be keeping much of the money, several other parties stand to benefit from the deal. It is being reported that portions of the sum will be going to families of the deceased members of the Beatles, Ringo Starr, Sony, EMI, and the former owner of the catalog, Michael Jackson.

“Several other parties stand to benefit” is of course something of an understatement, and “McCartney will be keeping much of the money” is entirely wrong. I’m not an expert on the Beatles’ tangled ownership, but an entity that is either EMI or controlled by EMI probably quote-unquote owns the Beatles’ recordings. One would assume that over the decades the Beatles themselves have gained some rights in the matter (like the ability to veto or at least participate in re-release strategies), but I’ve never read that the group got back control of its masters, and even if they did McCartney would be just one vote of three controlling entities. (Or four if they let Ringo have a say.)

McCartney has more of an influence in publishing (i.e., songwriting-rights) issues (or rather he has a say along with the other folks who control those rights, including Yoko Ono, Michael Jackson and Sony). Those parties would presumably get publishing monies from sales, but I don’t think they can stop an iTunes agreement, even if they would want to, which they wouldn’t.

It pains me to say that Roger Friedman has some decent coverage of this:

EMI Music owns the Beatles recordings, not McCartney. It’s EMI’s deal to make with iTunes or Amazon or anyone. McCartney can suggest a deal or be enthusiastic, but he has no standing otherwise. EMI does have to comply with certain permissions from the Beatles, or Apple Records, aka McCartney, Ringo Starr, Olivia Harrison and Yoko Ono jointly.

On the other hand, he also says this …

As it stands, Beatles recordings are available illegally on the Internet; otherwise, you have to buy the Beatles CD for the full price (they are rarely discounted).

It’s actually a pretty good path for the Beatles to take. Not being on a downloading service makes them special and separates them from the crowd. Also, the sound quality on CD is by and large superior, much better than compressed digital.

… which is much less clear, as Hitsville has written:

The issue: when was the best time is for the Beatles to strike in this market? The argument that the time is long past is that millions of its original albums are being digitized and passed around amongst friends. I don’t even listen to the Beatles anymore, just on the grounds of overfamiliarity. Still, I just took a quick look on my iPod and discovered … nearly 100 Beatles songs on it. I would bet a lot of people are like me, digitizing their own albums (in my case, almost absent-mindedly) or getting them from friends, and absorbing the Beatles into their digital library almost by osmosis. Isn’t the band losing an enormous, unrecoverable, income stream?

You’d think that the Beatles’ organization making a calculated decision on this. Perhaps, in old-school negotiation style, they were trying to drive a harder bargain, or build up demand, but that would seem to be senseless when on every passing day people are digitizing their own CDs and adding them to their iPod collections—and then passing the discs on to friends, who have no other way to get the music onto their iPods.

More here.

London’s Evening Standard is reporting that the Beatles catalog will be available on iTunes in the coming months, but if you read the story closely there are no sources and the whole thing seems rather … Heather-centric.

The paper ties the agreement to Paul McCartney’s unpleasant divorce from Heather Mills, the final hearing for which, according to the paper, is the week after next.

How McCartney got himself into his current legal zoo  is unclear; did he really marry Mills without a clear pre-nuptial agreement? (On the other hand, since Mills is representing herself in the dispute, it seems as if neither have been making sensible legal decisions.)

The rest of the Standard article salivates over the digital value of the  Beatles’ catalog on iTunes.

More on this from Hitsville here.

Without citing sources, a recent story from Think Secret published on the PC Magazine site had this to say:

Another near-lock for the September 5 event is the availability of the Beatles’ catalog on iTunes. Following years of litigation that ended in Apple’s favor between Apple and the Beatles’ record label, Apple Corps, concerning trademark infringement, the Beatles catalog—the most coveted catalog not yet available in digital form—is expected to at last be made available. Some have gone so far as to speculate Apple will mark the momentous event with the release of a special Beatle-themed iPod, although evidence of this has yet to manifest itself.

PC Magazine says that Apple will announce that Beatles songs will be available on the iTunes store.

I’d like to predict that this will get press coverage far out of keeping with its import, but whatever. The interesting question: Was Beatles Inc.’s slow movement on digital sales was a smart idea or not? It’s a difficult calculation.

A good part of the decline in pop-music sales the last five or six years is the tapping-out of the oldies CD market. The guys who had bought the Eagles’ One of These Nights on LP, 8-track and cassette over the years had their chance to slip the record biz en masse (WEA, Don Henley & Co., and Sam Goody) another fast $15 when the album came out on CD. This process was duplicated many many times (millions of times, perhaps billions of times) over the 1990s as music-loving teens grew up, got a little disposable income and felt the need to relive a few high-school memories on the digital tip.

(I’m not being condescending, here: I’d be very embarrassed to share the names of some of the albums I re-bought on CD on just these grounds. I’ll see your Fragile and raise you a Captain Fantastic.)

But by the end of the 90s this income stream had tapped out, and none of the industry’s other attempts at a new format (DAT, minidisk etc. etc.) caught on.

Then comes iTunes, and I’d bet that a lot of the downloading comes from people who already had the CDs of the songs in question. This is free money for the Eagles and the record companies, without the need to make the damn record, store it, ship it somewhere, or pay the dullish kid behind the register to sell it to you.

The issue: when was the best time is for the Beatles to strike in this market? The argument that the time is long past is that millions of its original albums are being digitized and passed around amongst friends. I don’t even listen to the Beatles anymore, just on the grounds of overfamiliarity. Still, I just took a quick look on my iPod and discovered … nearly 100 Beatles songs on it. I would bet a lot of people are like me, digitizing their own albums (in my case, almost absent-mindedly) or getting them from friends, and absorbing the Beatles into their digital library almost by osmosis. Isn’t the band losing an enormous, unrecoverable, income stream?

You’d think that the Beatles’ organization making a calculated decision on this. Perhaps, in old-school negotiation style, they were trying to drive a harder bargain, or build up demand, but that would seem to be senseless when on every passing day people are digitizing their own CDs and adding them to their iPod collections—and then passing the discs on to friends, who have no other way to get the music onto their iPods.

The band’s sales veer widely—the 1 collection sold 10 million in 2000 and 2001, but in a typical year the group has a sales base of 1M or 2M. Two years ago, the group sold 2.4 million, according to SoundScan, and last year 1.6, and are on track for about that this year.

Assume the band makes three bucks from each record sold, and so might gross $6M a year just from album sales royalties. Assume the band and the label split the 65 cents they would presumably get from each iTunes sale, and that would translate to a little more than $3—or about the same as for the hard copy—for each album equivalent sold over the web.

In the face of such numbers the main argument I can see mitigating against iTunes sales is that they might in the long run hamper the group’s ability to finagle new generations of repackaging. The success of 1 is a very strong argument for this. There are for some reason millions of people who will buy a Beatles greatest hits set, like 1, even though it has nothing but the same songs they’ve bought again and again, notably in the massive-selling blue and red double CD sets. By contrast, online, once you’ve bought the digital version of “Hello Goodbye,” why would you ever pay for it again, absent some added value?

In the end, though, whatever sales records are bruited about by Apple after the inevitable event occurs, I think in the end the band will have lost untold millions over the last five years by not having benefited from being in the first wave of digitization by allowing, in effect, their fans to do the digitizing for themselves.