Apple Buys EMI

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And the Beatles join the iTunes Store just in time for Saturday's iPad launch.

The deal... Just like with Apple's purchase of Lala, no hard numbers have been released. But both Citi and Terra Firma are happy. Citi gets its money back, and Guy Hands gets to save face, Terra Firma's covenant breaches become irrelevant, there's no need to raise and inject new capital and by selling to Jobs, et al, Hands gets to spin the concept that this was his plan all along.

Yes, the catalog license was just a ruse. Because, after all, everyone knows that Mr. Hands is smarter than Doug Morris and Mel Lewinter. Lucian Grainge? He's a glorified A&R guy with a bean counter mentality. Hands played the Universal boys like a fiddle. Do you really think he'd place the Fab Four's music in the hands of such charlatans? When he can put it in its rightful place, in the bosom of Steve Jobs, and see it live forever?


What we do know is Apple's got more of a future than major labels. Which is why the Cupertino company is smart enough to immediately close down new music development at EMI. It's about the catalog baby, unless you can stunt. Which is why Damian Kulash and OK Go are coming back. Yes, that was part of the deal, Jobs insisted. Upon launch of the 3G iPad, there will be a new OK Go video, to bump sales thirty days after the Wi-Fi launch. And, one year from now, when the 3-D iPad launches, the OK Go Rube Goldberg video will be free in 3-D for all purchasers. Along with a gratis copy of "Up" in 3-D.

A 3-D iPad?

3-D TV makes no sense. Sitting on the couch with those doofus glasses. But every 3-D iPad will come with WHITE glasses! Can you imagine the rage? Haven't heard from Kanye recently? That's because he's part of the 3-D iPad launch! He's going to promote the white glasses! Dr. Dre and Beats headphones? Come on. Monster compared to Apple? Iovine's no match for Jobs. Whatever happened to that Jimmy sponsored high quality sound for computers...go the way of SACD and DVD-A?

Anyway, despite turning EMI into a catalog company, there will be a road open into the new Apple-owned EMI (for the record, the EMI name will be dropped...no, it won't be called Apple Records, because of the Beatle conflict, the record company will just be another division of Apple Inc.) Apple has brokered a deal with SonicBids, wherein wannabes can submit music to be used in iPad promotions. One wonders how this works, because of the low quantity of music ultimately required and the vast number of submissions, but that hasn't stopped SonicBids in the past, so...

In other words, Apple will be in the new music business, but only for songs they can use to cross-promote Apple products. Furthermore, if you make a deal with Apple, you cannot tie in with any other company. Steve loves his walled garden. So, if you're contemplating a deal with Procter & Gamble, don't waste your time with SonicBids.

So what does this mean for music?

The story since the purchase of Lala has been cloud-based listening. But now that Apple owns not only the Beatles, but the Beach Boys and the Band (what Steve refers to as the "Three B's"), the company plans to drive down the price of music at the iTunes Store. Yes, within thirty days, every EMI track will be a dime. The major labels wanted higher prices?? Let them wrestle with LOWER prices! Yes, music will be a loss leader, all to sell iPads, iPods and iPhones. Everybody knows the money's in hardware. Furthermore, with streaming imminent, why not blow out MP3s? It took Universal ten years after Napster to drop the price of the CD to ten bucks? Apple can see that ownership is near extinction, they want to blow out product while they can.

As for the Beatles... They will only be available in Apple Lossless format. Yoko Ono insisted. It's a way of separating John from the legacy of Phil Spector, who famously wore that button "Back To Mono". By only making high quality files available, fidelity will be luscious, you won't get the compressed Wall of Sound and Phil can rot in jail, where Ono believes he belongs.

But, you say those lossless files take forever to download, they're bandwidth hogs!

Not Apple's problem. You pay for your Wi-Fi. And good luck downloading via AT&T on 3G, which is why Jobs will reveal the Verizon iPhone and iPads before the 3G model actually launches.

Controlling the music game, owning EMI and retail, forcing the other three major companies to play on his terms or die, Mr. Jobs is now moving into the touring sphere, where the majority of today's music money resides.

A deal has been brokered with Live Nation. With every concert ticket, you get a free download of the show within twenty four hours, IN VIDEO! Well, not every concert, just those acts controlled by Front Line. Yup, starts with the Eagles. Then Van Halen, who will be back on the road, although Valerie Bertinelli will not be singing backup, Perez Hilton's information is incorrect. Irving's plowing ahead with those acts who've collapsed all their rights and can make these deals. Yes, that was Terry McBride's concept, and his old charges the Barenaked Ladies, having a deal with EMI, will immediately make their concerts available on iPads too.

With so much power residing in Azoff and Rapino's empire, acts under contract to labels will clamor for their companies to grant iPad concert rights too. Soon, well, in two or three years, you know how slow the majors work, every concert ticket will come with a video. Expect audio first. You know how the majors like to dip their toes. Then again, Jobs has hired Hilary Rosen to whip the labels into shape, telling them this is the second coming, to get on board NOW, not to screw up like they did ten years ago.

Then, there's the true breakthrough. iPads at the show.

Yes, your iPad is your ticket. The screen will display a giant bar code. And this will thwart scalpers...like they're going to buy a boatload of iPads? Then again, just like acts scalp their own tickets, there's rumor of a back door deal between Azoff and Apple to do just this, sell discounted iPads to brokers, Azoff getting his money directly from Apple...

And once you've got your iPad at the gig, let the games begin!

Sure, you can tweet, and update your Facebook page. But, for an extra fee, you can get backstage video, every fan's true desire. For even more money, you get a personal greeting from the band member of your choice, to keep forever (or as long as your iPad works...) There's been talk of a further opportunity, one involving intimate involvement with performers after the show, but so far this has only been legally cleared in Nevada. Then again, Las Vegas is a burgeoning concert location.

Will iPads dominate at festivals?

Interesting question. Do you want Coachella Crud on your iPad? Or Stagecoach Schmutz? There's talk of a new device, much smaller, called the iWrist, but with such a small screen, it may be unworkable.

As for now, Steve Jobs illustrates his mercurial nature once again, doing the unexpected, swooping in and seizing an opportunity available to all, but making it work as a result of synergy. Yes, Microsoft kicked the tires. And Elevation Partners too. But Microsoft has got no hardware, no way to maximize the value. It made no sense for Ballmer to overpay. Sure, he could put Beatle pictures and music on Bing, but that's hard to truly monetize.

Palm's got the device, but no money and no traction. Bono and Paul McGuinness met with Guy Hands, but refused to put any of their own money into the deal. Guy told them U2 might be the biggest band in the world, but he couldn't sell the company on faith. As for trusting Roger McNamee...that just elicited a laugh.

As for Google... That was the reason for the Jobs/Schmidt summit last weekend (http://www.sfgate.com/cgi-bin/blogs/techchron/detail?entry_id=60029&tsp=1) One, it distracted the press from sniffing out the EMI deal. Two, it signaled a division of spoils, wherein Apple gets music and Google gets search. Like two Mafia bosses, they divided up the landscape. Then again, Google was worried about worldwide exploitation of the Beatles, the band is still seen as subversive in China.

So the major label era is finally finished.

Steve said there's no way he's paying "Hits". Indie promotion is truly history.

Rob Stringer is cock-blocked. Yes, he wanted to sell to Apple first, but his brother nixed the deal. Sir Howard still believes he can resurrect the moribund Sony brand. Ain't that a laugh. Although there is supposedly a PlayPad in development.

Lyor Cohen... That's why he's selling his townhouse. He knew, he's out. As for Edgar Bronfman, Jr....it's like that old Paul Simon song, "Something So Right"...

"When something goes wrong
I'm the first to admit it
I'm the first to admit it
But the last one to know..."

So it's Steve's world. We just live in it. All you Apple haters can either get on the bus or be left behind. Tech rules. And techies are smarter than music business people. Even hedge funders are smarter than music business people. Come on, can't you give Guy Hands credit, he played this beautifully!

(Note: Clive Calder was outbid for EMI by Apple, he saw no reason to pay so much, he had no synergy, but expect him to buy both Warner and Sony in the aftermath, which he will run on the cheap, with Billy Ocean as head of A&R.)

WORD OF MOUTH

Image via CrunchBase

First and foremost comes a good product.

Requiring no admission fee, no college degree, no qualifications whatsoever, the music business is peopled by hucksters, who employ myriad scams to get you to pay attention to their wares.

But it doesn't work.

Used to. Back when there was limited distribution, when bribing a deejay to play your song got you a leg up. But who buys music because it's got a high iTunes chart position? Sam Adams worked the system in order to get meetings with major labels. But then what? If they sign him, they might market and promote him, but that doesn't mean his music will sell. Because only good music sells.

Sucks, I know. Makes it much more difficult for you. You can't get any traction outside your family and friends. The system's rigged against you. Bullshit. If you were actually good, you'd blow up. We've got people surfing the Web 24/7 looking for good stuff, dying to tell their peeps about it.

In Wednesday's "Wall Street Journal" there's a story about Porter Airlines. I wouldn't have bothered to read it except for the fact that in Toronto, my ear was bent constantly about the carrier.

People waxed rhapsodic. The terminal was downtown-adjacent! The planes had leather seats! The flight attendants were all decked out like the sixties! There was a brand new terminal! And you only had to check in minutes before!

If Porter does any advertising, I'm clueless. But having heard the rap so much, I started spreading the word too. When Seymour Stein told me he was having trouble flying back to New York I asked him, had he tried Porter?

Porter is triumphing with a good product. And it's being sold by its users. Kind of like Google.

I remember the turning point. A phone call with a non-tech savvy friend about a decade ago. She was telling me about some Web-activity and referenced "Googling" something.

This was the proverbial straw that broke the camel's back. I'd been ignoring the search engine, I was a fan of HotBot, but now I had to try Google out, now that the hoi polloi were employing it. Hell, the hoi polloi could barely surf the Web. If Google gave them answers...

I switched to Google overnight.

But it gets better. Not only did I become a user, but a fan. I was thrilled when Apple installed the Google search window in the Safari toolbar. Yeah! It was like my favorite team scoring a touchdown. This is what people don't realize about Steve Jobs' company. We not only buy the products, we're believers. We're interested in everything Apple does. Kick the tires on new products? Shit, sometimes we buy them without even experiencing them first. Ergo, iPad pre-orders.

But it only works if you've got a killer product.

It starts with a track. And from that track, you can build a career. Just like the iPod got people to buy iPhones and Macs. Give someone a taste of an exquisite product, and they're on board.

And it's not about speed. Hell, the twenty first century is littered with products that were hits overnight and disappeared almost instantly. You've got to let the audience discover you. You've got to let people believe it's their choice. Shit, Apple is one cold computer company. But their stores are warm, the customer service is great. And this pays dividends.

Let's focus on service. Because the initial product is not the end of the relationship. Point is, you want a relationship. Dell's lame overseas customer service ended up decimating the company. Apple's made in America customer service gets people testifying. See the difference?

The music business has been about batting people over the head to sell them a product once. You bought it. It sucks? That's your problem. Furthermore, we rip you off at every turn. Just try getting a good concert ticket...what's up with that? Hell, the experience buying an airline ticket is better!

So focus on the music. There's nothing wrong with updating your Facebook page, tweeting away. But those elements are never going to make you. It's your music that's your calling card. And if your music is good enough, it will be embraced by fans and the word will be spread. No one sits at home waiting for their favorite song to come on the radio anymore... Shit, if you like something you can e-mail a friend the MP3, point to a YouTube page, there are many entry points for exposure.

You don't stand out because of the penumbra. Shit, even J. Lo lost her Sony gig. It's no longer how good you look, who you know, who you hang with... It's about the tunes.

Don't point out the exceptions. Those acts tend to be here today and gone tomorrow. Furthermore, this is a twenty first century change. When so much is available, when marketing is abhorred and tuned out, the only people we listen to are our friends. We trust them.

Marketing is the final step these days. It's about positioning. It's about imaging. Like those iPod billboards. They don't tell you much, they just remind you how hip the product is.

So don't bother attending marketing seminars. Don't listen to the major label tell you how it used to be. Just practice, practice, practice. Make something insanely great. And post it online. Hell, give it away for free. Because if it's really good, people will ultimately clamor around you to give you their money...for concert tickets, t-shits and signed CDs, even if they only listen to MP3s. Because believers need badges of honor. They want to evidence what's close to their hearts. It's the key to logos on clothing. Shit, no one wants to sport a JCPenney or Wal-Mart logo just like no one wants to help you sell your lame music. But Louis Vuitton?

And, in case you didn't know... That LV luggage lasts FOREVER!