Deconstructing Pop Culture

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The Beatles Limited Partnership

March 22nd, 2008 by David Kronemyer · 1 Comment

In 1986, when I was Vice President of Capitol Records, one of the main issues I had to contend with was constant litigation with the Beatles, on account of their various grievances, both real and imagined.  Then (as now), the Beatles were Capitol’s top-selling artists, as they were for Capitol’s parent company, EMI Records.

In view of this, I was bewildered by the constant friction in the label-artist relationship.  I authored a study proposing a possible strategy to resolve this impasse, which involved forming a special-purpose entity (“SPE”) with a venture-like structure.  At the time, I characterized this as a “limited partnership,” though in present terms, a limited liability company (“LLC”) would be more appropriate (they didn’t exist at the time).  Among other attributes, LLCs have flexible ownership and management structure, and also various tax benefits.  The paper also analyzes historical sales trends of the Beatles’ albums, and the labyrinthine structure of their contractual relationships with EMI.  

While EMI did not adopt the paper’s recommendations, its thesis provoked considerable internal discussion.  It foreshadows current trends in the economics of label-artist relationships.  These include so-called “360 deals,” wherein an artist receives an advance from the record company effectively collateralizing the present discount value of all potential future income sources, including not only record sales, but also touring, merchandising, and music publishing income.  It also anticipates the structure of the transactions recently concluded by Live Nation with Madonna, U2, Jay-Z and Shakira.  

Here’s a .pdf:

Beatles Limited Partnership