Idol morphing into record company with deal to directly distribute songs and videos through Apple’s iTunes and iPhone, though unclear how these instant recording artists will be paid

By Jeffrey Jolson & Jonathan Zipper

HOLLYWOOD, CA (Hollywood Today) 2/19/08 – “American Idol” appears to be taking the final steps to becoming a record label. “Idol” and its sister 19 Entertainment company already finds, signs, develops, records, markets, tours and manages talent, and will now directly distribute their music as well, though iTunes.

“Idol” will be doing everything but pressing and shipping discs, no longer a requirement for a record label in the digital age. And pressing can’t be far behind as “Idol” distributed and sold music on its website last year and this year massively expands self-distribution in a deal with Apple Computers to sell content through iTunes on an ongoing basis.

Champions will apparently still get a recording contract from a conventional label as their prize, though “American Idol” winners have had mixed success lately with those record deals. Taylor Hicks either exited or was dropped last month from J/Arista Records depending on whose publicist you believed. “Idol” and contestants have scattered deals to sell music such as “Best of” albums, through Clive Davis’s RCA and associated labels.

This is different. Contestants effectively become recording artists immediately, if by that one means recording and selling songs through commercial outlets, not just the Idol website. Starting with this week’s top 24 contestants, you can buy songs for 99 cents a pop – the usual iTunes rate. As of March 11, when the field whittles down to the top 12, video of the weekly performances will be available for $1.99.

Due to piracy in Seasons One and Two due to demand to replay the songs (this was pre-DVR), Idol decided to post their videos and performances on their website. They created the American Idol store originally to sell their winners and runner-ups’ CDs. RCA and Davis still released those albums.

When Idol started selling studio recordings of the songs each contestant sang on the performance shows, Apple saw the opportunity and jumped on board by signing a deal to be the exclusive distributor of all Idol material from the show. It’s only the cover songs. No new material is released, leaving contestants to do original albums with whoever will sign them, with RCA and 19 getting first crack at inking them.

“Idol” is not spinning the deal as launching a new label, though if it sings like a label, is it a label? After all, there are years of complex recording deals in place and more importantly, they would have to pay these artists for recordings now largely considered “promotional.” Yet direct distribution for these immensely popular acts without BMG/RCA is a huge step and Apple knows it.

According to the announcement made on Monday, fans will be able to purchase “Idol” video and audio performances through the iTunes service for use on their computers and iPods. The iPhone, currently available only on fellow “Idol” sponsor AT&T’s network, will become the official phone of the series.

“We have some truly outstanding talent this year, and by working with Apple and iTunes, we’re giving viewers another great way to enjoy America’s brightest new stars from ‘Idol,’” said “American Idol” creator and 19 Entertainment CEO Simon Fuller.

“I’m sure there will be many memorable performances that viewers will want to relive from this 2008 season.”

While the financial terms of the Apple-“Idol” agreement are unclear, the show’s other sponsors (Coca-Cola, Ford and AT&T) pay around $35 million for on-air / off-air product placement and promotion, as well as weekly commercial spots. Apple is the first new sponsor since the second season of “Idol.”

Nor is it clear how contestants would be compensated, now that each song they sing is put up for sale, not just broadcast. In real life, that’s the point which by definition, they legally move from amateur to professional status and a recording contract comes into play. Yet the “American Idol” contract with contestants (and now instant recording artists) is famously one-sided and the show effectively owns and controls the act and their output for some time.

Photo: Idol will be selling songs from these 24 acts starting next week. Does that make them pros and Idol a label?